Help Yourself

Buying on credit has become an American way of life, and as long our economy was inflating, that seemed like the logical thing to do. But that no longer makes any sense. Back before 2008, it made sense to refinance the mortgage to pay for the new car, or the trip to Europe. But now it makes no sense at all.

For the past three years our economy (as everyone is painfully aware) took a nose dive and is not even beginning to pull out. This disaster was primarily due to mismanagement by the banks. Often times the little guys feel helpless, but there are things we can do to help ourselves. The most basic and sensible tactic is to simply LIVE WITHIN YOUR MEANS. That is do all you can to pay off your loans and credit cards and do not buy anything on credit. Banks live on the credit interest that we pay. If everyone were to pay off all their credit cards and start BUILDING THEIR SAVINGS ACCOUNTS the banks would be in a world of hurt. Just imagine if instead of having $6,000 owing on your credit card and a savings account balance of $60, you had just the reverse, so that when big items came along, you could pay them out of savings and then rebuild you savings.

 This can be done if you make up your mind to just stop charging and start paying off, and saving. Do not buy any frivolous stuff (this means changing your lifestyle for a while) until you get your charges paid down. Then all of the monthly payments you make to your credit accounts can be deposited into savings. Once you get your savings built up, you can start living again as long as you don’t overdo it. Try saving a third of your paycheck.  Ok so you can’t save a third, so save a quarter of your paycheck. If it sounds impossible, you just don’t know how much interest you are paying.

 Credit is not totally bad, but we need to use it very carefully, and never charge more than you can pay off with your next paycheck. “Buy now and pay later” is a very risky thing to do. If you don’t have the cash in your checking account, then don’t buy it until you do.