Credit is something that is now abundantly available ~ it seems like no matter where you turn, anyone can pretty much get whatever they want, whether or not they have the cash to pay for it.
It’s pretty common – right? So common, my children notice when we are on the road – those big, lifted trucks with all the bells & whistles. The new GMC Yukon that pulls up next to us at the gas station for a fill – obviously perhaps some of them paid in cash. But doubtful in most cases.
Usually .. if they ask, I tell them the 4 most POWERFUL words.
And most people have convinced themselves that it’s okay to get anything that they want.. provided they can finance – after all, they work hard. They deserve a break. They deserve a bonus.
In the end, you’ll pay it off anyways… after all, your next bonus can pay for it, right? Or, perhaps your tax refund? Or perhaps you’ll sell something and pay it off.. still justifying the financial move you make. Perhaps you could have sold the item BEFORE and used that money to pay for it, thus avoiding financing altogether – but wait… that would require you to have to wait for something you want.
And that’s just unheard of in most cases.
Combine that mentality with the mentality of those who know better ~ those who wait until they have the cash to buy, or simply forego altogether and make do, we have a rather large populous of debtors in the U.S. that think that credit is something that you need.
But let me tell you…You don’t need credit to buy a car.
You don’t need credit to shop at the store.
You don’t need credit to buy new tires for your car/truck. You don’t even need credit to shop at the retail store – Kohl’s is a great example of that marketing gimmick. In that case it’s justified with a larger discount & free shipping – which means it’s ok .. right?
So why avoid financing? We’re probably two of the biggest advocates against it ~ and I’m always reminded by the time we bought our most recent truck. I recall going into the bank locally to get our money that we had in our account from a bank out of state. I remember telling the customer service representative my bank had approved us for a cash advance bank to bank since our bank wasn’t local.
And his response was … surprising: “Are you sure you want to buy your purchase in cash? Just finance it. We can sit you down right over there.”
(Me): Of course I want to make this purchase in cash. We don’t finance vehicles, never have, it’s not something we do. Thanks anyways though.
He hands me what I came in for, then before leaving he leans over the counter & says “are you sure you just don’t want to give that back and keep that in your account and instead, finance? Why not?”
Why not? I was furious that he would have the audacity to ask me the same question several times after I made it very clear the first time. We just don’t finance. If it’s not in the bank, we are not meant to have it – no matter how bad we want it, no matter how bad we feel like we need it or owe it to ourselves.
It’s not meant to be. That is basically it. And so far, that mentality has gotten us pretty far, and so I think we’ll keep it around a little longer.
Here are 5 reasons to say NO to credit:
1. Financing Means you aren’t Following your Budget
Or, you aren’t sticking to your budget. Either way, if you were, you wouldn’t be signing on the line for a contract. Budgeting is a great way to see where you are spending your money in every area of your finances. It’s a written plan – you tell your money where it goes instead of your money telling you where it’s going.
Without a budget, you don’t know what’s leftover – you don’t know how much you have left to work with. You don’t know what wiggle room you have for extra money for your savings, investments or even children’s college fund. If you know how much money you have left, you will know how much you have to spend. Without writing it down every month, I don’t have a clue of what is going out – I have to have that guide.
I just don’t know how you can go without doing that.
2. Financing does not Teach you Self Control
Sure, you can go out and put everything on credit – but is that truly exercising self control? Exercising self control can be difficult but it’s a great way to teach yourself patience, and makes you value your purchase a little MORE knowing you sacrificed to pay for it in cash.
3. Credit Card Interest Rates are Astronomical
Financing is expensive. No matter what “rate” you get, it’s expensive – it’s even more expensive considering some of the purchases are a few thousand dollars. Considering these things you are buying are already expensive, why make it any MORE expensive by adding interest?
Not to mention the rates increase if you don’t make your payment on time. Sure… everyone always says “but I pay my balance every month” — that’s great. Not everyone does. In fact, so FEW people do – you are still paying someone else for the money you borrowed, and if you happen to have a mishap in life (sickness, job loss)… it’s easy to find yourself in a pickle.
4. Financial Habits can Impact your Relationship
Money is one of the biggest reasons that families fight – it’s also one of the main reasons couples have marital problems. When there isn’t enough of it, then problems can come up ~ perhaps each spouse is on a different sheet of music. And believe it or not, if you aren’t on the same page, it can truly be such a disservice to your finances as a whole.
5. Financing purchases can lead to MORE Spending.
If you finance, then you start to justify your spending and the need to spend more – even if it’s just a little. What turns into one major purchase can easily lead to more smaller purchases. Not to mention, signing a piece of paper never hurts quite as bad as handing over the actual money in hand for a purchase. When you pay in cash, you feel pain associated with the purchase – ie. the hours worked, the family time sacrificed, etc.
In the End…
Just realize that anyone can pick up a loan, and anyone can walk into the store and buy a big screen, Macbook Pro, or even a new Lift Kit for their vehicle. Anyone can jump on the phone and pick up tickets to go on a cruise ANY time – same goes for a trip to Disney, or even LEGOLAND in California.
Every time you realize anyone can have whatever they want, you learn to be content with the things YOU have. You won’t have to be a slave to your job.
You won’t have to keep pushing back your goals because “things” got in the way.
Once you can buckle down your focus, pay off your debt, and focus on saving part to where you can save the cash to pay for your wants, needs and desires in green – then and only then, can you can do whatever you WANT to do.
All those other things are nice, but having that power to say no to the things you most desperately want “now”, & finding the discipline to save up and pay for them at a later time (when you have the green), will you understand why credit isn’t all it’s cracked up to be.