Don’t buy what you can’t afford. Simple, right? Well, sort of. While restricting spending to the limits of a paycheck is the foundation of sound money management, doing it in practice can be extremely difficult. With credit so accessible, there’s a strong temptation to regard living in debt as not just unavoidable, but acceptable. This is a very dangerous way to view your finances.
The widespread availability of credit has made a lack of ready cash inconsequential. Currently, over 191 million Americans hold at least one credit card. The average total limit for all cards held is $22,751. Having immediate access to such sums inspires many to quickly charge their way to dangerous arrears. Though the average per-household consumer debt is $5,315, balances in the six-figure range are not unheard of. Credit cards have morphed from their true purpose as a convenient payment tool to instant emergency account, holiday bonus, vacation fund, and salary increase all rolled into one.
It’s not just plastic that makes descending into debt so easy. Payday loan institutions have exploded onto our landscape. We can now tap into our future earnings just by writing a check. Many who use these businesses become enmeshed in a never-ending balance cycle, complete with interest rates that would make a loan shark gasp.
Having consumer debt causes stress and worry. It may also undermine your ability to save for such things as retirement and higher education.
How do we reverse the trend? Here are some ways:
- Refute the idea that maintaining debt is inevitable and just another way of managing money.
- Redefine yourself as a “saver” rather than a “consumer.”
- Relish the feeling of living within, rather than beyond, your income parameters.
- Accept that you may not be able to have everything you want (or even need) today and that a quick cash fix won’t really bail you out of a bad situation; it will just make the following month more difficult.
- Borrow only when you are absolutely certain you can repay the entire balance when the bill comes in. One way of guaranteeing this is to build a savings fund. The Credit Union has a number of easy ways to save. When you set up small, automatic deductions from your paycheck―you probably won’t miss the money or even be aware you are saving, until you see a nice nest egg in your account. Learn more here.
- Reject the idea that it is your responsibility to keep the economy rolling. It is not. You need to save for (rather than borrow from) tomorrow, so you and your family can be financially independent, prepared, and secure.
If you are unable to cover your expenses, don’t get a loan—get help. One invaluable tool to manage expenses in a disciplined way is a budget. Your Credit Union has a best-in-class budgeting tool. It’s online, interactive, and easy to use. Check it out here.
Above all don’t buy what you can’t afford. Sometimes it really is that straightforward.