on Credit

“Here is a simple but profound truth: YOU CAN NOT GET OUT OF  DEBT BY  BORROWING MORE MONEY. No more than an alcoholic can become sober by having another drink.Jerrold Mundis, author of How to Get Out of Debt, Stay Out of Debt, and Live Prosperously

There has been much ado in Washington regarding the downgrade of our credit rating. Armageddon type scenarios have been espoused, and predictions have been made that the markets will be hurt, interest rates will go higher, and the cost of business would be more costly. And in the midst of this entire ruckus, our political Chicken Littles are wringing their hands, not for the sake of America, but for their own political careers.

However there is one point that seems to be missed in the national conversation – would the downgrade even matter if we were able to pay off our debt? If you saved, lived within your means, did not borrow, and paid for things only when you had the money, would your credit rating really have much impact on your life? If you walk into a business with cash in hand, do you think they would care if your credit score was 500 or 800?

The problem with this argument is that living on credit, and having debt, is deeply rooted in our American consciousness.  We no longer wait and save before we make purchases or open businesses like our grandparents did; instead our first inclination is to take out a loan.  The reasons are many, but it usually boils down to impatience; we want to do things
now and have things now, instead of sacrificing to have things free and clear later. Unfortunately, very few people understand that debt and credit is a form of slavery, as it shackles our future prosperity. And, as we have seen in the current debt ceiling debate, we are already seeing what happens when we trust that future to “selfless” politicians. Is this how you want to live your life? Or do you want to be in charge?

The only way for us to really be in charge is to live debt free, and not live on credit, even for “emergencies”.  If we would just have money in savings, we would not need to lean on an
entity whose business is to make money. Have you ever wondered who those people are that make loans or own businesses that do? You got it – those that generally live within their means, have little debt, and have enough free funds to loan others so they can make money back in interest. For all the demonization of the banks and fund managers, I don’t think the root of the problem lies with them – it lies with us, because we would rather live on credit instead of within our means.  Personally, I would rather sacrifice a little now by paying down debt & living within my means, so I can be free to buy whatever I want later
without anyone’s say-so. I certainly would be in a better position to weather future crises.

There used to be a stigma on being in debt – no longer. The credit downgrade crisis going on in Washington right now is merely symptomatic of what is going on with a good portion of America as well.  While many Americans know how to sacrifice to make ends meet, there are still many who do not. How can we expect our politicians to cut up the country’s credit card, when we ourselves are unwilling to do the same? While over 66% of Americans don’t want the U.S. to take out more credit (i.e. raise the debt ceiling), that means that there are still 34% that think it may be a good idea.  America is finally waking up to the fact that we all have been on a spending spree, and that the time has finally come to pay
the piper.  Our current AAA credit rating has been undeserved for quite some time, and a downgrade might be the wakeup call we need to pivot away from the acceptability of using credit as a means to live life.  We are becoming slaves not only to our creditors but to weak-kneed politicians. The consequence of being a nation that lives on credit is being splashed across our TV screens right now. Do you like what you see?

“This is not a game, … Debt has become a part of who we are. It’s become that spoiled child in the grocery store with their lip stuck out: ‘I want it. I want it. I deserve it because I breathe air.’ And, well, that’s an uphill climb in our culture right now, to go against that and say, ‘Hey, let’s be grownups here. Let’s be mature, learn to delay pleasure, save up and pay for things.’” Dave Ramsey (b.1960), author of The Total Money Makeover & the Financial Peace education series

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