The unfortunate truth of the matter is that we, as Americans, have chosen to live with debt. How much debt each of us chooses to live with is an individual decision. We all know that some debt is inescapable, in that most of us can not pay cash for our home, our cars, or those other few big ticket items that periodically come along. However, outside these large expenses the debt so many of us accumulate can be avoided, specifically credit card debt.
As recently as around thirty years ago credit cards were rarities. They were reserved for those who were already financially stable, with regular incomes, for those who had stability in their lives. They were not used as a means of survival, as they seemingly are today.
Today credit card debt is one of the largest financial problems facing American families with some owing thousands of dollars to creditors. The sad reality is that much of this debt was unnecessarily amassed due to unsound financial decision making. The way to avoiding credit card debt is by limiting the use of your credit cards.
It is unlikely that we will give up our credit cards, so there is a second and less painful option, and that is to be fiscally responsible with our cards. By this I mean not using them for those things we want, or for those things that we could pay cash for later on if we just save a little while for them. We have to change our way of thinking when it comes to buying power. If we gave a baby a credit card and he had the knowledge to buy what he wanted when he wanted it, the result would be financially catastrophic for him. Sound familiar? It is all about discipline and self restraint.
It begins with a budget and an understanding of our needs versus our wants. In preparing a budget we should take care of our needs first by paying our existing bills; house and car payments, utilities, and loans, and then by paying ourselves. We do this by putting some money in savings or long term investments for our retirements. Everything that is left over is budgeted again and we decide how best to use that money. Is it time to by clothes for the children? Does the car need new tires? Gifts for Christmas or other special occasions? If these things are not pressing needs, then we set aside that money for the day when some of these things are needed. If we do this we greatly reduce the need to use that credit card on such purchases. We should always be setting money aside for expected and unexpected expenses.
By planning and saving for the things we need and want, we can greatly reduce the need to use our credit cards. Most of what we buy with credit cards could and should be bought with cash.
I have only one credit card and I use it for on-line purchases and to make reservations. For everything else, there’s cash.