In Debt We Trust Part 3

Comment

Comment by Danielle on January 2, 2009 at 10:44am

Note #2 - my own editorial comment: one of the families lamenting how much they dug themselves into credit card debt makes the statement that they come from a "middle class" family and were used to maintaining a "middle class" lifestyle. We should all remember that we're commercially programmed to attach a certain meaning to that.

If any of us who are used to a two-income household go down to a one-income household, we have the ability to make choices that still allow us to live within our means. Sometimes those choices are hard work, but they're still our own choices. Some of the links off to the side of this site (to Frugal Babe or Penny Pinching Grandma) illustrate how living off limited income does not have to include credit card debt.

I'm not saying avoiding debt is always easy. But 9 times out of 10 we control the decisions we make that allow debt to happen. I know there are still times when extreme medical conditions and other extraordinary events make that statement inaccurate...but the vast majority of the time it's up to us.

I'm an example, too. I don't have to drive a vehicle that I couldn't pay cash for, but I chose to. If I lost my job tomorrow I'd probably sell it and pay cash for a junker. I did make a choice to put enough money down on it when I bought it that if I had to sell it I'd likely get enough cash out to pay for a junker. Or, my hubby and I would have to make choices that allow us to get by with a single car for a while. Worst case scenario: bus line.

None of those things would be fun to do, but we would do everything we could to make choices that allow us to live within our means.

If I ever get myself into significant debt at any point in the future, I'll still recognize that it was my own choices that got me there. Choices over place/type of residence, transportation choices, choices over whether or not to work a second job. And my own choices will be the only ones that enable me to get out if I'm ever in that position.

But if i make smart choices today that allow me to live beneath my means, or choices that I could reasonably modify later on if income or expenses significantly changed...then hopefully I'm in a better position to respond to those life changes.

Comment by Danielle on January 2, 2009 at 10:31am

Note #1 - at the very beginning of the video it shows a big, long credit card disclosure that comes with your credit cards. A background note from a financial institution -- a lot of that language credit unions AND banks have to provide by regulation. But here's the main this you really WANT to look for in that fine print:
- What happens if you miss a payment? (i.e. this thing called a "Default Rate")
- What happens if you miss a payment owed to someone else? (i.e. this thing called "Universal Default". Although luckily new regulations say this should be going away in 2010...but some banks still use this)
- Under what conditions can the institution change your terms? (i.e. fees, rate, etc.)

Here's the english translation in most cases: pay at least the minimum payment on time, every time.

The common sense disclosure is -- live within your means! Think before you charge. The best way to use a credit card is to deduct the amount you charge from your checking account when you make the charge. This ensures you will always have enough to pay off the balance in full when you get the bill.