4 minute read
But I Like My Credit Card
from March 2020
32 // March 2020 by Charles Howell
Charles Howell was trained under the Dave Ramsey Master Coach program. He has been a money nerd all his life. After retiring from a career in Information Technology in 2017, he is pursuing his dream career. Charles lives in Silver Creek, Georgia, and serves clients anywhere in the country. About The Author T he Scripture verse, “The borrower is slave to the lender,” may seem a bit antiquated. You may have debt and don’t feel enslaved. I believe DEBT=RISK, and it exists on a spectrum.
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On the far end, you have people who use credit cards for the miles or cash back. They pay off their balance each month. They see no issue with that approach. For a truly disciplined person, the risk may be low to nonexistent. There may be other downsides to this approach. Studies show you spend more when you use a card, especially a credit card. That was my experience. I was this person, and when I stopped using a credit card, I felt like I had received a pay raise because I no longer tapped into my savings to ensure the balance was paid in full each month.
On the other end of the spectrum, you do have actual enslavement due to debt. Vulnerable people, often women, are held as slaves to evil people until they can pay off some debt. Human trafficking, to a great extent, uses people because of debt to unscrupulous lenders. The evil lender pretty much owns the victim. These lenders are not the payday loan people you see in certain parts of town; they are human traffickers preying on innocent people.
Somewhere in the middle but toward the extreme end are the payday lenders. They legally prey upon people at their weakest point. Onerous interest rates are killers and lead to long payoff periods.
Continuing along the spectrum, you have debt from loans against your 401(k). But this is your own money, so it doesn’t seem so bad. But it is holding your financial future hostage. If you leave your employer, chances are you will have to repay that loan immediately.
If you have loans from family or friends, you probably already know how that can negatively impact your relationship with them. There can be unspoken feelings of anger, regret, or shame if you are not paying them back on time.
The issue is DEBT=RISK. Bad things happen and at the worst times. You can lose your job. Both you and your spouse can lose your jobs. Someone can become very ill or be in an accident. All these things can and do happen: not to everyone and not all at the same time. But they do happen with regularity.
As you build your finances with emergency funds and pay off all debt, your risk profile lowers, or at least it feels like it. The risks above can still happen, but they have less impact.
If you have no emergency funds and have debt, start today and begin to master your money so you can live a life with less risk, no longer a slave to any lender. Ultimately, you can become incredibly generous to others.
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