The Buyers Market
Much of the stability of our economy is based on people being able to spend money they don’t currently have, a.k.a. “the credit system.” What makes the credit system so important is that it drives an inflated level of commerce. If we were to rely exclusively on cash purchases the volume that people are able to consume at one time would drop dramatically. Imagine what it would be like if you had to buy your car or your house in cash?
Instead of relying on a payment plan people would have to rely on a savings planWhat makes this immediate gratification mentality so dangerous is that people make decisions on what they can afford based on where they expect their income to be at the time of pay off.
For example a person might buy a big screen television, and resolve himself or herself to making the minimum payments on their credit card, because they are expecting a raise at their job. This agreement to spend money not yet earned creates a cycle known as borrow and owe. Inevitably an expense comes up that takes up the raise they received at work, and instead of earning more money, they have less in hand that they can spend.
This is because more money is going to make the minimum payments to their credit cards or other expenses.
Where the line should be drawn is somewhat grayed.
Certain purchases simply require people to purchase on credit. A home for example is far too expensive to save up for in any conventional means, especially considering that you would be paying housing expenses (rent) the entire time needed to save up for your home.
On the other hand, purchases based on impulse that don’t fill a core need and have high penalties (interest rates) can and should be avoided until there is enough money in hand to pay most or all of the debt off.
The strategy for success is relatively simple. Set goals for yourself, while outlining the path to get there. If you were taking a trip somewhere you would get a map and plan which roads to take.
The same holds true for your finances. See how much money you can comfortably put into savings each month. Then determine how long it will take you to save up for the item that you want.
You never know, after saving up all that money you may find that your original goal item is not worth the effort, and that you want to invest the money instead. But the effort involved in reaching your goal will give you a glimpse into the value of the item you want to purchase.
Then you will truly know if the purchase is with the effort to you.
For more information on Credit, Budgeting, Debt or Debt Management, visit www.solveyourcreditproblems.comTed is a Florida native with a bumpy financial past. After struggling to get his own finances under control, he began working to educate others on the perils of poor monetary decisions.
Ted Monroe
