To seek a high credit score or a life without debt, that is the question. When seeking a high credit score, you must make sure to have a perfect-payment history, stability on your job, an expanding credit history, and available credit you carefully use and repay. To get started, financial planners will recommend that you obtain a low-limit (like $500) secured credit card, use it, and pay it all back. The goal is to gain a high score to have easy access to credit for a car or mortgage. That said, financial planners are unlikely to ever tell you how to live credit-free and avoid the misery of mounting debt.
Why don’t they tell you? From global to national to local, all money is derived from a debt-based monetary system and is itself, a debt instrument (read: Federal Reserve Note on a dollar bill). Most financial planners are well-meaning but have not been educated on these facts and therefore, cannot advise you accordingly. Instead, they will advise you about good debt (mortgage debt/student loans) and bad debt (credit cards/auto loans).
The untold truth about money is what any online inflation calculator can tell you; $1.00 is now worth less than .o4 cents and keeps losing value due to how the system works. What this means to you is that the cost of living has skyrocketed and outpaces earning. Credit rushes in to fill the gap and you are the one stuck with the bill. Debt is a losing proposition, albeit “good” or “bad.”
Knowledge of this, alone, should be enough to give people pause regarding how they manage their finances; but it appears not to be the case. To choose a life without debt is to think outside the box. It requires proactive strategies that go against the economic grain of a debt-based society. That said, a life without debt and how to accomplish it is well-worth consideration.
Growing up in the 50’s and 60’s, when the dollar was worth more, my parents paid cash for everything and did not own a credit card. Paying for large purchases on lay-away plan was still very common then, and for those too young to know what that is: We would make no-interest payments (at least monthly) for our purchase that the store would keep until the final payment. Receiving the purchase on that last day of payment was oh so exciting!
Also considered horribly old-school today is how my mother managed the family budget. She housed several recycled baby food jars in her desk. Each jar lid had a label on it for: vacations, mortgage payments, school clothes, groceries, utilities, etc. and she would add money to them each pay period. That’s how they stayed out of debt.
My point? Due to the continual loss of money’s purchasing power, it becomes ever more difficult to live without credit, but those who are self-directed still can. When the multiple personal costs of accruing debt are considered (health, marriage and family issues), the alternative starts to look pretty good. Of course, like anything else, there are trade-offs.
Some of the upsides of using credit, albeit a card or any interest-bearing loan:
• Convenience of not carrying cash
• Statements that track everything for you
• Being able to make large purchases on the spot
• Credit card “rewards”
Some of the downsides:
• The illusion of wealth
• Impulse buying
• Overspending (paying “Credit Card Premium” prices)
• Paying interest and high interest on credit cards/payday loans
• Managing payments due to having several credit cards
• Overdraft charges on credit cards
• Often a lot of financial stress
Some of the upsides when you pay-as-you-go:
• Reality-based spending and prioritizing
• More likely to save for large purchases
• Minus instant gratification of impulse buying
• Less financial stress due to more certainty
Some of the downsides:
• Often wait-time on large purchases
• Limits activities to current funds available
• Adds the task of tracking your own spending
• Adds the task of managing funds available in bank accounts
• Can mean carrying a lot of cash
Remember that credit use is a choice you make and is not inevitable if you are willing to think creatively and make the trade-offs necessary to live a life without debt.