Baby step #6 - Use a ’save first and buy later’ approach to avoid spending money you don’t have
Are you struggling paycheck to paycheck and there never seems to be enough money at the end of each month, like I was? Is it a constant struggle to make your bill payments on time? Do you ever wonder why?
Money is a force which arrives into our lives and seems to leave just as abruptly. We all work hard - sometimes unbearable and monotonous hours - for our paychecks. Therefore, watching our money repeatedly drain away can be an extremely arduous and frustrating process. We know we need money to afford necessities and buy the luxuries we desire. Yet it seems we are constantly trying to catch up on our bills or finding ourselves in some type of debt.
Unfortunately, the system is designed to keep the majority of consumers in a constant debt cycle. Credit card companies are banking (quite literally) on the fact they can tantalize us with appealing opportunities and we’ll jump at the chance to purchase a juicy item we desire – regardless if we have the necessary funds saved or not.
“Well”, you might reason with yourself, as I did, “even if I can’t really afford it now, I’ll slap it on my credit card and do small minimum payments every month.” Sound familiar?
This mentality of ‘charge now, pay later’ is contributing to our inclination to spend money we don’t have. For the majority of us, this results in a mountainous cycle of debt. Thus we continually and desperately try to struggle out of the same hole. We get one debt paid off, but we’re immediately charging the next item. See where I’m going with this? So where will it end?
Since the credit card was introduced in the 1950’s, the past few decades have evolved us into a credit card using ‘n’ abusing, debt-clad nation. Is it any wonder credit companies issue cards to young people, without a thought to how irresponsible teens might utilize them?
Credit companies make millions billions off our hard-earned money each year – all in interest rates from consumers who buy massive purchases they can’t afford. Consequently they’re forced to pay the bare minimum amount each month when the bill rolls in. Remember the beauty of compound interest? Well, this is compounding interest working against you, and it gets ugly.
How does it feel to be paying interest, and then interest on top of interest? Do you know the interest rates on your current credit cards? Are you disturbed yet? I am.
One of the best ways to build a strong financial foundation is to eliminate unnecessary credit card spending unless you’re able to pay the card off in full each month. (There are a few exceptions to this, such as starting your own business, but that’s irrelevant to a broke-ass student charging a new iPod and taking forever to pay it off).
I keep one credit card handy for emergency purposes only and make all other transactions with cash. My monthly expenses are drawn directly from my checking account each month via online payments.
The added benefit of using cash is that it has really helped in cutting back my impulse buying. For some reason, it’s much harder to part with actual money as opposed to signing a credit card receipt. We tend to be more emotionally attached to money. This is a good thing because it ensures that every purchase I make, I really want it.
Using cash for purchases is an extremely productive way to reduce random spending tendencies. The time to change the vicious cycle of accumulative debt is now. Stop allowing credit card companies to profit off you.
~†~ Baby Steps are Key ~†~ Get angry and fight back!
Oh yeah, and go visit Cap over at StopBuyingCrap.com. Maybe you’ll learn something useful.
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You make some very good points in this post. I think it’s actually too good, and that’s a problem, because it may scare some kids away from using credit cards for the rest of their lives
Here’s the thing. If you know that you’re disciplined about spending, or think that you can learn to be disciplined, credit cards can be a great tool. In USA, everything is built around having great credit, and most of us can’t pay for big things like house and car with cash. Eventually, you’re going to be in debt. And if you’re disciplined, that’s nothing to be afraid of (admittedly, that’s a BIG if.)
To get a good rate on the loan, you need to have good credit history. And how do you build good credit history? By using credit cards
Anyway, great post, keep on bloggin’
Oh man I just love your blog, I used to live like a King back in India, spent like hell(my dad is rich in India), never understood the meaning of savings, could not save even when I tried to.
But now, after getting a grip on Austrian economics, something has embedded in me, Saving is the key for prosperity.
You can get an amazing idea, have someone to invest in it, and become millionaire, but to greatly increase chances of any prospects of becoming a really rich man, you must learn how to save.
Keynesian economics teaches us that spending is the key for prosperity. It is Keynesian economics following which Feds think that if people will have more to spend they will be out of recession.
So not true man! So not true!
Anyways I buy my t-shirts from here:
http://www.brandnewtees.com/index.html
Brandless t-shirts of same quality as branded ones, except with no label on them. The label usually is your attitude.
Anyways I then opened by Inkscape(the vector drawing program), draw some nice labels under the brand Renegade, and went to
http://www.clothinglabels4u.com
and ordered them(min order 150 cloth labels, so it comes around 2$ a label, and stitched them on my t-shirts and hoodies.
Now I walk around with attitude wearing a brand and t-shirt, nobody can find merely by Googling the brandname online.
As I write this thing I am getting a nasty idea in my head, throw up a $7 domain name, host on Oocommerce or opencart or zencart(any of the free e-commerce software) host it on your dreamhost account(there is a lot of space), and put the pictures of t-shits with the label and have the website of your own brandname, with really high priced t-shirts(like $70 or something), if someone orders them, send them the t-shirts you made(now its worth all the effort), if not then you didn’t really lose anything, you just became classy with all the behind the curtains frugality.