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The www.FedPrimeRate.com Personal Finance Blog and Magazine

Thursday, March 06, 2008

Why I Tend To Overspend

I am currently in credit card rehab – my loving husband, who admitted me, is also the chief of staff. We are in the process of getting out of debt for good, so there has been absolutely no credit card usage allowed, period. It’s been like this for quite some time now, and I have to say, I didn’t think that I would make it this long. Paying off debt while ceasing from creating new debt seems like an obvious solution, but putting such theory into practice is harder than it seems. When we abruptly stopped charging purchases, I began to show withdrawal symptoms, which is why I am here, cleaning up my act.

Although I went down kicking and screaming, I always understood that my husband was right for putting a halt to all credit card spending until we were ready to be responsible users. We did what many newlyweds do – we got a joint card almost as soon as we got married and bought things that we thought we needed for our new life together. The problem was that we didn’t have the money to get those things outright; thus, the use of credit. This kind of spending put us in a vice that really began to squeeze when unexpected situations arose, pinching our finances so hard that accounts became delinquent.

How did that happen?

I believe that, at least for me, the problem began when the foundation was laid for my conceptual understanding of credit. Besides the fact that my teacher was an eighteen year old girlfriend, there were negative influences and temptations on every side. College campuses are now lairs for predatory lenders with magic plastic cards, giving you a free t-shirt or tote bag for books in exchange for your credit application. Hip, trendy boutiques make it all too easy for young people to obtain store credit. So, my belief system concerning the purpose for and availability of consumer credit was corrupted from the very start.

I bought into the idea that credit was a pipeline as opposed to a lifeline. From what I had gathered from my friends and the credit card companies, consumer credit was there so that I could purchase things I couldn’t afford and simply pay for them later. As long as I made small monthly payments, I could buy whatever I wanted, up to my credit limit. Credit was a money pipeline, creating cash flow in the present based upon resources from the future. I could keep the pipeline going, so long as I put a little cash into it on a regular basis.

While that sounds good, it’s a shame that it’s completely untrue!

Consumer credit was originally developed as a lifeline, primarily for the well-to-do and business owners in order to purchase necessary equipment or other assets that would either appreciate in value or help them turn a profit. That’s a far cry from getting some new clothes (that I really can’t afford) this week, even though I don’t get paid until two weeks from now.

Well, after living a while with this “pipeline mentality”, I soon came face to face with the realities involved with racking up debts that I couldn’t pay, and then being denied the help I really did need in the future because of past indiscretions. Then, I turned around and started fresh again when I got married. Apparently, I hadn’t learned my lesson in college.

I sure did learn it during my stay in credit card rehab, though. It’s actually been a couple of years now. I honestly believe that I have been rehabilitated. But, just to be sure, we don’t plan on getting another credit card until we know exactly what we will use it for and that we will pay the balance off every month that we use it.

The pipeline is officially closed.

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