It is very easy to get credit these days. Many credit card companies offer introductory rates that are very attractive, combine it with a culture that encourages to spend money then there is potential for a personal finances disaster.
Our society seems to place value on the things we have and not who we actually are. I observe this whenever I go. People compare the cars they drive, the school the kids go to or the clothes they wear. It is ridiculous. This encourages people to purchase stuff using credit.
Here are a few reasons why you should say no to credit.
Lack of self control when dealing with your finances can end up in financial disaster. Exercising self control in financial matters can help you to achieve other things in life such as weight loss or the endurance to achieve very difficult goals.
Having self control is very important because it can help us to achieve or dreams. Financial self control can help us to buy a house, to go on holidays (fully paid with cash of course) and to stay out of trouble that can come from unsecured debt.
Using credit means you are not following your budget
Budgeting does not need to be complex. All you need is to do some simple planning and track your expenses. If you are using your credit card to finance everyday purchases then you are not following your budget.
If you are using your credit card to help with your cash flow then it is likely that you are spending more than what you earn.
Get those expenses under control, find other streams of income and get your budget on the black.
Whatever you do avoid using credit to finance everyday purchases.
If you want to learn how to create a budget and stick to it then click here.
Credit card interest rates are very high
The average credit card will charge over 20% pa interest. That means that if you owe $5000 over the course of one year you will pay $1000 in interest. That is almost $100 a month just for interest. Again just for the interest.
These days $5000 in a credit card balance is low. Creditcards.com says that average credit card debt per household is $15,788. If you are paying 20% interest on that, it is an amazing $3157 per year. Imagine what you could do with all of that money.
Poor financial habits can impact your personal relationships
Money is often the reason that couples fight. it is a very touchy subject especially if the couple is not working together. Budgeting for the family should be done with the family. If one person tries to enforce a budget the chances of success are very low.
Using credit cards can lead to bankruptcy
In the worst case scenario, if you spend too much and then cannot repay it you may have to declare bankruptcy which can affect your credit rating for up to 10 years. Prevention is better than cure.
Debt free brings peace of mind
Being in debt is very stressful. You are constantly worrying about your cash flow, making your payments and when you will be debt free,
Not having any debt brings an amazing peace of mind because you don’t have to worry about paying interest and you are in control of your cash flow. being debt free lets you worry about other things such as when you go to the beach next or how you are going to achieve your next financial objective ( not with credit please).
Credit card can be useful in case you are caught in a emergency situation without an emergency fund. Apart from that there are plenty of reasons for staying away from debt.
If you cannot afford to buy something with cash then you cannot afford to buy it with credit, then just don’t buy it. This article provides a few tips on how to avoid credit card debt.
Become your own financial hero by staying away from debt.