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How many of us, at the I-know-any-and-everything age of 18, applied for a credit card? Most of us were told that we needed it to build credit, to strengthen our score, to prepare for eventually buying a house.
Sure, yeah. That makes sense. Give an 18-year-old a credit card right before he or she moves into an empty apartment with an empty fridge. Great plan.
Here's the problem: everywhere we turn, as Americans, we are bombarded with credit offers. It doesn't stop when you turn 18. Heck, it sometimes doesn't even START when you turn 18. Lots of us even got credit card offers as kids, and it just heightened after we became adults.
(Not that that's news to you. We have a real debt problem in this country, so much so that the government just loves to keep us down. How, you ask? The costs of medical care and college are easily the easiest to accrue debt-wise, and we don't have much help from Uncle Sam there. Of course, our good old uncle has debt himself, so we couldn't expect much help in that area. Misery loves company, I guess, right?)
Let's look at a timeline of a typical American life, starting at age 18:
18-22: Apply for first credit card. Apply for student loans. Start borrowing student loan money, usually above and beyond tuition. Graduate with so much debt that you can't even comprehend it....and so it goes. Americans love debt. Or, at least, we think we can't live without it.
23-25: Nausea begins to set in when the first student loan bill comes, but luckily all graduates have a 6-month deferment. First "real" student loan bill comes. File for a "financial hardship" deferment. On a 28,000 salary with all that credit card debt, who can afford loans?
26-28: Realize that your BA in art metals won't get you that swanky job on Wall Street. Go to graduate school. If you're lucky, get it paid for. If you're not, take out more loans. At this point, some medical debt has probably accrued. Start paying on that, since it can't be deferred. Make minimum plus payments on credit cards.
29-32: Finance a house. Finance a car. Pay toward the cards. Pay toward the medical debt. Pay toward the student loans.
Here are some scary statistics from creditcards.com:
$15, 799 -- the amount average household credit card debt.Holy d*bt!!!
3.5 -- the average amount of credit cards per household as of the end of year 2008 stats
13.10 percent -- the average APR on credit cards with a balance
$2.43 trillion -- the total of U.S. consumer debt
13 -- the number of credit obligations the average American has; this figure includes cars, cards, and homes, among others
So, what's a practical, not-so-willing-to-become-a-slave-to-the-system guy or gal to do? Let's think about this.
- Don't buy what you can't afford.
- Don't take trips you can't afford.
- Don't buy something with a credit card if you can't afford it right that second.
- Don't spend more money than you make.
- Set up a budget and stick to it...or at least know what you can spend on what.
- Don't lend money unless you can afford to lose it.
- Don't finance anything, except a house.
- Really, don't finance anything...even a car.
- Really, really don't finance anything at all.
When will we stop being slaves to this debt cycle? Can we teach our children (future children, in my case) to get out of this mindset and, rather, focus on buying things they can afford?
As I say this, I'm looking around my partially furnished duplex. We haven't even bought a table yet, and the rooms we have furnished really aren't complete. But, that's okay. We've had four expensive international moves in the last two years, and we don't want to overextend ourselves. Money in the bank is better than money owed to the bank. And, our dining room might be table-less at this moment, but our fridge is full. With grad school starting in three weeks, we'd be foolish to spend our reserves on furniture. Better to be without stuff than to live with debt, I'd say.
What about you? Are you a slave to debt? If you are, when will you stop living a life of indentured servitude and move toward a life of financial freedom?
I'm still working toward that. Those student loans I took out in college don't pay themselves, and I'm counting down the days until I can scream, "I'm debt free!" Until then, I'm not borrowing another penny. No sir-y.
Stories? Advice? Suggestions? Pondering? Do tell!