Perry Glasser

PERSONAL FINANCE FOR THE CLUELESS– SPENDING #2 CREDIT

In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance on March 14, 2014 at 12:00 pm

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Credit Card?  Debit Cards?

Spending gets dangerous when the naïve, foolish, and young believe that the plastic in their hand is free money. The problem is so chronic in America that an industry has grown up to rescue people from the consequences of their own lack of control. Never mind that the lack of control is imparted by Consumer Culture.

This is America. If we get you in trouble, we will blame you, but we will always be eager to take your money to get you out of the trouble we put you in.

Dollar$ will save you the rant and the familiar charts, but instead give you the rules.

Never use a Debit card.

There is no exception to this rule because there are no circumstances where a debit card is accepted that a credit card is not.  In fact, those same places accept cash, as well. The less cash you carry, the less likely you will succumb to impulse-buying.

Vendors LOVE debit cards because they transfer your bank balance to their pockets instantly. But a credit card affords you as much as a 3 week float, the time delay between the moment you buy and the moment you pay. In that 3 week period, your money snoozes, perhaps makes your checking account free, perhaps draws interest. It may not be much, but isn’t that nickel better off in your pocket than somewhere else?

If you overdraw with a debit card, your bank will impose usurious fees;

A lost debit card carries large liability if you do not immediately notify the bank of its loss; After 2 days, if your debit card has been in use by a thief, your bank will only offer you suspicion and may hold you responsible for up to $500. But should you lose a credit card, by law, you are only liable for $50.00.

Never ever carry a balance on a credit card.

This is your life we are talking about. Fees and interest mount. The catastrophic results will cripple your economic life, cripple your romantic life, and harm your children as you struggle for years to pay for goods and services you only thought you needed because of the compulsions of consumer culture.

If you have self-discipline problems, throw your plastic away.

If you are carrying credit card debt, pay it off first

You have no financial obligation more pressing, not even saving for retirement. If the leeches are into you for upwards of 20 percent per year, you are like a runner in a marathon bleeding from an artery. The harder you run, the more you bleed. You will eventually drop dead and never cross the finish line. Close your wounds! Spend less until you are free.
There are no services that can pay off your debts other than debt consolidation, a plan that may put money in your pocket month-to-month, but extends the life of your loan. Use debt consolidation if you must, but it’s even better to PAY IT OFF!

Good Debt

Dollar$ make a distinction between taking on debt in a good way vs. taking on debt like a runaway teenager set loose in a mall.

Consumer debt. Borrowing money to satisfy the false cravings instilled by Consumer Culture is always a bad idea. The satisfaction is temporary; the object or service bought will quickly need to be replenished; the payments will go on long after the object is of any use or pleasure.

Leverage. Borrowing money to invest in ways that will create revenue at a faster rate that the interest accrues is always a good idea.  Dollar$ knows you are not General Motors, so we are not talking about durable goods that will pay for themselves by producing more cars sooner. However, Citizens can avail themselves of some opportunities.

untitledReal estate. You have to live somewhere, and mortgage interest is about the last substantial tax deduction available to a Citizen. Mortgage rates are historically low; do not buy a home unless you expect to live in it for more than 5 years. If you are buying residencies as investments with the expectation of putting in sweat equity, Dollar$ salutes you. If you are buying real estate in hopes of a quick flip because prices are soaring rapidly, Dollar$ reminds you of the vast tracts of empty homes in Las Vegas where speculators were left with unfinished projects because real estate boom was swamp gas.

Auto. You need a car, and it is indeed an asset that will enhance your revenue opportunities because it will take you to and from work. In some places, however, automobiles and parking spaces constitute luxuries. You don’t need a car if you live and work in lower Manhattan.

Education. There is no better investment than in yourself. Your earning power over a lifetime soars with a college degree. Dollar$ does NOT subscribe to the Buccaneer mantra that you learn the skills their businesses need right now because these loons cannot predict the future beyond the next quarter.

Dollar$ urges you to major in what you love, but minor in how you will make a living.  Become a Graphic Designer with a minor in Business. Study Literature and minor in Computer Sciences.

Commodities Speculator

Become a generalist: in the digital economy of the 21st century, you will have 6 – 7 careers. You will need to be flexible. If you study a specific vocational skillset, your job will, eventually, be either automated out of existence or outsourced to the 3rd World. Buccaneers will tell you otherwise, but they are the very same people who will be outsourcing your job, expressing regrets, and suggesting you borrow money to return to school to retool.

Screw them. Take control. Lead the happy and productive life.

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