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Monthly Archives: June 2005

Commentary for June 4th, 2005

Commentary for June 4th, 2005, from a guest writer.

The Cost of Living to Impress & The Joneses

There’s nothing worse than living to impress and managing to be fake in the process. In a culture of keeping up with the Joneses, who are broke by the way, we Americans constantly feel a pressing need to flatter others, buy the best, and upgrade every inch of our lives. Why? And how does most of America finance their wonderful lifestyles they can’t afford within their budget? Credit cards, of course. Living on credit cards only causes stress and gives you a jaded view of your true financial situation. Is it worth the constant debt to impress others or keep up with the Joneses? No, it isn’t. There’s nothing worse than putting luxuries on a credit card. If you can’t afford your purchase and have to put it on a credit card, simply don’t buy it or sign up for it. Wait until you can actually afford it with cash or a debit card. Whether it is a $5,000 dream getaway vacation or a new version of your iPod, you don’t really need it, you want it. And that’s not good enough of a reason.

Stupid Entitlement, and it is Stupid!

Another problem with consumerism is the theory of ‘entitlement’. You deserve this new toy or this relaxing, overpriced vacation because you ‘earned’ it. You worked so hard this year, went through a bad relationship, or think you deserve it because you could die tomorrow, well….guess what? Entitlement is a sure-fire way to get yourself deep in debt and spend years of regretting it. So let me get this straight – you worked real hard this year so you’re going to pile a big heap of stressful debt on yourself for a one week vacation? When the vacation’s over and all that’s left is a party hat and a pile of blurry photos, you’re left with a big bill and barely anything to show for it. Talk about depreciation; that’s instant depreciation! At least with a depreciating car, there’s something left over you can sell or barter with. After a luxurious vacation all you have are memories and photos, most of the time. The fact you’re left with little makes paying that credit card bill all the more difficult. The same goes for living life like there’s no tomorrow. The rationalization that ‘I could die tomorrow’ and you deserve something is also means for a slap in the face. When tomorrow comes, like it does for the majority of us, you’re going to regret it. Sure, you do deserve a vacation but can’t you live within your means and pay for it with your money, not borrowed money? Won’t you have a more relaxed and better time? Remember you’re not supposed to be living within your means, you’re supposed to be living below them.

Shop ‘till you Drop

Whoever came up with this phrase needs their head examined. Sure it’s just a phrase, but is this what we want to be known for…shopping until we fall over, from complete exhaustion? What’s the reward – do we at least get the items free? NO! Then why the hell are we doing it?! For fun? For excitement? Because we deserve it? To escape problems that are eating us? Forget it.

The Retail Rut

Don’t let stores fool you into opening credit cards with them. Sure they offer you 10% off your first purchase and small perks, but in the end, you just agreed to another monthly bill that takes money away from your checking account. And if you rationalize it by saying ‘I’ll close the account right after I pay it off”, most people don’t and that’s what the company is counting on. The other problem with that philosophy is that credit card opening and closure will forever be on your credit report. It is much better to see one or two credit cards with a long history of on-time payments than to see ten accounts opened and closed within a matter of months. Just think about all the times you’re asked to open a store credit card, you’ll be shocked reminiscing. If you opened a credit card at all these stores, you’d probably have 15-20 credit cards! Some gullible people have done that and they also have had to declare bankruptcy because they can’t manage the $100,000 worth of debt that entangled themselves in. Don’t let that $8.50-an-hour-making cashier sway you into singing up with something you didn’t intend to. Are they going to pay your bill when it becomes due? They could care less. They just want to promote their store credit cards and look good to their managers so they can get a raise or recognition…and you paid the price.

Speaking of people trying to separate you from your money, how about service plans? What a waste of money. Save all that money in a ‘service plan’ account on your own and just see how much you actually dip into it. Probably not much, if at all. And if you’re so worried about the quality or function of an item, ask yourself ‘Why am I buying a heap of junk, is it that bad quality I absolutely must buy a service plan?” Don’t buy the heap of junk then.

All service plans aren’t bad. For instance, if you’re bringing your $2500 laptop to school or work everyday and you know you’re a clumsy fool, get a service plan. Not from Best Buy, because they’ll charge you a big premium over and above the normal fee it costs to insure the item. That’s how they make their money…uh….all their money. Most laptop companies (direct from their website) will sell you a much better service plan that will INCLUDE accidental coverage for a nominal price, compare that price and the features of your local store. Direct from the manufacturer is so much better, anyway.

Credit Card Hell

Very few people use credit cards wisely. Finance-smart people who don’t want to be had, pay their balance off in full each month. Hopefully you get a credit card with a 0% rate for a promotional period, and then afterwards it defaults to a low rate like 7.99%. Annuals fee cards should be avoided. Even if you’re earning miles or points, compare the cards out there. There are cards that earn points or rewards without an annual fee. And are your rewards worth it – do you really use them? It may not be worth the hassle for most people. Are you getting a $25 reimbursement check every month or two because you’ve charged so much? Well, compare that to the finance charges they’re sticking you with. Are you really ahead? Of course not, they want to make money. They are big corporations, don’t fool yourself.

The CC ‘revolvers’ as they’re called carry a balance to the next month and don’t think twice about it, even though they’re making the credit card companies rich. Think how easy it is to lend a sorry sap (sorry to offend Mr. or Ms. Sap) money at 19.99% interest, given the sorry sap has less than perfect credit. That’s a great profit for them! But when I ‘lend’ or ‘invest’ my money in a bank, I’ll be happy nowadays to get 0.5 to 2% interest in checking, or maybe 6% with a nice CD. Savings rates are so low many people don’t even think about saving anymore. So forget it right? Wrong! It is important and worth it to save anyway. Why should you grab the credit card every second a problem occurs?

And now some shocking statistics and facts to make you think twice about spending every penny of your disposable income on stuff you don’t need in this consumer-driven America:

–Over 33% of the Americans that own a home are only one paycheck away from a foreclosure.

–In 2003, over 1.6 MILLION Americans filed for bankruptcy.

–Right now, the average American family has between 10 and 15 credit cards in their name – from major credit cards to store credit cards from individual stores. Currently over 1.3 billion credit cards are active in the United States.

–Over $1 trillion in purchases are made on credit cards.

40% of American families spend more than they earn, and the average family consistently carries almost $6000 of credit card debt per month.

–90% of people in our culture buy things they can’t afford.

Conclusion

Still want that new gizmo you don’t need? I’d think twice about it. Most accountants and financial planners suggest that you should have at least two to three months worth of expenses built up in your checking account. Even though that sounds harsh, it’s a truism. If that seems impossible, try building up a $1,000 emergency fund and keep adding to it monthly, even if you can only add $50 a month. It’s better than nothing. We, especially as Americans, have to realize we’re in over our head in debt. Maybe you specifically aren’t, and that’s great, but we, as a nation, ARE. We have to look over our expenses and think ‘Is it really worth it’ in regards to some purchases and some extra bills. I know that the stress you cause yourself isn’t worth it. There’s no worse feeling that not being able to pay your bills or feeling too tight at the end of the month because there was a sale you couldn’t pass up. My best advice to realize your financial shortcomings is a spending diary comprised of your big-spender stores that you frequent. Write down what you bought and for how much for each store in a short description. Tally it at the end of the month, pop your eyes back into your socket, and realize ‘WAS IT WORTH IT?’ ‘DID I REALLY NEED IT?’ Just being more cognizant of your finances and having a slight plan in place will make you much better off than the credit card charging sheep out there. Hope this helps. © Cyberphreak.com 5-4-2005

 

Posted by on June 4, 2005 in Uncategorized

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