I was just sitting here thinking about how many people seem to have credit and money issues. At the base level it seems pretty simple. Don’t spend more than you make and save the rest. Right? Ok don’t jump down my throat. I know it’s not always that easy or that simple as life is complicated and I can fully appreciate that.
Specifically, my issue lies with our obsession with buying stuff with money we don’t have (this means CREDIT)…I mean why dig the hole? Again I understand the idea of leveraging for really big stuff. But for everything else what makes us do this and how do we fool ourselves into thinking that it’ll be fine? Why can’t you wait another 2 months when you have the money? Who actually spends the time to read the terms and conditions that CC’s set forth. For those that pay on time and in full you could care less right? But the one time you miss or decide to finance that big purchase you’ll notice pretty fast on that statement.
I’m no financial planner, but I feel that I’m pretty good about living within my means (though it’s barely sometimes). It made me think…why? Why are some people smart about their money and why do others live on the wild side? I think it breaks down into 3 main parts.
1. Education
As strange as it sounds I think there needs to be more emphasis on teaching the basics of how money and credit works. What’s a credit card vs a debit card? What does it mean to balance my checking account (I don’t feel the actual task is necessary with the advent of online banking)? In my experience, we don’t really grow up being taught these life lessons then we get to college not understanding credit cards, how they affect our personal credit, and sign up for student cards for some free schwag. Sometimes it ends there and other times we add to our already large college debt. The good news is I believe this is covered much better nowadays.
2. Habit a.k.a Where are my piggy banks?
Growing up I had a piggy bank. Maybe I dated myself, but I don’t see piggy banks anymore. I think this may be a downside of this digital age. I like to think of the piggy bank as the antithesis to the credit card. CC’s teach spending cause it’s easy. You swipe and the item is yours. The loss of money just happened in the future where you can’t see it yet. With the piggy bank you get to give your mental decision to save a physical attribute. I believe in muscle memory. When my brother and I were kids we each had a plastic piggy bank. He had a blue one and I had a red one they had these green hats…anyways I digress. I can remember putting money into that piggy bank. I wasn’t even saving for anything and I’m not sure why I started doing it so I’m going to chalk this up to my parents slamming yet another value into me. But there was something exciting about feeling it get heavier and even opening it up once in a while to see how much you actually had saved (free math lesson!). Where did I get my money? We didn’t get chore money =( But my grandfather would always give us each a dollar when we went to go see him at the restaurant plus you find random stuff on the floor and change from lunch. Having that piggy bank there and seeing it means you have to make a decision every time you see it. Bring the piggy banks back!
3. Culture
Americans are consumers compared to other cultures. I remember in my High School economics class my teacher mentioned the savings rate of Singapore was something, but what struck me is that America’s saving rate was negative. There actually seems to be a recent swing with America saving more and other places spending more, but I think the culture still deserves a category on its own. It’s that powerful. There’s not much you can do, except be aware of it and make your individual change. Knowledge is power.