Friday, August 19, 2011

Cash or Credit

Everybody in the USA can tell you that our country is in deep doodoo but nobody seems to really understand what that means. They want to point fingers and blame everybody but nobody wants to take responsibility for the problem. I am not an economist and I certainly don't have a good grasp of the problem but I do know what does and does not work for me.

I looked up the definition of the 'debt ceiling' and it seems to concern our total debt and the interest on that debt. This debt and the interest that is incurred affects every citizen and is reflected in the interest rates we pay on everything we buy on credit. That is why the media was screaming about the national down-grading. It forces the financial institutions to raise consumer's interest rates.

Americans live on credit. They use credit cards for everything from purchasing washers and dryers, to buying fast food at Krystal's. No wonder this country is in such deep debt. No wonder so many people lost everything when the economy hit a recession and they lost their jobs. People are living from week to week and never prepare for emergencies.

Years ago I worked in the finance business. I worked for small companies in Dalton. I worked at several different finance companies because I was part-time and there was always an opening at another finance company when I was no longer needed. I learned something while I was doing that. I saw the same people come in, time and again, wanting to borrow money. I saw a lot of the same people who had loans at other finance companies come to the new company I was working for to borrow money. They were habitual borrowers.

I watched managers and assistant managers 'chasing loans' trying to get their delinquent customers to make payments on their loans. I even saw them convince the delinquent customers to come in and renew their loan so that it would 'get off the books'. Sometimes the customer who hadn't paid anything for months or years would even get a little money back. The delinquent customer would skip away happily with his small pittance, secure in the knowledge that he had screwed the credit company. 

Sure enough, when the new loan came due, they didn't pay. Then the assistant manager had to 'chase' them again. It was a vicious cycle. I couldn't understand how that helped anyone, but the credit companies live by different rules than the rest of us. They only wanted to get the bad debt off their delinquent books and look good for corporation, whoever that is. This seemed positively ridiculous to me, since the delinquent customer wouldn't pay their debts to begin with. Why renew a loan only to go back into the bad debt list again in three or four months? It reminded my of a dog chasing it's tail. It never was going to get it.

All my life my parents drilled into my head the importance of paying your bills and staying out of debt. Working in the finance business allowed me an opportunity to see the down side of credit. Some people would borrow as little as fifty dollars for something. Then they would pay that off and come right back to borrow more. I thought that was crazy. Admittedly, fifty dollars was a lot of money back when I was young, but I couldn't believe people were so hard pressed that they couldn't save up the money. They didn't bat an eye at paying huge interest rates, though. I think interest was around eighteen percent back then. I don't know what they charge today.

I bought a new washing machine from Sears and they offered me a ten percent discount if I would put it on my Sears card. It had expired so I allowed them to sign me up for a new one. I was planning to pay it off immediately anyway. When I got the card it was at twenty five percent interest. If I had made minimum payments I would have paid several hundred dollars more than the cost of the washer. That, my friends, is a racket.

We were able to pay our house off a few years ago, right before the economy tanked. I had always paid more than the minimum payment so we could get it paid off early. While everybody else in the country was struggling and losing their jobs and their homes, we were secure in the knowledge that we had our house. We might not be able to pay our electric bill and may even have to have cable and other luxuries cut off but, at least, we had a roof over our heads. 

Donny has always let me pay the bills and make any financial decisions. He knows that I am so paranoid about debt that I will not rush into buying anything. We aren't rich but we aren't in debt, either. Whenever we have to buy something on credit, I always pay it off immediately. I don't want to be beholden to anyone. I especially don't want to pay more for anything.

It is too easy to get credit. That is why everyone is in debt. They never learn to pay off their bills and they never learn to do without. When they really are in need and are desperate, they will use credit to get by. That is like digging a hole and standing in it when you want to get out. The deeper the hole, the harder it is to get out.

I don't blame people for wanting new things, but everyone seems to have forgotten the phrase 'keeping up with the Jones' is not a good thing. It means trying to keep up with your neighbors although you can't afford it. It used to imply someone is acting stupid and pretentious. When you live above your means you will find that you don't really belong there. I know it's a huge slap in the face but sometimes you need a good slap in the face to wake up.

I don't have a fancy house and I don't have fancy furniture. I don't have a nice new car and I don't dress like a fashionista. I just live a simple life and try to keep my bills paid. I don't want to keep up with my neighbors and I certainly don't want to impress them.

It's time to put down the plastic and start using real cold hard cash. Sometimes people seem flummoxed when I pay with cash. What's up with that? That's what that plastic credit card, or debit card, is supposed to represent: cash. Cash is King! Use it. Don't abuse it. And, for gods sake, quit digging your own grave in credit.

I know a lot of people were hurt by the economic downturn and I am not trying to belittle anyone. I only want to sound the alarm and, hopefully, rally the troops. We would all be better off if we learned not to buy things unless we could really afford them. We would be better off if we learned to save up for big ticket purchases like refrigerators or cars. We would save millions of dollars in interest fees. I wouldn't want to buy a new car that costs $20,000 dollars and pay six or eight thousand dollars extra in interest. Saving that money in the bank would earn interest, unlike financing it. Everybody used to have to save to buy something. Now anyone can buy anything with credit.

I didn't mean to insult anyone, although I probably did. I just think we need to get back to the good old days. That way we will plan for any contingency. Everybody needs to start a nest egg. I learned that when I was young.

Daddy was in the union and every few years the union would go out on strike when they were renegotiating a new contract. Sometimes Momma was the only breadwinner. She learned to save money when they were both working so that they wouldn't be empty handed when the union went on strike.

We all aren't in a union but we all have good and bad times in life. The best way to take care of ourselves and our families is to make sure to be prepared for the next emergency.  

It wouldn't hurt America if we learned to pay off our national debt and focus on  becoming a country that is solvent. We need to turn our financial revenue towards rebuilding America. They should start with the infrastructure; roads, bridges, dams, federal parks and memorials. among other things. 

We should resurrect some of the ideas Roosevelt employed in America during the greatest depression in American history. Roosevelt created jobs. We need jobs. The economy will turn around when people are able to work. The economy will improve eventually; it always does. We just need to be prepared for the next emergency like we are going through now. We've had plenty of recessions. We will have plenty more. We should become a nation that isn't riddled in debt any more, individually and as a nation.

Seriously, though, don't you love the feel of cold hard cash? I know I do. What are you going to do next time someone asks, "Cash, or credit?"

Responses are always welcome.



  1. Pam, you are right on the money... What an appropriate pun, huh?


  2. The world is a strange place at the moment. Banks have let us all down ... but still they are given massive bonuses; gold is at an all time high so much so that they have actually made machines where you can instantly purchase small ingots; hackers frighten all of us from the very top to those who are on the breadline; credit cards and debit cards fluctuate in popularity. We are all 'piggies in the middle' hoping that we can steer clear of the purchasing problems ... money is great but never have we had to take so much care to make sure that what we receive in our change is the genuine article. There are so many forgeries out there both notes and coinage it's worrying to think that you can take out the genuine stuff and come back with fakes in your change, I think!!

  3. Polly a lot of stores have special markers they use when you give them a big bill $5 10 20 etc. If the pen makes a brown streak on the bill it is real. There are counterfeiters out there but I've never gotten any bad bills.

  4. Connie I've been thinking for two days about an appropriate response and all I could come up with is 'I thought it made a lot of cents.' Get it? Cents. LOL


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