1.) DO NOT EVER EVER MAKE FRIVOLOUS CHARGES TO A CREDIT CARD.
If your first thought was ”I don’t need to to read this, I know what he’s about to say”, that means you’re probably one of the people that need it to read it the most. By the way, that’s true of most things in life, don’t think you’ve got it all figured out, trust me you don’t…
Credit cards are like the devil in sheep’s clothing. Since so many people have them, on the surface they don’t seem like a big deal. In most cases the story starts out the same way: you get the credit even after having heard all the horror stories. You tell yourself you’ll only charge certain things to it like gas or groceries. You may even stick to this for a year or two.
But then something unexpected happens that costs money, and of course if you’re like most people, you have no emergency fund saved. Now because you’ve been a responsible credit card paying boy scout for so long, you figure you’re responsible enough to use the credit card to pay for this emergency.
So you start paying that big charge back over the next 2-3 months, being that good boy scout again. Then all of the sudden, something else comes up, and you have to use the card again. This time, its just not quite an emergency (or maybe it is), but something right below what you consider one.
You think: ‘‘Well I’ve been pretty good about paying back that other charge, I’m responsible enough to do the same thing with this, even though its not exactly an emergency….”.
So know you’re paying both of those back, but then a real emergency comes up again, and of course you still don’t have anything saved, so you need to use credit from the card again.
Your monthly disposable income gets less and less with each of these charge’s you’re having to pay back on the card, so now you’re even more tempted now to use the credit available to you on the card. After all, think about it: your paycheck shrunk because that money went towards those first 2-3 credit card charges.
And that’s when the vicious cycle starts. This process repeats itself, over and over, all the way up to the point where you max out your available credit on the card. It happens to people all the time, every day. It just happened right now, somewhere someone just maxed out their credit card.
If the situation gets real bad you get a couple more credit cards, and the same exact thing happens with those. You need more and more credit because more and more of your money is going towards paying the credit you used on the first 2 cards.
So now you’ve maxed out 3-4 credit cards. This might be the point where someone who isn’t thinking straight might start considering loans, or payday loans. They’ll resort to pay day loans because loans with a better interest rate won’t be available to them due to their credit. Their credit has taken a blow from the 3 maxed out credit cards they haven’t paid off.
This is sad story so many people find themselves in. Stress, anxiety, worry, fear, anger, resentment probably start to set in. Now this credit situation is consuming your thoughts all day long. Base level needs start to become a real concern as someone may start to wonder where their next meal is coming from.
I didn’t even mention that by this point, someone’s probably already turned to a close family member or friend to borrow money (and may or may have not have paid them back, usually the later).
Now they’re calling Dave Ramsey in tears, asking what they should do. That’s if they haven’t already filed bankruptcy first.
And this all started with that first credit card. That first little piece of plastic.
It came to you as an offer in the mail, pretending to be your friend, like the devil is sheep’s clothing.
2.) DO NOT TAKE OUT STUDENT LOANS TO PAY FOR COLLEGE.
This is a HUGE problem if you haven’t figured it out yet. The student loan debt is going to be the next mortgage crises in this country. It’s only a matter of time. This one is even more serious than the credit cards are (and a bigger problem).
My advice to you is: Don’t become a statistic.
Taking out student loans, to pay for a college degree is STUPID! Even if you’re going to school to be become a DOCTOR, it’s still one of the stupidest things you can do and will put you in debt for the next 15-25 years (or longer) of your life.
Albert Einstein called accumulating interest the 8th wonder of the world. That was smartest man in the world that said that. When you have student loans, interest is growing on the balance of your debt. Every day its growing, more and more.
Interest is working against you, instead of for you like it would with investments in an IRA or 401K for example.
And in response to what I’m talking about here, don’t give me that crap about ”An investment in knowledge pays the best interest”. If taking out student loans to fund a medical degree is stupid, then its exponentially dumber for everyone else.
Knowledge is valuable, and I even believe in that statement of ”an investment in knowledge pays the best interest”, but not when it comes to student loans.
Remember: You cannot bankruptcy your way out student loan debt. THEY WILL GET THEIR MONEY BACK, EVEN IF IT MEANS YOU PAY ON THOSE UNTIL YOU DIE….
If you stop making the payments, they will just start garnishing your wages from your paycheck. I’ve worked with and seen this happening with more than several people. Lives have destroyed because of student loan debt. Suicides, ruined relationships and marriages….you name it.
Loan services prey on uninformed, ill advised and ignorant kids in their early 20’s right out of college. Ignorance is bliss. They graduate college thinking the the world is their oyster, but boy are they in for a surprise.
If you have a high student loan balance, and are having serious problems with the payments, the best advice I can give you is to go DaveRamsey.com, become a sponge, and soak up as much knowledge as you possibly can on how to get out of debt. He has just about the best advice there is available out there.
You’ll also learn how to get out of credit card debt there as well.
The moral of the story is: If you play with fire, you will get burned.
Don’t ruin your life just because you need instant gratification. It’s really not worth it. If you play with credit card and student loan debt, you’re going to find that out whether you want to or not. Don’t become a statistic. If you already are a statistic, then be a man and do something about it.
Being in debt is NOT okay. Starting families with tons of debt piled up is NOT OK. It’s time to wake up and stop being ignorant of that.
I’ll see you guys again soon, until then: