Overcoming Credit Card Debt Mistakes

Introduction

Most people make some credit card debt mistakes at one time or another in their lives.   Mishandling of credit is responsible for destroying so many people’s financial futures.  I want you to understand what this feels like.  

You are literally opening your pocket or pocketbook. Creditors are able to reach into your bag and take what they want.  As they clinch clusters of money, they are withdrawing  your seed money.   

This would have been your money to apply to whatever Venture you wanted to get into.  Rather than being forced to pay someone who you were forced to pay.   

You could have applied this money to Investments,  businesses,  philanthropy and other worthwhile activities that could help you leave a true Legacy.

We steal tomorrow’s wealth-building cash to keep up with the Jones’ 

We are buying things that take money from ourselves.  Myron Golden, one of my financial mentors,  said that the trap of the middle class is debt.  

This statement presented a stark image in my mind.   Imagine someone who is struggling to make ends meet. They live hand to mouth paycheck to paycheck.  

Finally,  they get enough income to have positive cash flow.  They see money at the end of their bills.  Unfortunately,  they don’t use this money to build wealth.  Why in the world not?  

It’s all because of the family that lives next door,  down the block,  or anywhere in this country.  They’re called The Joneses. And we’re trying to keep up with them.  

You get yourself into debt trying to look like them.  Here’s how crazy that is.  We kill ourselves and get into debt to look like other people who are already in debt.  

  • Do you really need the boat?
  • Do you really need the luxury car? 

Funny joke.  The other day I saw someone I knew with a luxury car  and it was parked outside as they were washing their clothes in the laundromat.  

If you don’t get why that is funny,  you’re exactly the person that I am trying to reach.  Stay close. I’m going to change your life.

The reason why I mentioned the two previous items are because they are liabilities.  You may call them toys.  But I call  then what they are. 

I define a liability as something that you can’t sell for more money than you bought it.  

We are using credit for emergencies

This is the part that might sound weird.  You may think I’m absolutely nuts when I tell you that we make credit card debt mistakes by using them for emergencies.  

I can already see you breathing heavy over there.  “If you can’t even use credit for emergencies then what in the world is it for?” You’re right, in  a sense.   

Credit is an absolutely helpful tool to have when you need to access Capital quickly.  You’ve  got that.  

The problem arises when we use credit as a substitute for a savings.  This,  and other subtle switches like this,  make the difference in someone’s Financial present and their financial future.  

This is the very reason why I started www.profit2prosper.com.  It’s also the reason why I decided to do this Your new financial plan series.

Using your credit card to take care of emergencies is like sending the wrong troops out to battle.  You’re savings is what takes care of your emergencies.  

Again,  they are both your soldiers but they serve different purposes.  

What happens when you use credit for emergencies?

When you use your credit card to pay for your emergencies,  there is a disconnect between you having to feel the emotion of spending that money.  

When you use your savings to take care of the emergencies,  you feel it immediately.  It’s almost as if you can feel every drop of blood that leaves your body.  

When you spend from your savings,  you’re mentally bound to replace it.  We’ll talk more about that in the next blog post.  

Imagine you have a $700 emergency.   it is easier to swipe your car than it is for you to go to the bank and pull $700 from the ATM.  

Even if you use your bank card you know that money is leaving your account.  Even though this is painful, the benefit is that you have $700 in cash to absorb the blow of this financial emergency. 

The only creditor is you.  It’s your money.  Pay yourself back to restore your peace of mind.

When you swipe your credit card, not having a savings,  you are less likely to pay that money back.  If you can pay that money back,  recovering from your financial emergency,  it will take you forever.   

Not only because you’d be robbing yourself of wealth building income every month.  You also have to fight against the convenience of that small number at the top of your statement called the minimum payment.  

It’s designed to mentally anchor us to paying the least we can.  This ensures the credit card companies gets the most interest off of our backs over the term of our debt 

So yes,  both  your savings and your credit card can cover your financial emergency.  One however will make it easier for you not to replace the money.  Can you guess which one it is? 

We are using credit in absence of money

We are coming after all of these money myths surrounding credit card debt mistakes.  Another big one is thinking that we can  use our  credit in place of cash.  

In case you haven’t heard it before,  credit is best used when you do not need it.   This means that you are skating on thin ice when you use your credit card,  not having the money to pay for the thing you’re buying in the first place.  

If you doing this,  man you messing with the wrong system.  I’m going to tell it like it is cuz I love you.

What you should do to prevent credit card debt mistakes

There are two switches that need to take place in your mind immediately:

  1. Only buy what you have the money to pay for – This may seem like signing you up for a death sentence.   Not true.  So go tell your emotions to  go somewhere and sit down.  This is been one of the most liberating Financial mindset shifts in my own life.  When you condition yourself to only use as much credit as you have the money to pay for, you begin to see things clearly. It’s like you unplug from The Matrix.  You’re able to see how the game is set up for you to fail. The credit card companies are relying on you  wanting to outdo your neighbor.  That’s how they get you.  They’ll be right there to fund that aspiration,  and take Your money, your children’s money, and your children’s Children’s money.  You decide what’s more important.
  2. My man Jaspreet Singh taught me that you don’t buy one until you can afford five – It’s your money.   You are entitled to do whatever you want with it. Who am I to tell you how to spend it?  I’m just saying.  It’s a sound financial principle that can bless you if you can hold yourself to it.  Do you want to get that $600 gaming console?  If you have $3,000 saved up,  according to this principal that would be an Okay purchase to make.  If, however, you begged your roommates and Friends to spot you to get the money to purchase it.  Something tells me that’s not the best financial decision you made this month.

The truth is you need cash to make credit work.  Don’t believe the lie.  

Conclusion

We learned that credit abuse is actually a cash abuse. We still from our cash that is used to build our wealth. Let’s work together to create a strategy and end credit card debt mistakes. We should focus on removing our dependency on credit cards. As the Scripture says the borrower will be slave to the lender.

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