Written by, Stasie Tillman
The United States Government has shut down. Again. All this means is that the politicians on Capitol Hill have not agreed upon the dollar amount to further extended the deficit. DEFICIT meaning hole! We as a nation have been in the hole for some years now, but it began increasing exponentially each year since our removal from the gold standard. To operate on credit became the order of the day.
That’s when the banks began printing money banking on the American Standard as a name that no amount of financial mismanagement could devalue.
News Flash! The dollar is devalued! Even the country that shares our border to the north has a more valuable dollar than ours. We’ve used debt to fuel our spending, but instead of focusing on a repayment plan we write laws that allow us to borrow more. In the short term, it allows us to keep chugging along. But in the long run, the US is willfully abdicating our position of wealth and strength in the world to one that is now indebted and subject to those we owe money.
Busting the Credit Myth in Wealth
Our constituents have simply followed suit adding more debt than they could repay in their lifetimes. How is it that the wealthiest country in the world has a balance sheet a trillion dollars in the red? We’ve swallowed the bit believing that we have to owe debts to be considered financially viable in society.
Boy, were we wrong! Now our government and its bureaucratic agencies are shut down. The politicians can’t agree upon a resolution, college students are graduating with $100,000 owed to Sallie Mae, and on average homeowners owe $75,000 – $150,000 more on their homes than they’re worth! And the credit bubble keeps increasing.
There is a better way. One that requires a rigid forbearance to forego instant gratification that buying on credit offers, in order to save, stay within your means, and purchase what you want with cash. Financial expert, Dave Ramsey, often shares how he learned the hard way to avoid debt and teaches people to do the same in his book The Total Money Makeover.
Successful Businesses That Operate Without Debt
Some of the most successful businessmen abhorred credit and made sure their businesses operated without it. Companies like Apple, Amazon, Bed Bath & Beyond, and others have reached enormous success without a line of debt on the balance sheet. Even one of the world’s largest creditors, Mastercard, operates without debt.
The same principle that was good for those businesses is perfect for the individual. You can do it too! For those who believe that you need debt to build your credit record, here’s another way. Check out this article on How to Build Credit Without Debt for tips you can employ to go the road less traveled by.
The Borrower is Slave to the Lender
If you ever borrowed money from anyone, you may remember feeling a change in the relationship. A shift takes place when money changes hands. It doesn’t matter what the relationship is, be it a sibling, parent to child, or friendships. A debt now lingers like a hanging weight on the bond. Consider every situation thoroughly, and be wise. Sometimes you may just have to say ‘no,’ rather than to hurt a good relationship.
Outside of close relationships, the consequences for unpaid debts are stringent. The bankruptcy rate for individuals has continued to increase despite fluctuating credit practices and government bailouts. Bankruptcy leaves a derogatory mark on your credit file for 7 to 10 years, a low credit score, and makes the individual subject to limited access to new credit.
Other than bankruptcy, people can have various liens (creditors place holds) on their property (such as a car or home, which they can confiscate). Or an individual’s paycheck can be garnished (meaning that the debtor collects a portion of his pay before he receives his income). Look at how many wealthy people have been imprisoned for fraud, financial mismanagement, and or unpaid debts to the US government (such as Enron executive Jeff Skilling, Bernie Madoff, Wesley Snipes, & others). The consequences of borrowing without a timely repayment are severe.
Ways to Build Credit & Avoid Debt
There is a common belief in the United States that you cannot build credit without acquiring debt. This is a lie to perpetuate the dominance of credit card companies. People open credit cards or other loans thinking it beneficial to add a debt to their credit profile because it validates their creditworthiness. Stores, banks, politicians all spew the same schpiel, which perpetuates consumers spending more than they can afford. All in the name of consumerism and instant gratification.
This article from Credit.com researched ways consumers can debunk that school of thought by avoiding opening charge cards or loans and using websites that track monthly living expense payments. They keep track of your monthly rent payments, along with utilities like lights, heat, cable, etc. Check out How to Build Credit without Going into Debt for ways to go the road less traveled for building creditworthiness.
You have to make a decision on how you want to establish your money and your credit history. Then put it into practice and be vigilant, because those credit card offer letters hit mailboxes almost daily. Don’t succumb to the temptation.
Ways to be Generous
You may have heard it is better to give than to receive. It’s a nice sentiment, for sure, but one best learned by experience. Have you ever given spare cash to a homeless person, or volunteered your time to help those less fortunate than yourself? The tradeoff for the cash or time offered is a deep satisfaction of being a contributing member of society.
It is gratifying, to say the least, and gives a deep sense of being connected to humanity. The act of giving activates reciprocity in the universe. You actually never really are at a loss. The bible says give and it shall be given to you in good measure (Luke 6:38). When you give with a clear intent to help or contribute, it doesn’t matter who you gave to or what the purpose was for, but the very act of giving is like a deposit in the universal bank of good. You are owed something in return, and the bible clearly states that you will be given what you were owed and then some.
Develop a habit of giving regularly through charitable donations to trusted organizations that help others. Cultivate generosity by paying it forward. For example, you could buy the coffee of the person in line behind you. Or pay the grocery bill for the next patron. Don’t only look for needs, sometimes they aren’t evident, look to be a blessing to someone else.
It Pays To Be A Lender
In the same way, lending operates from a position of strength. You have to have something to be able to give something. Now, I am not a proponent of being unwise with your resources. But if there is a need and you are tapped to assist, consider it wisely and do as you deem best in the situation.
There are those people who are in constant need and see you as their benefactor. They come with frequent petitions for your help (whether it be financial, material, or simply emotional support), but they show you by their actions that they have no intention to make better decisions & change their situation. These kinds of people only work to drain your resources and nothing else. Be wise.
Power in Lending not Borrowing
The key is to do all you can to save your hard-earned money. This means giving up some luxuries for a time so that you can build up your cash stores. When you think about it this way, you realize people borrow because they don’t have the cash on hand. But that won’t be the case for you.
When you have the cash reserves, you operate from a position of authority. You won’t be subject to the lending restrictions or the stipulations the dealers want to impose. You can clearly state your preferences for a purchase and you’ll see how dealers bend to meet your standards.
Decide to be a lender and not a borrower. There are many resources that will help you achieve this. Some of the courses offered right here on A Stoic Life Financial Resources will give you the tools and strategies you need on your path to financial freedom. Sign up for our newsletter and we’ll send our list of financial course offerings as they open.