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  • Posted June 4, 2018

The Price of Convenience

I’m alarmed by a trend in the use (abuse) of debt I’ve seen over the years, and I believe it’s only going to get worse. Vendors are making it easier and easier to pay electronically – now you just have to swipe your phone. The accounts are typically linked to a credit card, allowing consumers to get instant gratification and delay facing the full cost “indefinitely” (assuming they only make minimum payments). I have a few issues with this.

First – the impact it is having on families’ financial health. The majority of households I come across are leveraged to some degree – car loans, mortgages, credit card debt, etc. And while I will be the first to admit the benefits to borrowing, it should not be forgotten you are using someone else’s money and ultimately they have control. Families are paying more in interest and service fees than they are saving for goals, like retirement, leaving nothing to show for the money spent.

Second – what is the next generation learning? Balancing a checkbook is becoming a lost art, as less and less people use checks. Instead, consumers are encouraged to automate their payments – so they don’t have to pay any attention, ever. Add to this the simplicity of subscription services and “free trials”; and before you know it you’re living paycheck to paycheck but don’t know where your money is going.

I’m not sure what schools are teaching children in traditional classes, but my son was taught how to count dollars and coins in his learning for independence classes. I will admit this could be important and help him get a job; however I think it’s equally important to teach about responsible use of credit, and the impact it has on your life.

It’s “painless”, people no longer have to ask themselves “can I afford this”? Instead, it seems to be “which card should I use, to get the best rewards”? Unless you’re paying the balance EVERY month, the only people being rewarded are the credit card companies. Credit scores are being considered in more facets of life, including in some cases auto insurance and utility bills – yet how many of us not only know our score, but understand how it’s calculated?

I worry for my son, because credit is so abstract. To help him be successful, I’ve resorted to purchasing gift cards, and tracking the spending using Google Sheets. It’s not perfect, and I think he’s a long way from mastering it – but it’s a start. Obviously this isn’t the solution for everyone, but I would encourage people NOT to automate their bills – because it doesn’t take that long to pay them; and, in my opinion, it’s worth the time spent to understand where your money is going.

If you’re not paying your credit card balance in full each month, ask yourself what you’re spending on. You’re living outside your means (or you did at one time). Focus on getting your spending below 90% what you bring home each month – start building yourself a buffer. Go through your statements, what recurring charges surprise you? Finally, look at what your credit cards are charging each month as interest – this is money you owe them and you will have NOTHING to show for it. Imagine if you’d put this money into an account for you?!