Ah, it’s that time of year again. The days are getting a little longer, a little brighter. The bills start piling up despite the fact it will be another couple of months before the tax return arrives. That’s if there is a tax return of course. These things are not always guaranteed.
Next year, we say, we’ll do it differently. I won’t spend so much. Maybe I’ll get a bonus or win the lottery. The great Canadian retirement plan seems to be “winning the lottery” as in, if I win enough in the lottery, I’ll be able to retire. Then there is the great Canadian lifestyle plan, which is “living within the extent of my credit limit”. Does that seem backward to you? It sure does to me, but I’ve been guilty of it.
I have tried to raise my kids to understand that you have to buy things that you can afford. Save first, shop later and with luck it’ll be on sale. Or maybe you’ll decide that you didn’t want it in the first place. For the most part they handled this quite well. Saved their part-time earnings and birthday money for clothes (my oldest daughter waits ages for stuff to go on sale and it usually pays off) and big items like game systems. Until they entered the age of credit they did not know what credit was. And then my oldest daughter graduated and somehow managed to get her first credit card.
I think credit ought to be reserved until kids are at least 30. Read on for why.
Since Christmas I have had several friends and clients approach me about money issues. This may surprise you since I am someone who likes STUFF and I have a well stocked kitchen, but there was a time when this was not so. I became enamoured with credit. I had student loans, and automatically a credit rating. I got credit cards. I leased a car. It was amazing this life – here I was making crappy money and yet surrounded by stuff. It didn’t last of course because I was broke. One very fine line away from a soup kitchen, and I am not kidding. How do you manage all that financing with two kids, single parenthood and a student loan? Answer=you don’t. You are bankrupt.
So my friends and colleagues who know this part of my sordid past will sometimes ask my advice. I think, at times, they want to hear how going bankrupt saved me from being destitute, but this was not the case at all. I was destitute, and if had not been for my family rallying around me (not paying my debts, but being there for me in every other way) I probably would be pushing up daisies right now. No joke.
The thing with credit is that is NOT an answer to anything, except wilful accumulation. Sure you need credit to buy a house, rent a car, blah blah blah. But really, the great mindset believes that you need credit for everything. A $6.95 cup of coffee, a tank of gas, a handful of lottery tickets and a pack of cigarettes. We subscribe to all kinds of things using credit; electronic and paper version of newspapers, magazines, music downloads, ink for computer printers. And what do you have at the end of it? Nothing. Not a gal danged thing.
In my household, the last quarter of every year seemed outrageously expensive. September was back to school for my girls and often, for me. New books, pens, crayons, clothes, back packs…October is my youngest’s birthday. Thanksgiving. November is the oldest’s birthday. December is my birthday and lo and behold, Christmas. It was like spending money from September 1st until year end. Not just gifts either. Big festive meals with roast beast and all the trimmings, and wine and beer to boot. My Dad’s birthday being in mid January I think he really got the short end of the stick!
It wasn’t that I wasn’t working. In fact much of that time I was working full time, going to school full time or both. When the kids were little I’d put them to bed and study. As they got bigger we scheduled computer time so we could all get everything done.
I think the problem is that differentiation between broke and poor. I like Larry Winget’s description; poor you cannot help. Broke is deciding to spend more than you have. I like to think of it as champagne taste on the beer budget. There are two ways to get over being broke. Work more (yeah, get a second job. A third can help too). Spend less. Period. I know we hate it, but the truth is that unless the net result is more input and/or less output, you cannot get ahead. Pay day loans, second mortgages and credit cards charge just enough money for you to never actually get out of debt. So don’t get in it. And if you’re in it, then get out. More inputs, less outputs. Period. ‘nuff said. No need to sugar coat it. Broke is broke. More inputs, less outputs.