The full heading of this post should be: educating people to manage debt is like trying to tell a blind man he looks good. It sounds like a good idea, but it is unlikely to make much of a difference. I’m not putting people down, just stating the obvious. If debt were easy for everyone to understand, we would have no need for insolvency procedures and most likely have much less lenders tenders on the high street. The thing is some people understand what debt is all about; but many don’t and that causes problems.
Failing to Learn
Debt, or rather uncontrollable debt is often the result of temptation getting the better of us and making us overspend on things we can ill afford. Even after working hard to be free from debt, we often find ourselves back on the slippery slope within weeks of paying off our loans. Some would say we are destined to be enslaved by the banks because we will always have debts hanging over our heads.
Starting fresh with a clean state is only achievable if you have a complete understanding of what has caused your money problems in the first place. Even though we have multiple accounts that offer many different lines of credit, only a few of us understand the complexities of the banking system and even some that do are powerless to stop themselves getting into debt.
The Credit Con
If you only ever learn one thing about money, make sure this is it:
Credit Reduces Your Ability to Spend – Fact
Most people feel empowered when they have a purse or wallet full of credit cards; or when they are able to shop on lots of different websites with buy now and pay later offers. The sooner you realise that credit reduces your ability to spend your wages, pension, benefits or whatever money you have; then you are on your way to a more satisfying life.
The reason is simple. Interest charges are money for nothing. The minute a creditor places an interest charge on any of your accounts, you are paying for the privilege of having an account. Interest has no value to you whatsoever and if you are paying interest every month, you have less spending power than before you had a credit agreement.
The Just In Case Account Con
People often say they have a credit card ‘just in case’ something happens, which means they need to call on a credit card. However, anything that has a large cost will usually be available on credit anyway. A replacement boiler, washing machine or other essential household appliance is available on credit from almost every supplier. With that in mind, why bother having a credit account ‘just in case?’
I may have referred to credit accounts or features of accounts, as ‘cons’, but this is not because of any deception on the part of the credit card or loan companies. I’ve used the term because we often con ourselves into believing we need these accounts when in fact we simply want them. Some people find it strange for an adult not to have a credit card readily available; but do these same people consider self-inflicted debt to be acceptable?
What if it All Goes Wrong?
Inevitably, people get themselves in debt that they find difficult to control and that often means periods of stress and denial; which often leads to more debt. It’s time to speak to someone if you think you are in this situation. Recognising you need help managing your repayments is the first step and speaking to a professional from either a debt charity or a debt management company before it’s too late.
Abel Froman is a recovered debt junkie who has made use of debt management plans to restore his credit rating on two previous occasions; he blogs to help other people in a similar situation. +Abel