Financial Literacy: Keep It Simple!

As a nation, we have been witnessing a tragedy of epic proportions. Debt, deficit spending, and credit card use have taken control of the lives of millions. The result has been skyrocketing bankruptcies and enormous stress on individuals and their families. How can we avoid this situation? One way is to AVOID the credit card trap altogether!  

I grew up in a family with a very modest income. However, we were never financially strapped. My parents’ method of managing their finances was a simple one, but it worked. They stuffed envelopes with cash for key expenses and lived on what was inside. No credit cards, no loans, no overspending. No more money in the envelopes meant no more spending. Simple. I have adapted my parents’ conservative, simple approach through budgeting and banking and we’ve always lived financially stress-free. 

The same is not true for the majority of Americans. The credit crisis is enormous on both a national and an individual level. Bankruptcies are at a record high and most families would say that they are experiencing at least some level of financial stress. How did this happen? A couple of things have caused it: 

·      The widespread availability of credit cards, coupled with a lack of discipline to use them responsibly (studies show spending via credit cards is substantially greater than cash only)

·      Financial literacy is not a priority in many education institutions, despite the importance of budgeting and investing in daily life

·      The rise in consumerism and the strong focus on buying “things” in our culture

The long and short of it is that easy access to credit cards and loans has given consumers a false sense of financial security. This lures them into spending more than their income can support. The debt builds and accrues interest, making the monthly payment grow every month. Today’s average family has several credit cards with monthly balances well into the thousands? Eventually, there has to be a day of reckoning and these large balances and interest charges MUST be tackled.

Fortunately, you don’t need to be a rocket scientist to live debt free. It’s easy—just be disciplined and abide by this basic principle: Use credit wisely and sparingly and resist making purchases if you can’t pay with cash. Keep it simple—avoid the credit trap and you’ll relieve your financial stress.

“Credit buying is much like being drunk.

The buzz happens immediately and gives you a lift. The hangover comes the day after.”

Joyce Brothers

Do you have some good strategies for (or questions about) avoiding or overcoming credit card spending and debt?  Do you keep it simple? What’s YOUR method? Jump into the conversation on my website and leave your comments . Then share th fun and keep the conversaiton going - please forward to friends and encourage them to sign up for to receive our weekly emails at www.dennistrittin.com/newsletter.aspx..