Pimp Your Finances

I saw a great list that I had to re-post here. It’s a list of 10 lies that got you (and keep you) in credit card debt, originally posted at Dough Roller.

It may be a month old, but it’s just as relevant as ever. After all, I’m still battling my credit card demons.

So how does their list of lies compare with the lies I’ve told myself? Let’s take a look. I’ll run down their list, then add in a few of mine.

1. It’s an emergency

Even if we have an emergency fund, we may not really be using it for emergencies. If life or liberty isn’t at stake, it’s not an emergency.

This is something I’m about to fall for. I’m going to use my emergency fund to pay for some home repairs. While not an emergency, I still consider it urgent, as I could end up with long-term drainage problems if I don’t do something soon.

2. We deserve it

I think we’ve all used this to justify some unnecessary purchases before. We worked hard. We had a stressful week. I’ve been doing good. There is never any shortage of excuses.

However, doing things because you “deserve” them only sets you back an equal amount. If you’re not careful, you’ll end up with a constant stream of celebrations, but no progress to back it up.

3. It’s a bargain

When you find deals, the question should still be “do I need this?”, not “how much am I saving?”

Buying something you don’t need is never a bargain, regardless of how much money you’re saving.

4. It’s not that much money

Small charges add up. It’s easy to dismiss $5 or even $20 there because it doesn’t seem so bad on its own. But if you’re already carrying debt, it’s even more expensive than you think.

And even though it’s a bit of a cliche, if you can cut back on $20 a week, it adds up to more than $1000 a year.

5. The payment is small

When making big purchases, you should consider the total cost (and interest), not just the minimum or suggested payments that you’re given.

A small example is buying a big-screen TV. You can go to any store, and they’ll gladly point out how it can be yours for only XX dollars per month.

Or on a bigger scale, you can shop for houses, and banks will tell you that you can afford to pay XXXX a month on your mortgage.

But it’s never that easy.

Their plans almost always never include interest, or any of the details. What happens after the initial grace period wears off? What about finance charges? Property taxes? Etc….

The devil is in the details.

6. The card rewards make it worth it

Reward cards can be a good deal – if you pay off your balance every month. But if you keep a less-than-ideal card and carry debt just for the sake of those “free” rewards, you’re really getting hosed.

7. 0% Introductory purchases

It’s a good deal while it lasts, but the whole point is to let you build up a big balance before the introductory rate turns into a high interest rate that you can never get out of. Don’t fall for it!

8. 0% Introductory balance transfers

Again, these can be a great deal. I’m using a few to save at least hundreds, possibly thousands now.

But if I don’t pay off the cards before the intro period wears off, I’ll end up getting burned. It’s a good deal, you just have to make sure you don’t fall for their trap.

9. It’s for my business

Credit cards can be a valuable tool for businesses, just like consumers. However, you don’t want to say “it’s for the business” as your excuse to spend whatever you want. You have to show restraint, just like you would in your personal life.

10. I’ll pay it off after graduation

Ah, I’ve said this before! Sure, build up debt in college. You’ll have a real job after you get out.

But a funny thing happens… it takes longer than you think to find a job. Or you can’t find one that pays what you hoped. Or even if you do, your spending goes up anyway.

You should judge your spending on what’s happening now. Now what you hope or expect to happen in the future.

…and now for a few I’ve learned from my own experience.

11. I’ll start paying down my debt… next month

It’s easy to make the decision to change, but the hard part is following through. If you know you have a problem and need to stop, do it NOW! Don’t put it off until next month, or it will keep getting put off.

12. Things will be different once I make more

You assume that as you make more, you’ll have less problems with money. In reality, the opposite normally happens.

You can’t just assume that once you get a raise, you’ll start using more of it to pay down debt. You have to have a plan ready, as well as the intentions to actually do it.

13. But this time is different!

After you’ve decided to get out of debt, you’ll inevitably face some hurdles. Hurdles that make you want to throw caution to the wind, at least one more time.

Maybe some unexpected crisis has come up. Or there is are concert tickets, gifts, or a dress you just have to get. Normally you wouldn’t indulge, but this time is different!

You tell yourself that after this one last purchase, you won’t make any more with your credit. But it always happens again.

Debt is a slippery slope. Try to quit it cold turkey if you can.

I hope you enjoyed their original ten lies, and my additional three. Hopefully I’ll be putting them all behind me soon!