Monday, September 19, 2011

My Two Cents on Debt - Get off the "new" Merri-go-round

If you are reading this blog I am likely preaching to the converted but I am going to get on my soap box.
There are only two kinds of debt that are acceptable:
1. Debt for a mortgage
2. Debt for an education

Yes, I believe in credit cards but only if they are paid off 100% each month. I never pay a cent in interest and charge at least $10,000 per year to my credit card. I pay an annual fee for an airmiles mastercard and as we travel frequently this is a very cheap way to support our travel habit.

If I didn't travel I would seek out a zero fee or low fee credit card for additional benefits (ie Presidents Choice credit card = free groceries).

So many reports in the news these day of people spending more than they earn and how they feel with their personal debt level.

Yes, as a nineteen year old with my first credit card (Sears was the only company willing to give me credit - $500 spending limit) I maxed it out buying an overpriced vacuum and lamp which at the time I thought were required necessities for day to day living. Had I known better I would have purchased those items used - but learning about money takes time. It took me two years to pay that off and I have never met my credit limit since.

Flash forward 23 years and I almost never buy new (except electronics) as buying used just makes so much more sense. I am continually shocked to see designer clothes at my local goodwill. Who can't afford five bucks for the most awesome blouse ever? And guess what? No need to charge it to my credit card (and it comes pre-washed so I can see how it will wear). My latest search is for luggage as the $15 Samsonite luggage scored this Spring on Vancouver island was just smashed so that the zipper won't work on our last trip.

If you are on the credit card hamster wheel it is time to get off. The easiest way is to start purchasing used so you can afford all purchases and put away that credit card until you can pay the balance off each month. Really, after you wash clothing once, drive that car once, scratch that brand new table once - what difference does new versus used make?

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