"Get Smart About Credit" Day

Disclaimer: I am not a financial planner/adviser nor do I claim this commentary as financial advice. I am a widower and single parent of two teenagers, and I have experienced financial hardships and continue to struggle with managing finances in an effective and responsible manner.

Today, we celebrate "National Get Smart About Credit" day. I think it is an important celebration, perhaps one we should observe every three months, a call for all of us to become more informed about the credit industry and how it affects (some would say, destroys) our finances and our lives.

Let me be blunt: credit is evil.

One more time: credit is evil.

It really is worth repeating: credit is evil.

Credit is evil in many ways. First, it makes it easier for us to be irresponsible. That is, it makes us less able to respond to our long-term financial needs. Why? Because it makes us incredibly dependent on others for our needs and wants.

Second, credit has made it possible to bypass the process of saving for something that we need or want, and we have lost the willpower, discipline and skill to work, save and plan for those things.

Third, getting things quickly and easily has diminished the value of those items, and has lessen our enjoyment from acquiring them.

Finally, credit has enslaved us financially, turning our present pleasure into future suffering.

Credit is used in many scenarios:

• The poor use credit to get things they need. Using credit ensures they remain poor and/or makes it harder for them to get out of poverty. This is financial/economical slavery. This is what slave/plantation owners and early industrialists used to do: force workers to buy from them on credit so that they were forever indebted and could not leave. Slavery. 
• People use credit to get things they want. We all fall into this trap. 
• We want a new phone: sign the credit contract and it is yours. Except we pay a lot for that new phone in charges that we otherwise would not. 
• We want a new car: get a loan. If we look at the terms (especially the things that they try to hide from us) we can quickly see that loans can be very expensive. For example, when I bought my latest car (back in December 2012) I got tricked into buying an extended warranty that I normally would have not opted for. How? The finance manager altered the interest rate to make the payment stay "about" the same. Except he could have given me that better interest rate to begin with and not add the extended warranty (which is, as many of you know, pretty useless and pretty expensive). Extended warranties are free money for car dealers, so they always try to sell you one. And so does BestBuy and Walmart and everybody else.
• We want a new home: get a loan (with no money down) that includes much more than just the home (IE., appliances, fences, etc.). Since the 2008 financial woes, the minimum down payment has been enforced more closely, but many builders still lure buyers with "no money down" deals. I have fallen twice for that. The first time was a total disaster, and the second time could have turned out poorly if not for extenuating circumstances.
• We want to go to (or send our kids to) college: this is one of my pet peeves: another form of modern financial slavery. So many fall for the false paradigm that we have to start college immediately after high school, pay for college with loans and finish our college education in x number of years. None of those are true. Don't fall for that story line. High schools and colleges try to sell you on their plan, the one that is in sync with banks and lending organizations, so that they can slave you for decades. Just say no. Do it some other way. Work part time and go part time to school; find a trade and have fun with it — you can make lots of money and be debt free. A good carpenter, plumber or electrician can have a much higher net income than that of a surgeon over their lifetime. Look into it and think about it. Don't buy into false promises and lies.
• The wealthy use credit to finance projects with other people's money, promising better returns on investment than they would get from other sources (such as the stock market).
• The government (at all levels) uses credit to finance projects, which most of us end up paying in the form of increased taxes — unless you are wealthy or a corporation because then you can get away with paying no taxes and forcing the middle class to foot the entire bill.

I am sure there are other scenarios in which credit is used, rarely responsibly, mostly carelessly. And in almost all ways I can think of using credit, I think we are better of saving the money and being disciplined to live within our means and only buy what we can afford, what we can pay for right now, not next month or next year.

Shakespeare said it best: "Neither a borrower nor a lender be."