Credit cards/Debt/Living Within Your Means

Society in general is an "I want it NOW" mob.

Credit has always been too easy to get, way too young.
That leads to a lifetime of "thinking" that if you can pay the payment--you're alright.
Seriously, it's a decision you must arrive at consciously.
It's not the "norm" of this society.
You have to have the guts to go against the "norm", the car payments, the getting what you want when you want it-NOW, and learn to WAIT for what you want WHEN you can afford it.
We're debt free including the mortgage and it feels pretty nice.

Credit cards are a tool, a FINANCIAL tool. If you handle them right they are an asset to help you manage your money. If you misshandle them they can seriously wound a budget.

If you try and pound in a nail with a screw driver you won't have much success. If you try and cut a 2X4 with an ax, you get the job done, but it would be better if you used a saw.

A credit card is the same. All my credit cards give me something when I use them. From some I get airline miles. From some I get cash rebates.

A credit card used wisely gives you a very high credit score which can get you a better (lower) interest rate on car or home loans. The lower the interest rate the less you pay for the loan. And that by itself is a good enough reason to learn how to properly use credit cards.

Good luck to you and yours.

We each have a credit card for gas and groceries. We pay it off, in full, every month. Otherwise, all purchases (even "BIG" ones) are on our debit card. Bottom line, if the money isn't in the bank to cover it... we don't buy it!

We budget and save and live well below our means- but we still live a good life. We both drive cars that are nearly the 10-year mark... but we OWN them! We live in a modest home... but we can AFFORD it AND can take the massive hit when we (hopefully) sell it to move closer to my job (cut down on commuting). We don't eat out very often, but when we do- we pay cash. We don't have "toys" b/c we wouldn't use them often enough. We don't buy books, we go to the library. We save for retirement, college, private schools and security.

Bottom line, it really IS that simple. Your household income shouldn't be a "surprise". Spend less than you make. Save for a rainy day, but when it "rains" it usually "monsoons". Save for your retirement- your children can always borrow for college.

The only debt we have is our mortgage as well and my husband's school loans. It feels good and I wouldn't live any other way. We don't panic when my husband's company starts talking about lay-offs b/c if needed we could cut back further because we would HAVE to- get a second job, whatever.

As a nation, we over spend and under save. It's really sad, but true. No one is entitled to "stuff"- in fact it's pretty useless in the long run.

For what it's worth, we both have crappy "free with your renewal" phones with no internet. Why? Because we don't need it! I have a computer at work and one at home- I don't need one in my hand 24/7 too! Right there... major savings for people. Want vs. Need... just a thought.

Not everyone's financial situation is so incredibly black and white. Credit cards are tools. When used correctly you can build a great credit score which can help you obtain great interest rates on a home or car but your credit score also has impact on things like insurance and/or getting that job.

Each individual may need to do something different in order to acheive financial credit utopia and that supreme top limit on their credit score. Each person would need to figure out how to do that and balance life and living, emergencies and tradgedies along the way.

Sometimes I wish life was so incredibly black and white but it's not. Shades of gray and colors all come into play which shakes things up.

We don't buy something we cannot pay for. It is that simple. Now, of course, there are exceptions with the house and car. And I incurred student loan debt. But had I known what I know now, I wouldn't have.

Because we live within our means, it means we have a smaller house than most of our friends. We have modest cars (2005 and 2007) but both are very nice and reliable. We don't take lavish vacations. That one I am not too happy about. =)

I don't even carry a credit card anymore. Why would I? The ONLY reason I could see carrying one is if you are on a very tight budget and you think you may run into a serious problem while out on the road or traveling. For ex - single mom traveling with kids, car breaks down, must put on CC.

Using cards for points is the silliest thing I have ever heard. (unless it is your bank card of course). The only reason people get rewards from CC's is because the CC company is making money off of you!! Think about it!

I have one master card, one visa, one discover and 3 store cards where I shop most - Target, Kohls and LOFT (OK, so I probably don't *need* LOFT!!) I have never abused my cards and have never revolved any of them. I don't really know why. Maybe I got it from my dad, who always paid his entire balance each month. My husband and I only have mortgage debt and, unless something catastrophic happens, that's how we plan to stay. I'm not saying I'm "all that", just that I guess some people get credit cards and using them correctly with no problem. What I like about the store cards is the discounts. It doesn't cause me to buy more than I need. But really, who doesn't shop at Target? I get 5% off every time I go there. It adds up. And I get extra coupons at Kohls just for having a card, and that's when I shop for my girls' school clothes, gifts, etc. I don't go buy things just b/c I have a coupon. My visa is a "Upromise" card, where a certain percentage of my purchases go into my girls' 529 plans. I've had the card for about 5 years and have accumulated over $500 for my kids. That's free money! And no, I don't spend money just to earn money (know what I mean?) I buy what I need, with a frivolous purchase made here and there (not often). I also refuse to have a card that charges a yearly fee. There are so many cards out there that don't charge fees. So I guess that's my take on it. If you live within your means and know how to handle credit cards then go ahead and use them. But if cash only works best for you then do it! My brother and his family were in debt until they got rids of credit cards. They pay cash for everything and it's working for them. Guess you just need to know yourself (and your self control or lack thereof!!)

Scarlett - I didn't read your response before I typed mine. I have to respectfully disagree! My credit cards are NOT making any money off of me because I do not pay annual fees and I pay the balance each month. If you do these things, then the rewards are just perks (like the free money I mentioned in my kids' 529 plans) And I didn't even mention the rewards Discover owes me. I keep accumulating it (you can cash it out after you've earned $50) but they owe me over $300. And if you get it in gift cards they'll give you even more. I'll probably ask for a Kohls giftcard and buy my girls' back to school clothes with it. Things we need anyway. Something interesting about my Discover card - my husband and I ONLY put gas on that card. That's it. You need gas, right? So honestly and truly, that $300 they owe me is FREE.

Of course, there are some people out there who might actually charge MORE and buy random things in order to earn more rewards. I'm not one of them.

Cheryl you sound kinda like me. We don't have credit cards. We did have one a few years ago, for just in case, but then they started minimim fees or charges or what-not, so we canceled the one card we had. We also use our debit card as a credit card or pay actual green cash. (Some places will give a discount if you pay green cash). We are very non-materialistic. We get rid of what we dont need/use. We JUST yesterday, got a nice flatscreen tv. Until yesterday, we've had one of those huge heavy boob-tubes. My MIL wants to buy me new towels and rugs and stuff for our new house, but we're just not ready for new stuff yet, so we really do wear things out until we need new ones and don't buy things we dont need.

Doesn't the bible say that we are not supposed to be in debt?

We live below our means, and are very happy for it. We are building our house as we live in it (we're roughing it, seriously. I don't have kitchen counters, nor cabinets, no doors on our rooms yet ......). We don't have cable. Never have in our 4 years of marriage. Last pair of shoes I bought was at the thrift store for $6. Last pair of jeans I bought was for $4 at the thrift store. Last haircut I got at the salon was for $30 probably 6 months ago (I will trim my own hair when my ends get bad). We dont go out to eat but maybe once a month. Simple life is much easier than a materialistic life.

It's hard for me to speak to this issue because not everyone has a set means to live within. If you get paid X per hour or X per week and you know this, then great, make a budget. But when your income can quite literally jump up and down and all over the place on the whims and fancies of other people and their personal situations, then it gets rather depressing to try and set a budget.

We are working hard to be a cash only family too! We are only $2000 in credit card debt and working hard to get it paid off, but due to unforseen medical expenses we have had to put this on hold and use our extra money to keep us afloat for now. :( I am hopeing to get back on track in the next few months.

Our credit card debt is from when we were in college and not really thinking, but YOU better be sure to know I will not let my kids make the same mistakes we did and misuse our financial aid money.

Edit** I agree with Krista P. I have a cheap free phone too. I look at the computer (well mamapedia) all day while at work and at home. Otherwise I am driving and DO NOT NEED to be on the phone when I am driving.

We have credit cards (two of them) because it's easier to pay for things than using cash. And, it allows us to get points that can be used towards other purchases. We pay off our credit cards every month, so there are never any finance charges or interest. I think a lot of families that have credit cards use them the way my family does.

But I do agree that if you're living off your credit cards and max them out without being able to pay, that IS financial irresponsibility.

We've been a cash only family for a few years, as well.

Here's why I WANT a credit card:

- My dog broke his foot. We had to wait ELEVEN days to get paid, because no local vet will take payments or bill. Cash or card up front. MY POOR DOG!!! No pain med. Unset bone. It just makes me *angry*.

- My car got flooded back in Feb/March (while I was at the hospital for a week with my son). Since it rained for something like 4 months straight this winter/spring it could never dry out (we had dehumidifiers going and the engine and heater going, and a rug cleaner, all to no avail). So my car is completely *infested* with mold. I have to get an all new interior and I haven't the $500 insurance deductible to do it. So for 5 months, I've had no car. (For want of a nail, the shoe was lost, for want of a shoe...)

- I have an injured shoulder. (Broke a wedge shaped piece of cartilage off of the glenoid (the cup shaped part your humerus fits into) and ripped the tendons and ligaments away from the bone. I have very limited movement, and am in constant pain (since February). FORTUNATELY I have high pain tolerance (I'm in chronic pain from my waist down). To fix it is a very simple outpatient procedure. Why haven't I done it? Well, I need a couple hundred up front for the copays. AND I need to cook for at least a few weeks in advance (because my arm is going to be strapped to me for absolutely NO movement for 6 weeks or the repair won't hold... and then 6 months of VERY careful physical therapy) and cannot afford to buy the groceries in advance just yet.

$ What we HAVE paid for was our son's medical bills. Our insurance deductible for major care is $8500. Not including 11 trips to the ER @ $100 a pop, and 20 or 30 specialist visits @ $45 a pop (due right then), and $3000 dollars worth of COPAYS for medication. In 3 months time... it only HAD to cost us about 4k + 8500. ((Now, the 8500 we COULD have payment planned out, but my husband didn't know that, and out of fear just paid as much of it as we could. 6k. DRAINING us completely. And every spare dollar going to cover daily medical expenses (copays, etc.). Any chance YOU have a spare $12,500? Plus another $1500 for the 3 "can't pay for it" emergencies that happened above. Plus another $5k for 2 months of mortgage payements (because hubby's work decided not to pay him for his last 6 weeks with them until OCTOBER), and another $1700 for COBRA, because the HR person screwed up and cancelled our health insurance on day 1 of his 2 weeks notice, instead of when he actually LEFT.

Can you come up with $21,000 in 4 months time?

We live within our means, as long as nothing REALLY EXPENSIVE crops up in the form of an emergency, and my Husband is getting paid regularly. But beyond the "standard" emergencies that always crop up (which I haven't added to the list)... when all of a sudden you're faced with NEEDING (not wanting, but needing) thousands you don't have... what do you do?

Myself? I don't eat for 3 or 4 days at a time, get behind on my bills, beg and plead with absolutely every creditor around to put us on hold and payment plan us out, cancel all of our son's activities, cash out our IRA (taking a 30% hit) and cry, wishing that we had a credit card.

For my husband and I, we use our credit cards to buy experience. We love to travel to other cities, take road trips, and go to festivals and concerts, so we do so once a month or every couple of months, and use our credit cards for the bulk of the expense. We have had them since college, and pay them off or leave very little balance month to month, and it works out great for us. Having done that for a few years and building credit, we were able to buy our own house with a reasonable loan in our mid-20’s during the worst recession of our time. YES, we are financially responsible and secure in our jobs, but if something were to happen, we could switch our level of spending very easily. So, if we needed to be cash only family, we could, but we choose not to. Credit cards are a great financial tool, and if used responsibly, can really help out. A piece of furniture here, trip to Vegas there…it’s all worth it to us.

It's been a long time coming, but we finally paid off our credit cards. But I am not cutting them up, we still use them (only responsibly now). Why? A couple of reasons.
1) We pay for our kids' martial arts classes thru one of those automatic billing services---they charge our account once a month for that month's 'tuition'. I don't want them to have access to my bank account. I don't like ANYONE having access to just take money out of my account. If there is an error, the money is gone. A credit card gives me some protection.
2) I also like to buy major purchases on a credit card. It gives additional warranty protections and protections against a seller/company that won't make a damaged product good. For ex.: I bought a gym membership on one one time. Paid in full to get the best price and additional months of membership for free. The gym went out of business 3 months later. I called the credit card company, provided the documentation, and they refunded the charges--they got the joy of dealing with the gym and it's bancruptcy, not me.
3) When making reservations, again, I like the added benefit of not giving out my bank information. If there is a charging error, or a "hold" for deposits, I don't want my actual money "held" before I go on the trip and spend it and in the case of error, for my account to bounce something elsewhere.
4) this is small, but there are cash benefits (rewards programs) that inject small amounts of cash ($10-20 every 6 months?) into my hands. Yes, these are available on no-fee cards. As long as you are paying your bill in full, not incurring interest, it is free money. Not worth it if you aren't responsible with the cards, but if you are, money is money.
:)

I wish we only lived with in our means and we did early in our marriage, but once you get the first credit card and see how easy it is to use, then you ggo for the next one then the next one, I got sick and almost died 2 1/2 years ago, and I lost over 800.00 of my monthly income and I ended up in collections for like 5 creditors, I went from havinf 15 to 20 credit cards, some were just catalog credit cards, but now i am down tro two that I'm trying to get rid of, I been working on my sebt for almost 3 years now, I will nevwer do it again, if I don't have the money for something I don't need it. Credit makes us materialistic, wrong way to be. J.

I have ONE credit card after filing bankruptcy nearly 3yrs ago.

Small debt really. I have it to rebuild my credit. I will charge something (and my cc has 0% for a full year from purchase) and pay it off over the next few months. I don't pay interest, but it's still building my credit back up.

The home my family lives in is technically in my step dad's name, but it's our house. We pay the mortgage. It's like a lease with option to purchase situation. We overpay on our mortgage every month towards principal. We have ONE vehicle payment and a camper trailer payment. The ONLY thing in MY name is my credit card and my cell phone bill.

We don't spend more than we bring in. We almost never have cash on us. Like you, we use Debit. I don't use credit for Christmas. I don't use it for groceries. I don't use it for gas.

ETA- This summer we had TWO kids in child care. That alone cost almost $1200 a month. If we can do that and not be up to our eyeballs in debt because of it, I think we're doing just fine.

We've made the switch to CASH only - Very hard at first, but you get the hang of it~ Just like with anything. We dont spend more then we bring in :-( Sometimes it is Very aggravating but its what is BEST for Our Family and Our Future!!!

I use cc's for on-line shopping because it's more secure than using a debit card. I use them when we vacation so we don't have to hastle with cash. I have some bills that auto-draft to my cc's, this is for my protection if I need to dispute something and also for my convenience. I pay the cc's off in full every month. I get either miles or rewards points on all of them. Last year all the gift cards I gave people for Christmas were paid for with cc points - about $300 worth. My husband and I flew RT to Cozumel on his miles last year, 1st class (he travels for work, those weren't all cc miles).

As someone else said, cc's are a tool; if used wisely they can be of great benefit. The problem isn't credit card use, it's credit card mis-use.

Of course living within your means not outspending what you bring in. I don't understand why people constantly spend more than they can afford. My best friend is like this. I'm not talking literally needing to buy food but other just "stuff." And people need to SAVE too for retirement. But credit cards can just be a convenience. I use them as much as possible bc then at year end I can see my spending and I get points etc. And I buy a lot online so kind of need to use one. So it's not credit cards that are necessarily evil. They help people overspend but I've never carried a balance on my credit card ever. Not $1.

To me living within my means is my income split into 4 parts and I don't go over this. Preferably I live under my means.

1/4 = House payment, insurance and taxes
1/4 = All other monthly bills
1/4 = Food, gas and cleaning supplies
1/4 = Savings for new roof, furnace, college, new car, retirement or . . .

Currently I am living over my means because my income is split in 1/3rds and I don't have any money saved for emergencies.

We are cash only as well. Was not always, but I've wised-up on money smarts and I'm not going back! We have our mortgage, and we DO have one car payment- it bugged me at first, but I'm over it... All the other cars I've EVER bought were paid in full-cash.

I agree: "living within your means - means that you don't spend more than what you bring in"

My advice is don't ever CONSIDER a purchase out of your means.

It does feel like you kicked a nasty habit when you live without credit cards. Makes the air smell better too.

I think that financial responsibility is paying your bills, even if that means only the minimum payment on a credit card. Financial utopia is realizing how much more you can have without interest payments.

Troy and I just spent a week in Italy. I assure you we bought what we wanted to buy. Yes it made a small dent in our savings. Still within two months we will be back where we were and saving again.

I have had credit cards for decades and have never misused them. They are a tool, as others have said. I now live on a limited and somewhat unpredictable income, but my credit score is exceptionally high. That has been a real asset to me. Even now with student loans, my assets are greater than my debts. I don't need to operate on "cash only" to manage my money responsibly.

One example of a credit card as a tool is that I need to occasionally travel for work. The company I work for reimburses me for those expenses afterwards. If I didn't have a credit card, I would be loaning the company my cash to book flights/hotels/rental cars. With a credit card, I charge these expenses then get reimbursed in time to pay off the balance without paying any interest. I've also earned enough "miles" through work trips to take a required trip for school free, and for me and my daughter to take our first ever vacation together.

I have just switched to cash only for everyday purposes and it really helps me control my spending on little things. Before I used my debit card to pay for things like lunch, coffee, groceries - OMG it's almost impossible to keep track of how much you spend during the week for... well, as you say: nothing to show for.

We also have credit cards. They are for purchases you cannot make in cash and that are safer to make per credit card rather than debit (mainly online purchases). I don't carry them on me when I go shopping (only use them at home) and pay off the full balance every month.

BTW, I do think it is important that you have one and occasionally use it (and pay it off right away). I came here from Europe (where we do have credit cards, but they are not very common) and of course had no credit history. If you ever want to get a mortgage to buy a house or any kind of loan (like a student loan) you HAVE to have a credit history and nowadays many potential employers and landlords (if you are renting) will check it as well.

Good luck.

Well, I like to use credit cards, because I get cash back on my purchases. We never carry a balance, so I don't think I live beyond my means at all. If you are able to use a credit card responsibly, it's good to do so because it establishes a good credit history. It makes banks more willing to loan you money at an advantageous interest rate for purchases like a home or a car if you can demonstrate that you are able to use credit with restraint.

Good for you that you have been able to find something that works for you.

Betsy is right about Europe. In Italy, in particular, credit cards are a rather "new" item ( I heard more often about them in the 90s) and because of our historical tendence to save, people use them only for online necessities or for booking hotels (or similar). We generally have buying the first home as main goal (apartments in the main cities are hugely expensive), so we deal with big mortgages, therefore it is a basic necessity to rely on cash/debit cards in order to monitor the monthly spending and make sure we always have that little extra that allow us to have extra pleasures like summer holiday (weeks long in august pretty much everywhere), dining out in the evening and during the weekends, short day trips in the countryside with the family and so on. Also we keep in mind unforeseen emergencies (medical not so much because here is free or cheap) as a car broken down or some problem in the house which needs to be fixed (plumbers are crazy expensive). So, all in all, although the majority of us is not *rich*, we do ok because of the way we handle money.In my opinion using credit cards is useful, but it's bad if we let them take over.

I definately agree! With credit cards you really don't feel what your spending, literally! We stopped using credit cards,it's been almost two years, we only use cash and to be honest, it feels GREAT! Yeah, I can't indulge in buying the things I "want" rather then need. I only take a specific amount of money out with me while shopping and set a limit for our spendings. It's truely the only way to go with the way our economy is. Our credit cards weren't maxed out but the intrest rate was just getting higher and higher. But the best thing we did was stopped using credit cards...I 100% agree with you though!

We lived within our means when we had the means. We had a few credit cards with high limits but never used them. We'd charge a grocery trip here or a tank of gas there to keep the accounts from getting closed on us but over all, we managed without credit just fine.

Then my husband lost his job and between what I could scrape up taking minimum wadge retail jobs here and there and his unemployment, it wasn't enough to cover everything we had before. We cut out everything but the necessities and the one luxury of internet access. Even then, every month it was a war of attrition on our meager savings. Eventually the savings ran out and what caught our fall into the abyss of foreclosure and moving in with my parents was the credit cards.

We've slowly accumulated a debt over the year of his unemployment, and he just found a job last week. The job only pays about $400 more a month over what he was getting from unemployment and after paying for the long commute every day, at the end of that month most of that extra $400 is eaten away. So we're essentially in the same boat as we were before... except now the daily worry that the car is going to break down is added onto the heap of everything else we were previously worrying about.

Without being able to borrow, we'd have been out on the street. I'm sure we're not unique in this situation and I wish that we could go back to the days where he was making enough to support the household, but things are what they are and when the wind blows hard in the wrong direction, you can either sit and gripe about it or adjust your sails.

I don't spend more than I make in general, but I do carry a balance on my credit card(s) because there are things that I have to have that I cannot afford to pay cash for like: my fridge and freezer broke down at the same time. I couldn't afford $2000 for new appliances so they went on the credit card and are being paid off monthly. Or when I need to get the car fixed. When I can't afford to pay cash for things, I use the crdit card and pay it down.

My mother taught me that credit cards are like 30 day loans and I do my best to treat it like that. I also use my bank card to purchase everyday groceries and bills so I can track my expensis. Thats what I do,
A.

I think there are very few people who live within their means. I think living within your means is more than not spending more than you bring in. It is about saving for retirement or illness or an emergency, etc. and having proper insurance coverage - disability, life, etc.

Credit cards are somewhat necessary with the internet, but I agree, if we do not have the money, we aint buying honey!

I think a lot of people live like this - "We buy things we don't need with money we don't have to impress people we don't like."
— Dave Ramsey

How sad.

credit cards are not necessary. at all.

i agree with you.

Wow, I think credit cards are great! We have about 6 of them between hubby and me. We use them often but pay them off immediately. We get cash back, rewards (free electronics-stuff we actually use), and CREDIT HISTORY. AFter using the same cards responsibly for greater than 10 years, both hubby and I have excellent credit. We don't have to worry about being turned down when trying to buy a house, car, you name it. If you're not the type to give in to temptation then I think credit cards can be quite useful.

Amen sister!

My husband has a credit card, but he only uses it for groceries and gas to build his credit since he has none. They don't do credit in Europe (you know that, I am sure).

I don't get credit cards... It is exactly what you said. Financial irresponsibility. I have never had one and refuse to get one. The only debt I have right now is my car, which is almost paid off. I make my payments from my debit card. NO CREDIT!

Well, my new hybby and I have terrible credit from our previous divorces. We don't "qualify" for credit cards because of our bad credit but we can't improve our credit without showing we can pay timely on our credit cards! We are cash only also. We don't actually carry cash but use our debit cards for the money to come right out of our accounts. It has really made me think about the purchases I'm making. I don't buy stuff anymore unless we really need it and/or LOVE it. I'm trying to teach this to the kids as well. I also don't pay full price for anything. We are currently trying to save for a home. I am happy to be living within our means but also need to stash more away for retirement...thats next... =)

Credit Cards are EVIL! Lol. I used to have them when I was younger. I had a few of them, and I was young and stupid and couldn't keep up payments.
Finally after a few years I got them all paid off and debt free.

Now, married and a toddler later, we are credit card free!! None for us.
And as for debt, all we owe is our car and we've never missed a payment.

I am really proud of how far we have come in just a few short years. It took a lot of work and patience but we are happier this way.

We dont spend more than we can afford, and if there are things we want then we discuss it, and talk about if we REALLY need it and if so then we plan it. We talk about all big purchases and things like that.

It really works for us to do it this way. We try to keep everything as simple as possible!