What is one of the number one reasons for bankruptcy, stress, divorce, loss of property and unnecessary financial pressure in your life?  It's DEBT!  Our immediate gratification culture of "Buy Now -- Pay Later" and easy access to credit is coming back to haunt us!

Great marketing tempts us to use credit everywhere these days, and ours is a culture of "I want it now so… buy now, pay later."  This popular belief that living beyond one's means is a normal lifestyle is simply NOT true.  A normal, healthy financial situation does not include buying anything you want on credit and just "paying later."  In fact, you should avoid using credit as much as possible, or altogether.

Dangers of "Buy Now, Pay Later"

Proof of how dangerous it is to "buy now, pay later" is all around us.  The Enron and WorldCom disasters early in the 21st century show how poor credit policies can bring on loan defaults and bankrupt­cies.  Failed savings and loan institutions and the resulting $500 bil­lion bailout of the 1990s placed our country in severe financial danger. 

The credit and mortgage crisis of 2007 showed how relaxed qualifications and over extending credit not only affected thousands of families but severely damaged the economy.  No one is immune to debt -- governments, big business, families and individuals are all hurt when they abuse it.  Loan defaults and bankruptcies are skyrocketing!

Easy Consumer Credit on the Rise

After World War II, greater availability of consumer credit drastically increased the number of Americans in debt.  Marketing experts introduced three new credit strategies still enslaving American consumers today:

1.    The Easy Payment Plan.  This credit strategy was to advertise a low monthly payment instead of the total cost of merchandise.  Consumers were per­suaded to shift from saving to pay cash for things, to only looking at how much the payments would be. It worked like a charm!

2.    Long-Term Mortgages.  Long-term G.l. housing loans were offered to veterans returning from the war.  Soon long-term mortgages became the standard of home finance.  30-year mortgages became the rule.  Long-term car loans soon followed; many are 6 years - the skies the limit!

3.    Credit Cards, Bank Guarantees, and Lines of Credit.  Since no collateral was required, credit became easy for Americans to obtain.  The high interest rates and fees charged made the lend­ing companies rich. It became very easy for consumers to buy almost anything on credit.

Easy credit has also changed the way people think about and spend money.  Studies show that people spend more money when they use credit vs. cash.  Many consumers now consider available credit just like cash in the bank.  Credit has turned the majority of individuals and families in America into debtors -- with all its pressure and burdens.  If you're in debt, you're not alone.  According to the Federal Reserve, Americans are in $1.98 trillion of debt, more than $18,000 per household. 

It's ALL about the Interest! 

People who understand interest -- EARN it, people who don't -- PAY it.  You're not only buying things you can't afford now - but you're paying much more than the sticker price.  When you buy on credit you pay your creditor compound interest.  According to Albert Einstein, "Compound interest is the greatest invention known to man." But it's only great if you're on the receiving end, NOT paying it!  The wealthy understand this concept, see Building Wealth.  

Be the exception! Don't buy into the mindset that consumer lines of credit and debt are part of healthy finance. They're NOT. Carefully managed credit is a powerful and useful tool. When used wisely, credit can be very effective in building businesses, establishing credit, and even building wealth.  But unmanaged credit quickly becomes out-of-control debt. When it reaches this point it often becomes harmful and even devastating.  If you don't have the cash, ask yourself do you really need it and is it really worth it.  Keep your emotions in check and resist the powerful marketing and sales messages designed to entice you into buying now and paying later.    

It can seem impossible to eliminate debt from your life, but you have the power within you to make the necessary financial changes, and establish new habits based on proven, successful money management fundamentals. Then you can not only pay off your debt, but you'll be able to build wealth!