It's All Someone Else's Fault!

So whether or not I think the government is doing a good job is beside the point. What amazes me most is the number of people, and groups, who are blaming them for the things they themselves have caused. The thing that is irritating me the most right now is the number of the people who are blaming the government for all of their personal financial problems.

I'm not saying that nobody is having financial difficulties as a direct result decisions made by the government. For a number of people who are unemployed right now it can or will result in financial turmoil; but those are not the people I am talking about.

The people I'm talking about are the average Joes that have mismanaged their money for years. The ones that put everything they buy on a credit card, or use on time payments for everything they buy. The ones that barely make the minimum card payments every month, and brag they get 1% cash back, but at the same time are unable to keep $100 in the bank from payday to payday.

Don't get me  wrong, I've been there, done that. I thought I had the world figured out. I lived paycheck to paycheck and I bought everything that I thought I needed. What I didn't realize was I was living one mishap away from financial ruin. That was about 15 years ago.

The bad part was I had that one mishap and everything fell apart. My debt was not large, but it was large enough that I starting to get the calls from credit card companies. I was paying my utility bills every other month and eating the penalties and fines for late payments. And the debt kept building, and I kept spending.

One day I decided that I had enough. First I started tracking every single penny I spent. I didn't have to worry about increasing credit card debt, because mine were maxed out and they were not looking to reissue them when they expired. So I sat down with a calculator and started figuring how long it would take for me to pay off my debt making the minimum payments. It came out to seven years. That's because the interest was eating up 40 -50% of each payment that I made. So I looked at my budget a little closer. I was eating out way too much, buying too many things that I really didn't need, and using my debt card way too much.

For myself I found that when I used a debit/credit card I started to forget that it was money.

So I switched to cash and checks for everything. I would only take $30 out a week for personal spending. When it was gone, I was done until the next week.

I also started paying all of my bills (rent, utilities, insurance, etc) as soon as they arrived in the mail. Even if they were not due for weeks. Delaying the payments till they were due was giving me a false sense that I had more money in my accounts then I actually did. I also started paying three times my minimum payments.

Something odd started to happen. I started saving money. So I was paying down my debt, and saving money. I recalculated how long it would take to pay off my debt. Now it was down to 2 years. Two years is still a long time, but a lot less than 7. So for two years kept on track, saving money, and paying down my debt. Saving and paying. No new debts. Saving and paying. Suddenly tragedy hit.

My TV died.

I reached for my recently reissued credit cards; and I realized this is how it starts, and I put them back away. Instead I went to store with my checkbook and paid cash for my TV, and I still had money in my account.

In time I started having little celebrations. My last payment for credit card company X, then company Y, and finally Z. What was amazing was for each debt I was paying off, I started saving money that much faster. Suddenly one day it was done. No more debt, no more monthly payments other than housing and utilities. The first month when I had no additional payments was almost confusing. I was actually saving 60% of my paycheck. I also increased my personal spending allowance to $50 a week.

So enough of my history, that was over several years ago now. Since that time I have purchased a new car, I have purchased my own house (actually purchasing it from the bank but that is good debt, not bad debt), and I have a comfortable amount of savings in the bank. So I am not trapped in the revolving door of debt like many people I know, and many of them do not seem to see it.

Here are some things I have noticed. Banks, lenders, and credit card companies are not the villains in the story of debt. They are partially to blame, but debt, like drinking too much, is more to blame on the person doing it, than the providers. My credit cards would allow me to charge more than I actually make in a year. They provide me the option to charge that much, they do not make me charge that much. A credit limit is not a finish line, it's a line of credit. Now I only use my cards for emergencies with the following exception. Once a year I charge one small purchase on each of my cards, and pay it off over two payments (they want you to pay a little interest to show that you care). I do this to keep my accounts open and active.

If you are spending all of your monthly paycheck to pay off your credit card balances every month and have no money left, you are in over your head. This is not to be confused with the people who are using the 1% cash back cards to do just that; These people have plenty of savings in the bank to cover their purchases, they are just using their credit cards to take a little money back from the card provider. They are not living paycheck to paycheck and using credit cards to fill in the gaps.

When I spoke with the bank about buying a home, I was told I could comfortably afford a house payment which was about 35 - 40% of my monthly salary. I agreed, but found a home where my payment was 20% of salary, because that was what I was willing to pay. They let me know what they were willing to loan me, it didn't mean that it was my goal to meet that mark. Many people do not see the difference and then blame the bank for letting them borrow more money than they can actually afford to pay back.

I also only borrowed enough money to buy the house. If you do not have reserve cash left in savings after you close on your home, you probably cannot afford to buy a home. Having to take out another line of credit to pay for home improvement projects as soon as you buy your home should sound a warning bell in your head; You are looking to do something you cannot afford to do, and you are probably over extended.

So back to what I said early in the piece: Unexpected things can happen which can put a strain on your finances. You can lose your job, you or a family member can have an accident or emergency which can put a major strain on your resources, or even take everything that you have. Things like that can happen to anyone, and you can only be so prepared. Those are worst case situations. But if you are relying on credit cards to make it through the month, every month; or if you are going to payday advance locations and floating baby loans every month, you are in trouble and you need to make a change.

But if you are one of the people who are/were living like that; and got behind on all your payments, and then missed a few payments which just doubles and triples the next payment, and then reached a point where you could no longer afford to make any of the minimum payments, not because of an emergency or because a life changing event came along that was out of your control.  The bank didn't force you to use your credit cards, the loan company didn't make you buy a house that you couldn't really afford, the car dealership didn't twist your arm and make you buy a car that was out of your pay grade.

The government didn't make you do any of these things either. You did it all by yourself. Stop blaming everyone else for a situation that you ran open armed into screaming "Wheeeeeeeee" all the way.

I was there once myself, the difference was that I blamed myself for being stupid with my finances; and I also fixed them all by myself too.

Now if we could get the government to read this, maybe they could do something about their spending too.