IT Pilgrimage

A Journey From IT to Freedom

Posts Tagged ‘Credit’

Credit Cards, The Root Of All Evil?

Posted by IT Pilgrim on June 5, 2008

Are credit card companies really the root of all evil. These days it seems popular to believe that banks and credit card companies have cause all of our problems. I am including the sub-prime mortgage mess, and the more recently decried credit crisis. Well, I am going to go out on a limb here and voice what will probably be an unpopular opinion here. We have don this to ourselves. That’s right, I am claiming responsibility for my own mistakes. Do I have a home that’s now upside down and un-sellable, yes. Do I have credit card debt, yes. And its all my fault.

We, as the American public have caused ourselves this problem by not taking responsibility for our words and actions. Is this insensitive of me, I would say probably, yes it is. Its time to draw that line in the sand and step over it. By we, I mean as individuals and as corporations, all of us. We buy things on credit that we cant afford, we buy bigger houses in nicer neighborhoods that we cant afford, and the list goes on and on. Rather that waiting for someone to save us, I believe its time to make a stand and start digging ourselves out. All I can hope for is that at least one person hears my rally cry. So where do we start?

Step One: Take Inventory
Its time to take an inventory of your life. Walk around, write down everything you have and everything you owe. I personally like to separate the things I have into two categories: need, and don’t use. Have some extra clothes laying around? Toys, Dvds, etc? Sell them on Ebay, have a garage sale, just get rid of it before you change your mind. Have a gym membership that you don’t use? Get rid of that too. Stop eating out, even if you have to eat cup of noodles every day for a year, its still cheaper than eating out. Stop paying for and get rid of everything humanly possible.

Step Two: Start Digging
Now that you know what you have and what you need, its time to get to work. This is where the expression, no free lunch comes in. Can you get overtime at work? Do it, work overtime until your hands and eyes fall off. 70-80 hours a week, its totally do-able. One word of caution however, try not to work more than 100 hours in a single week. I have found that somewhere after that point you get tired enough to start hallucinating, I do not recommend it. If you cant get overtime, than get a second job, even if its at a burger joint, or greeting people at the local superstore. Work night, work weekends, work lunch hours if you have to. If you’ve read The Millionaire Next Door, you’ll remember that many of them sited working weekends as their big break.

Step Three: Pay It All Back
Making a little extra money now? Good, its time to start filling in that hole you dug. Even if it seems insignificant, $5 or $10 can make a difference. The usual personal finance wisdom is to pay down the smallest debt, or the one with the highest interest rate. I found however, that sometimes, at least to start with, it helps the most to pay off the debt that you hate the most. Whatever that may be for you, be it the credit card, the mortgage, whatever, just pick one. Use every dime of your extra income towards it and make that sore spot go away.

Step Four: Install Some Insulation
Debt paid off now, or at least have your head above water? Beautiful, now its not quite time to quit that second job yet. Now its time to start taking some of that extra income and stashing it (preferably in something bank-like and not in the mattress). That way, when your radiator blows from working so many hours, or your car has trouble you have a little something to absorb the fall. Even if you only stash $25 a month, its more than you had before and a good start.

Step Five: Keep it Small
Now, at this point, hopefully you have made that hateful debt go away and have built yourself a nice little emergency fund. At this point, if you really want, you could probably quit that extra job, but you might want to consider one more little emergency fund. I like to call this, my “take this job and shove it,” fund. That way, if I decide I hate my job too much to come in on Monday, I don’t have to. I would recommend somewhere between two to six months salary, depending on how much you make. The higher paid you are, the harder it may be to find a job, so you will need more.

So, where am I you might ask. In the interest of full disclosure, I am hovering somewhere in step 4. I work two jobs, and take on any little extra way to make money I can find. I have one credit card left, (the one I hated the least), and I am rapidly catching up to that despicable mortgage. I expect them both to go away by the end of this year. I have had a few brain melts and haven’t taken more than 3 days off in near on 4 or 5 years as I am saving that as my reward. I tell you that, just so you can see that it can be done. Statistically, we are one of the hardest working nations in the world, hours-wise, its time to have something to show for it. Anyone with me?

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