Managing Credit

I think a big misconception a lot of people have, is credit being “their” money to spend. I have a lot of meetings with client that will admit that when they were younger they viewed credit as money in their pocket. They didn’t, maybe due to lack of credit knowledge, realize how much credit actually cost them. Sooner or later these same clients found themselves in Bankruptcy or credit troubles. I see clients come through that have missed payments for $15, or collections for $100, or over limit by $10, or written off credit cards for $500. It may seem way out of line to have these things happen, but it is certainly reality. Any number of things can happen to people financially to cause a snowball affect with credit. One point I would like to make is that if credit was managed from the beginning than these challenges wouldn’t happen. Now, some of you might be saying that I am out of line by saying that, but if you really think about what I am saying, than I am not out of line. Of course none of us are perfect, and their are a lot of challenges some of us face in life. Some of us can face divorce, a spouse being injured, car accidents, layoffs, etc but these reasons are not a reason to be over our heads. I am a true believer in living within means. This means we should be spending money according to our income. For instance, a person making $2000 a month should not be $5000 in credit card debt, or even $2000 in credit card debt. On a $2000 wage, after expenses the average person living on their own my not be able to pay that debt back. I understand some might be saying that they were fine until they took a pay cut, etc……but the fact is they weren’t fine if they were managing credit. My opinion is that credit is an emergency back up plan, credit is to be used if you can afford to pay it back that month, credit can be used for investing as long as the return is greater than the percent borrowed at( and paid monthly). I cant stress enough that young adults need to learn about managing credit at a younger age than current. I strongly believe that our education system, banks, and government need to make it a point to teach these young adults, or teenagers about credit and how to manage it. How many teenagers get a credit card for the first time and go to the mall and purchase items on it, or how many just keep swiping it for drinks at the bar, or gas, or personal items. Are they really thinking about paying it back when they swipe the card? My opinion would be No. The reason I say this is because if they were thinking about it they might not have purchased that item in the first place. Obviously I’m writing this ,thinking to myself, I might have had the same challenge when I was younger. Maybe I have had challenges myself and have learned to overcome those challenges. Don’t get me wrong here, I am not preaching, just voicing my opinion on this topic. I cant help to think to myself, what if the teenagers were more educated on credit, at a younger age? Would the banks suffer? Would interest rates be lower? How is it that we are one of the toughest countries to get credit in, but yet we have uneducated people in credit? This doesn’t make sense.  We are the economic hub of Canada and we have some of the highest incomes in Canada, but yet, some of these same people don’t pay their debt. Some of these high income earners are the same people that are also getting qualified for bad credit car loans in Alberta. Some of these same people are looking for everyone approved car loans in Alberta . Some of these people are looking for a secured credit card to build credit. How are some people making over 6 figures annually and looking for 0 down car loans . I have to believe that the government should step in and at least try to be a part of the solution. Not the solution now, but the solution before the credit is granted or approved in the first place. Some will say it is up to the parents, but if the parents weren’t educated than how are they suppose to educate(I’m referring to the topic of credit only). I understand that banks aren’t allowed to approve car loans if it will put the client in financial hardship, so this would tell me that the client should be educated on financial hardship can happen.

A Good blog to go to that will assist in money management is Vicky is well educated in this topic.

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Just my 2 Cents