(Not) Keeping Up With Our Parents: Credit Card Debt

Posted by Lynnae on June 9, 2008

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This week Nan Mooney talks about debt…my favorite subject.

It’s the chapter I’ve been waiting for. The one I knew was coming and couldn’t wait to read. And I wasn’t disappointed. Chapter 7 in (Not) Keeping Up With Our Parents is titled Bridging the Gaps. As the title implies, this chapter is all about what people do when there’s a difference between what a person needs/wants and what a person can afford.

As usual, Nan Mooney used examples to back up her thesis that people need something to bridge the gaps. She states that those who are lucky have parents who can help them out with college educations or a down payment on a house.

But for those who are not so lucky, they have no choice but to turn to credit card debt. Yes, that is what she said.

For those of us whose families can’t provide help, or can’t provide enough of it, there’s really only one option left. Debt.

It makes me wonder what our grandparents did when they ran into financial difficulty. They didn’t have easy access to debt, yet they survived.

My belief is that people have a lot of “emergencies” today that aren’t really emergencies. If the air conditioner goes out in your car, it’s not really an emergency. Yes, it affects your comfort level, but air conditioning in the car isn’t necessary for survival.

Or Mooney gives an example of a woman who was laid off at her corporate job, and decided she just couldn’t stomach getting another corporate job. So she went into business for herself. In the process she accumulated $100,000 in credit card debt. And she makes $25,000 a year as a therapist.

I have no problem with people leaving the corporate world to go into business for themselves, but they need a good plan. Taking out $100,000 in loans when you know your earning potential as a therapist isn’t that great is not a good plan. The woman in the example should have applied for a job that would meet her financial needs and made a long term plan to leave the corporate world. At this rate, it’s going to be hard for her to get out of debt.

What can a person do when their income doesn’t meet their needs?

For those at the very bottom of the income scale, there are social service programs available to help in times of need. For those of us in the middle class, I think we need to carefully consider what is a necessary expense. Cable TV is not, even though all of our neighbors may have it. Driving a brand new car isn’t necessary either.

If you’ve pruned down your expenses as far as they can go, then you need to look at increasing your income to meet expenses. My husband still works a couple of shifts as a janitor, so we can make ends meet. In the next few months, we’ll transition to a place where my earnings replace that income, and he can quit.

For us, debt is not an option. And if we can do it, so can others. I don’t have a magic formula. I just choose not to use credit cards. Sometimes that forces us to get creative with solutions to financial problems, but it’s been over a year since we’ve charged anything, and we’ve gone through some of the hardest times in our lives over the last year.

Yes, it’s hard to say no to the pressure of credit cards. But if we expect our children to avoid the temptation, we need to model the behavior. Credit card companies make a lot of money off those who can’t pay their balance in full every month. The fact that credit card companies are ruthless in recruiting people to go into debt isn’t going to change anytime soon.

If we want future generations to be free of the bondage in credit card debt, we need to teach our children the dangers of debt before they head off to college. We need to explain how credit card companies work. We need to show our kids that living without credit is not only possible, but also fulfilling.

If you are currently struggling with credit card debt, my heart goes out to you, because I’ve been there. I only recently paid off the last of my credit card debt. Two books that I found extremely useful in the process were The Total Money Makeover by Dave Ramsey and Debt Proof Living by Mary Hunt. Both authors have step by step plans to help you get out of debt. Check them out from your library, and make a plan to get out of debt today.

It might be difficult. It might take a long time. But I can tell you that being free of credit card debt is worth the struggle of paying it off!

Do you believe credit card debt is necessary? What do you do when you have an emergency you can’t afford?

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Comments

27 Responses to “(Not) Keeping Up With Our Parents: Credit Card Debt”

Chanin on June 9th, 2008 4:46 am

Glad I found you! Can’t wait to read more! My DH and I are now working hard to pay off CC debt and not get into it again!!! My goal is 1 year and I just started at the beginning of June!
Kacie on June 9th, 2008 4:59 am

I am one of those people who lived on credit cards during my last year of college. I was working full-time and had low expenses, but I just couldn’t make ends meet.

I *thought* I was decent with money, but looking back, I realize just how many ways I could have saved even more money.

And then, I did a silly thing to put the icing on the cake: I took out a credit card so I could charge my honeymoon to it. Yeah. Dumb.

So I went to needing credit cards to buy groceries, then I reasoned, “I’m already in debt and I want this thing now…what’s another $2k?”

And then, the first month out of college while Shane and I were working “grown-up” jobs and we were waiting for our first paychecks, we lived on our credit cards since we had no savings.

By the sheer grace of God, we dug ourselves out of that mess and now have a savings account built up.

Maybe making dumb decisions helped me to become more frugal in the long run. Either way, I wouldn’t advise anyone to repeat those financial choices I made!
Mydailydollars on June 9th, 2008 5:01 am

Nice critique! I agree, much of the battle comes from discerning what’s a need and what’s not. I’m with you. . . no more debt!
plonkee on June 9th, 2008 5:33 am

Never say never. There is usually an option other than debt in every circumstance, however it’s not always the best option. I’m proud to support micro-credit (with cash, via kiva.org). For the people that I lend to there, debt is likely to be their best chance of finding financial security - at least that’s been the micro-credit experience so far.
Lynnae on June 9th, 2008 5:59 am

@Plonkee - I agree that there are always exceptions. But I really believe that most debt is not the result of needs. And especially not credit card debt. Usually there are options (such as making payments to a doctor).

And I’m glad you’re supporting kiva.org. I’m not a fan of debt at all, but if you’re going to go into debt, please don’t make yourself a slave to credit card companies. They’re ruthless!
Debt Reduction Formula on June 9th, 2008 8:16 am

I don’t believe credit card debt is necessary, although I believe it’s harder to live without credit card debt today than it was 50 or 60 years ago.

The #1 reason why is inflation. As more money is printed, prices increase. The price of goods rise long before salaries do. So there’s a time lag that causes an erosion in buying power.

But it’s a good question to ponder. I’m not sure there’s a clear-cut answer for all situations.
Liana on June 9th, 2008 8:48 am

I completely agree with the idea of re-evaluating what is truly necessary in life. We have rabbit-ears on the tv, a 2-door (paid-off) car, and generally buy only necessities. However, I disagree with avoiding credit cards altogether. Many credit cards offer great benefits, and if you have self-control (key word) you can make your necessary monthly expenditures work for you by earning rewards. Just by using our Alaska Airlines Visa for *everything* we can charge we earn a free ticket almost annually. Plus we get a $50 companion certificate annually. The fee for the card ($75 annual) pays for itself quickly. If you are not a frequent traveller, other card rewards may be of more interest to you. Shop around and find one that gives you the most benefit.
Angelsong on June 9th, 2008 9:09 am

I do not have any credit cards. I refuse. When we bought our house last November, it was through a program that required $100 in earnest money. And we chose a home that fit our budget. We have a fixed rate mortgage, and paying it is a priority. We even found a home equity accelerator program that lets us make more than an extra house payment per year, to pay off the mortgage faster. In doing this, we are saving money on interest amounting to almost half the value of the mortgage. We don’t buy anything on credit. We save for things we need, and we are finding that we don’t “need” as much as we used to.
Kelly from My Small Cents on June 9th, 2008 9:15 am

Speaking of downshifting careers, Feminist Finance is talking about that right now. http://www.feministfinance.com.....-term.html
Finally Frugal on June 9th, 2008 11:43 am

I just posted about the fact that the amount of credit card debt owed by Americans is still increasing (albeit at a slower rate than last month). The reasons for this are varied: less equity in homes (and therefore less cash available to ‘borrow’), higher food and gas prices, job loss, etc.

Sometimes credit cards can ‘bridge the gap’ during a true financial emergency, but I believe that Americans are still denying the fact that they can’t live on the equity in their houses anymore. The equity’s gone, but they’re continuing to live like it’s still there. Add to this the fact that the government actually WANTS us to take on more debt (by consuming at ever higher levels while our incomes remain flat or actually decrease). I hid my credit card from myself months ago (and now can’t find it), and I’m so glad I’m gradually weaning myself off of credit and finally learning to live within my means!
Momma @ Tales From The Road Less Traveled on June 9th, 2008 12:11 pm

I guess this is one good thing about getting completely messed up with credit cards in college. Once I screwed my credit up so badly the first time, I learned at a very young age that credit cards are bad news if you can’t pay them off in full every month. After several years of raising 3 children, on my own, in an expensive metro area on $10 an hour without incurring any debt, I feel like there is always an alternative to racking up credit card debt.

I’m glad you’re reviewing this book Lynnae. Your reviews are providing lots of food for thought.
Marci on June 9th, 2008 12:26 pm

I totally agree with you about the ‘good feeling’ that being debt free provides! It just lifts all that financial burden right off your shoulders and makes you almost carefree

And about debt - there IS always another option - there are usually Several Options. And the one option that is Always available to us is - DO Without or Make Do!!! For me, doing without, or making do, is a lot more stressfree than having to deal mentally with debt. Debt just eats at me and freaks me out!

Thanks for reviewing the book ! geez - I can’t believe that anyone would actually say that the only alternative is credit card debt…she really needs to get real!
fuzzarelly on June 9th, 2008 12:34 pm

I began reading your site a couple of weeks ago and find it useful and fascinating.

As per today’s topic, I use credit cards like Liana does. Our State Farm Bank card is free and gives us cash back on purchases that can go towards either our insurance or a credit card bill.

The trick is to pay off the bill every month and on time. No fees or interest. If we can’t expect to pay off the bill on time, we don’t get the item. But, on the other hand, if used wisely, the bill won’t come for 6 weeks and by that time enough money can be set aside to pay it. We discuss at length making big purchases like a new computer or a home improvement project and do not buy impulsively.

A credit card is a valuable tool and not inherently evil.

One thing I don’t do is read catalogues. If I don’t see it, I don’t want it. The desire for an object usually results in unhappiness. Either one is unhappy for not getting the object or is unhappy with the object once bought.
SavingDiva on June 9th, 2008 1:50 pm

I don’t think credit card debt is necessary, but I do still use my credit cards. I pay the balance off every month and pocket the rewards…BR gift certificates.
Ivy on June 9th, 2008 2:33 pm

I hate when people say you HAVE to go into debt to do things. I don’t know if you saw my post on my dental woes, but so many people told me I was going to have to go into debt it actually made me cry.

Luckily, a local dental student came upon Home Ec 101 and saw the post and she’s made me an appointment for the dental school (which incidentally isn’t taking appointments for people who just come in off the street- you have to know someone) so I’m going next week.

So much for HAVING to go into debt or apply for “Care Credit” to get my teeth fixed.

The only thing in your post which I must slightly disagree with is the comment about air conditioning in your car. In some areas it gets so hot, it’s necessary to have air conditioning. Of course, that’s what the local auto diesel schools or bartering is for. There’s ALWAYS a way. Always.
Emily on June 9th, 2008 7:59 pm

The part of this post that rung most true to me was the part about “emergencies”. I think, in general, most of us have it so good, we don’t know what a real emergency is. And like Kacie said, once you’re in the hole, what is a little bit more here and there and then everything has turned into an emergency. I see friends who have so little money but just keep borrowing because they think they just have to have new things or they and their kids will be miserable. Like many others, I have already been in and out of debt and never want to go back. I know there are benefits to using credit cards wisely, but I won’t go so far as to ever say they are necessary.
JenLive! on June 10th, 2008 7:48 am

Well written.

I know it’s been awhile since I’ve stopped by. I usually just read in my feeder. But I thought I should pop in and say hi. The blog looks great! Very professional, yet friendly.

And to think I knew you when you were mostly just under the clutter
Carole on June 10th, 2008 8:52 am

I have never owned a credit card, and my husband has not had one since we have known each other. Our parents and grandparents went without if they couldn’t afford something and we do the same. We have a decent roof over our heads, and eight year old car, enough to eat, some entertainment, good friends and some pets; all on a lowish income, but we have no debt. No amount of material goods would make us sleep better than we do now. Debt has become the norm; crazy!
Michelle H. on June 10th, 2008 9:25 am

Hi Lynnae,
I completely agree - we tend to sometimes look at things and think they’re emergencies when truly they are not. I live in Texas and didn’t have a/c in my car as a teenager - you can do it if you have to. We also only had one TV channel growing up! Marci had a good point about the good feeling of being debt-free and sleeping well at night. Amen!
Sofia Kim on June 10th, 2008 11:37 am

Credit card debt is on its all time high with today’s economy. Hopefully people can obtain the help they need to get out of debt. Thanks for the article!
Harmonic Wealth Fan on June 10th, 2008 1:51 pm

Great site, really helpful.

I’ve always been a little skeptical of the new-agey books my wife reads about self-help or changing your life. But she was so impressed by this one (James Ray’s Harmonic Wealth) that I agreed to read it. AND I CAN HONESTLY SAY THAT IT ROCKED!

What I liked about James Ray was that he didn’t just sell you all these fluffy ideas and leave it at that. James Ray breaks it down into applicable lessons and examples and even provided an online study course that helped me to apply the book to my life and come up with ways I can be more “Harmonically Wealthy” – wealthy in all the “Pillars” or areas of my life. James Ray doesn’t just address the money issues or the relationships – he says that all “5 Pillars” – financial, relational, mental, physical, and spiritual - have to work in harmony for you to achieve a truly wealthy life. I like that approach because it makes sense to me and is about results, not hand-holding.

Here’s the link to his website: harmonicwealth.com/read
Emily @ Taking Charge on June 13th, 2008 1:59 pm

“It makes me wonder what our grandparents did when they ran into financial difficulty. They didn’t have easy access to debt, yet they survived.”

I also wonder this, though I know at one point debtors’ prisons were used to punish people who could not pay off their debts. I actually wrote about that recently, because I wonder what on earth our country would be like if those still existed…
http://blogs.creditcards.com/2.....meback.php
Marci in Rainy NW OR on June 13th, 2008 2:59 pm

Re Emily’s Post - I think what they did when they couldn’t afford it was “Make Do or Do Without”…. don’t think there was a choice there … which is the way I tend to look at it also

And I’ll agree with you on the debtor’s prison stuff!
Until Debt Do Us Part on September 17th, 2008 8:16 am

Great Post. I can feel your pain.

I agree completely with your point about going $100k into debt just to make $25k. It doesn’t make sense, yet so many people do it. A lot of people don’t realize that they have a debt problem until it is almost too late. At that point they have to relearn their financial habits and adopt to a whole new lifestyle.

Keep up the momentum