Credit Card Epiphany
“Epiphany” carries a religious connotation for many folks, so I looked it up to make sure I used the word properly. Here is what Mr. Webster has to say about it:
- A sudden, intuitive perception of or insight into the reality or essential meaning of something, usually initiated by some simple, homely, or commonplace occurrence or experience.
- A literary work or section of a work presenting, usually symbolically, such a moment of revelation and insight…
I’m sure many of us have had a credit card epiphany at one point or another. Maybe you got to the point where you had several cards and were only making the minimum payments every month, but your debt level wasn’t getting any lower. I sure know how it feels to spin your wheels like that.
At that point, maybe you found a friendly loan company to help consolidate your debt into one easy payment so you could pay off your bills. It’s a great concept, but it only works if you cut up your credit cards. If you keep using them after you consolidate your debt, it’s not much of a solution. Even if you promise yourself to only use a credit card for emergencies, you might find yourself wondering, “Is a new iPad an emergency?” No, it’s not.
Last October, Bloomberg ran an interesting article, Consumers Paying Down Debt Helps Boost US Expansion. Here is a short excerpt showing that some folks are getting it.
“… Americans finally are getting their finances back into shape, Federal Reserve figures show. Household debt as a share of disposable income sank to 113 percent in the second quarter from a record high of 134 percent in 2007 before the recession hit. Debt payments on that basis are the smallest in almost 18 years, while the delinquency rate for credit cards is the lowest since the end of 2008.”
One of the people they outlined in the article had 27 credit cards and over $57,000 in debt – and that is not at all unusual. I guess as long as he had a credit card balance below his credit limit, he assumed he had money.
The Key to Independence
Many folks let the illusion of wealth fool them into thinking they’re on track. Imagine I had brokerage account with a $1 million balance, but I also had $1 million in debt. People might think I was rich, but in reality my net worth would be zero. If that were the case, I’d sure have a lot of catching up to do. Unless I happened to buy a winning lottery ticket (no such luck), I probably couldn’t go from debt-ridden to debt-free to wealthy overnight. Turning things around is a process.
A financial turnaround is often triggered by an epiphany about carrying way too much debt. It happened to me and my wife and to many of our friends. I realized that I earned a good salary, but it was all going to this or that payment, and we really didn’t have any money. If that sounds familiar, don’t panic. There is a way out.
The first step is to be brutally honest with ourselves about our priorities. If wealth accumulation and a comfortable retirement are at the top of our list, we need to get out of debt and stay that way… period. Only then can we start accumulating real wealth.
True wealth gives us options. It lets us decide how we want to spend our time. If we want to retire comfortably sometime before our 100th birthday, we are going to need it. Social Security alone won’t cut it, and no one wants to spend their golden years working at Walmart.
A singer named Johnny Paycheck was a one-hit wonder. His hit song went something like, “Take this job and shove it, I ain’t working here no more.” His royalties from that song allowed him some financial independence for a while, but drugs, alcohol, and out of control spending caught up with him just as reality catches up with each of us, whether good or bad.
Perhaps the recession has revived some basic, commonsense values in the baby-boomer generation. Living within our means and saving money is not old fashioned; it’s the key to independence. The sooner folks remember that, the easier their lives will be.