For the record, I’m quite certain that this article will be a bit controversial. And to be honest, I’m a bit saddened to know it. However, I remind myself that such is the case because the people I care about—such as yourself—have long been taught several counterfeit standards when it comes to money, debt, paying interest and being truly prepared. So, if you get a bit grumpy with me for making you squirm a bit in this article, I promise you that I will totally forgive you and even empathize with your position because I’ve certainly been in that same place.
Credit Card Debt-A Hole NOT to Get Into
A couple days ago, I tuned in to one of my favorite talk shows on the radio since I had a rather long drive ahead of me so I tuned in to make the drive go by more pleasantly. Darn it. I picked the wrong day for pleasant warm fuzzies.
My host de jour had on a special guest and so-called expert on debt. This guest has recently come out with a book that has been raved about on the New York Times Bestseller List. The show was taking live questions from listeners; a middle-aged man called in and stated that he had a credit card that was costing him 17% interest and that the rules on the card just kept changing in favor of the credit company and he wanted to know if he should take money out of his retirement to pay it off. The “expert” informed him that one should “never take money out of retirement to pay off a debt” because the penalty for withdrawal and the interest earned on the retirement fund far outweighed the benefit of paying off the credit card debt.
As I heard this advice ring through my surround sound speakers, anyonelooking at me at that exact moment may have thought that my life had just been narrowly spared as the result of an errant driver on the freeway. It no doubt appeared that I was engaged in a bad bout of road rage by the look on my face and the fact that I was slinging passionate sentences towards my windshield. The only problem with that presumption though, was that there was hardly anyone joining me on the freeway at this time. I suspect that I had some rage in me, but I must sheepishly admit that it was not geared toward another driver, construction worker, or ridiculous pedestrian. Rather I was quite disturbed that such advice was being given, and even worse, was actually endorsed by my favored talk show host. The bottom line is, the advice was just plain wrong, and in my opinion, dangerously wrong!
If people could look at their monetary affairs from two very solid perspectives, then these kinds of errors in judgment would lose their popularity.
Perspectives on Credit, Debt, and Overall Finances
Perspective Number One: It’s important that money be viewed with the understanding that rough times are ahead of us which will greatly devalue our assets. How do I know this? Because history has continued to deliver this ruthless cycle ever since soft asset currency was created, AND because our nation (and even the world) has done nothing to learn and thus avoid the very same actions of the past which cause a painful financial collapse. In fact, not only are we in the perfect position to be hit with such a collapse soon, our economic policy, both domestic and international, has ensured that it will be the worst and most devastating collapse ever!
I know. I know. I don’t usually take this kind of position when it comes to preparedness. Understand that I still wholeheartedly believe in peaceful preparedness. But without a solid foundation of truth, any preparedness actions we take will be futile when up against the monumental challenge ahead. I’m not trying to get anyone to panic. I’m simply hoping and praying that our preparedness efforts will be done in wisdom. Ignoring or being ignorant of one’s true state of demise can be more dangerous than the not preparing at all, in my opinion.
Continuing on in this vein, it’s important that we understand that with a serious financial collapse, the money we have in retirement or other savings is at risk of turning into nothing due to a dramatic devaluation. That being the case, wouldn’t it be wise to take care of every needful thing while you still have the assets to do so? Paying off that credit card while your currency is still worth something makes a heck of a lot more sense to me. Yes, I think that retirement accounts and savings accounts are wise, but only if they are in their proper place of prioritization. Remember, out of the Ten Principles of Preparedness, Financial Preparedness is number 9 in terms of prioritization. Folks, it was only 2 to 3 years ago in which millions of Americans lost a serious chunk of their retirement funds, all because of a plummet on Wall Street. These folks did everything right; they worked hard; they contributed to their savings/retirement accounts; they were conservative in the selection of their investment portfolio. But in spite of all of this—to no fault of their own—they lost years of retirement monies seemingly overnight. As a result, my dear father-in-love who’s always been frugal, hard-working, and avoids debt, has now joined millions of other seniors in the same position; and feels that he now has to work until he’s 72 years of age in order to retire and keep a warm roof over his head.
Also, has this “expert” completely forgotten about Enron and other companies which were vile stewards over their employees’ retirement accounts? Has he not taken a look at the Social Security account and its imminent failure? Seriously, when I heard his answer to this caller, I couldn’t help but wonder what planet he’s on or whether or not he works for the Government or the Federal Reserve? *O.K…Deep breath. Calming down now* These are just a few of the reasons why I believe that postponing the elimination of a debt in favor of keeping a retirement account is shortsighted—both forward and back. Do what you KNOW you can do now with your money that is vital to your future, and then you can get more focused on a retirement plan. In the case of the man who called into the radio show, his withdrawal and subsequent penalties incurred from his retirement account would create a much smaller impact on his monthly retirement money than would the monthly interest charge and required payment of his credit card.
Even without a serious collapse, most persons realize that a million dollars today isn’t what it used to be. In fact, if you can believe this, if you’re “just” a millionaire, you’ll not likely to be accepted into any lofty social circles. Discrimination is quite obvious towards mere millionaires and seems to only pay attention to billionaires nowadays. So putting off eliminating credit card debt today, with today’s dollars, in favor of relying on a future value of money which may not be there, but most certainly will have a lesser economic impact, is sorely lacking in wisdom, don’t you think?
Perspective Number Two: The impact of credit card debt in our lives should never be underestimated. It is the financial equivalent to brain cancer, in my opinion. And it should be vehemently avoided! It is not harmless. Its presence in a household poisons the very soul of a family. It enslaves entire communities and is a merciless dictator. It corrupts core values, diminishes accountability, and betrays self-worth. There is no such thing as an altruistic credit card company. Which will mean more to a person’s retirement—being debt free or being handcuffed to the accrual of interest nearly 5 times that of inflation? A noose of credit card debt in the midst of retirement is a voluntary shackle and should be avoided at all costs. Every dollar permitted to accrue interest because of debt represents a self-inflicted wound to the foundation of our economy. Worse, every dollar of debt which a person accrues leads to another 180 dollars of debt in our economy. To underestimate the impact of credit card debt in our own lives and in the global economy is akin to believing that a successful heroine drug dealer improves the economy because of the income taxes he pays.
On a final note, I implore you to understand that credit card debt has no virtue whatsoever. Please don’t fall for the illusion that you are mightier than a credit card. If you are reading this and have somehow rationalized that you are the exception to the rule, then you have already fallen prey. You may tell me that you never use it and if you ever do, you pay it off. I assure you that it’s still a danger because you are actually allowing a piece of plastic control you; not to mention the whole credit score scam, money laundering scheme, ego stroking, and enslavement that goes with it into your life. If you can’t bring yourself to cut them up and throw them away, then you’re smitten. If you feel like you MUST have it, even without a balance, then you have already been bitten. It’s like keeping a poisonous snake in your home but somehow believing that you’ll be safe so long as you keep it in the closet. Why have the snake in the first place, folks? Take a step back and ask yourself, what is it that compels me to have this thing? If you are honest with yourself, I am quite certain that you will not find any good motivating its possession. Instead you will find fear of the unknown, entitlement, materialism, an empty promise of some other benefit, or some other deceptive encouragement. If it doesn’t bring any peace and security in our life should we really give it shelter?
While all of this may sound a bit dramatic to the unconvinced, I’m 100% certain that credit cards hold no value—not even in the event of an emergency. A debit card works just as well if your transaction requires plastic; and any emergency that one might feel needs the aid of a credit card, will only be compounded in trial if used. Financial collapse, earthquake, hurricane, job loss, serious illness, or national power outage—none of these “emergencies” will be served well with a credit card. Cash or perhaps only gold and silver, are your real friends in such an instance. If that’s the case, then shouldn’t we eliminate it from our lives along with the eroding values which accompany it?
Here’s one last thought for you. How would our economy be impacted if millions were to shred their credit card today?