Is anyone really happy with the amount of income they’re making? I think we all feel that we deserve to have more, we deserve to spend more, we deserve to have less stress worrying about all of the things we need and whether or not we have enough money to pay for it. And we work hard! Why shouldn’t we be able to splurge now and again?
I often get asked, “Why do credit card companies keep offering me credit?” or “Why do finance companies keep sending me pre-approved cheques in the mail?” The answer is simple, credit grantors want to make money. And they know that it’s pretty easy to make money when they feed our desire for instant gratification, our desire to buy what we need or what we want, regardless of if our income supports it at the moment. And they know two things – we will rely on credit when times get tough (and potentially even if they do not) and we will pay our bill because we want to ensure our credit rating stays intact.
It is important to note, that if you use credit and pay interest on that credit, you are, in essence, paying the banks / financial institutions money every month to supplement your income. This is the worst second job you can have. You are not getting paid, you are paying for it!
How do you know if you’re paying money to supplement your income? I’ll give you four easy ways to find out:
1. Track your expenses for at least three months.
2. Compare what you are spending to your income.
3. If you are spending more than you are making, you are either dipping into savings or “buying” credit to supplement your income.
4. Track your credit balances each month. If the outstanding balance grows each month, you are using credit to create income.
The first step is awareness, visit our other blogs for tips on how to avoid this pitfall and stay tuned for more advice.
Happy, healthy finances!
Mary Ann Marriott
aka Dr Debt