Piotr Jakubowski – Mind over Marketing

Nobody Gives You Credit, You Have To Earn It
December 3, 2007, 2:33 am
Filed under: accountability, advice, credit cards, finance, financial intelligence

I was watching a documentary, “Maxed Out” about credit card use in the United States. The situation is dire. Before I get started, here are some quick statistics. 

  • Total US Consumer Debt (including installment debt, but not mortgage debt) – $2.46 Trillion in June 2007
  • Total revolving debt is $904 Billion
  • US Households will have received 5.3 billion offers for new credit cards in 2007
  • 40% of US families spend more than they earn

 Courtesy of Credit Cards.Com and Hoffman Brinker.

One of the best quotes in the documentary was “Nobody Gives You Credit, You Have To Earn It”. Funny thing about this, is that the quote came from a very old clip from the 50s or 60s. This mindset is not new, yet it has been disregarded so vehemently over the last few decades.Nothing in life is free, especially not credit.

Yes, you may start out with $500. But when you’re paying 24% interest on your last missed payment, are you given credit? Not anymore. I keep returning to this subject, but I strongly believe that it is important to establish a strong sense of financial responsibility early. Yeah, you could buy that car that you can’t afford. But do you want to be paying $30,000 for a car worth only $20,000?

Robert Kiyosaki hit the nail on the head in his book, “Rich Dad, Poor Dad” . One of the only ways out of the Rat Race of debt (yes, chasing yourself silly to find money to pay off next month’s bill is a rat race) is the exercise of financial intelligence.

“The only way to get out of the “Rat Race” is to prove your proficiency at both accounting and investing, arguably two of the most difficult subjects to master.” – Robert Kiyosaki

Yes, we do live in a “right here, right now” world. But wouldn’t that computer or TV be so much sweeter if you worked hard for it and bought it with cash?


Materialism & Credit Cards pt. 2

This weekend I had the pleasure of inviting a friend of mine to speak to our business fraternity. Tom Coates is the founder and president of Consumer Credit of Des Moines, a company that assists families and individuals in dealing with their credit problems.

Some of the statistics that Tom mentioned were frightening. In 1987, credit consolidation was a $100 billion business, with the average debt at $2,000 and average number of cards at 3 to 4. Today, it has become an $850 billion business, with the average debt at $5,000 to $6,000 and the average number of cards at a staggering 8 to 10!

Other interesting facts included
– 60% of adults revolve a balance of $9,000
– The personal savings rate is negative
– More than 50% of people are living paycheck to paycheck, literally

All of these facts and statistics don’t reflect on the underprivileged in this country. Even people who seem rich are affected by it. These facts reflect on those who are financially irresponsible.

As ludicrous as it may sound, these credit offerings are essentially setting a payment trap from which it is quite difficult to escape once caught. The accessibility of plastic, the availability of these deals and the irresponsibility of the people involved are the biggest reasons for getting caught in these payment traps. If you can’t afford it, then why try to buy it?

Lessons learned during this presentation:

Develop an affordable lifestyle. Most people are already in debt straight out of college (college payments). Don’t make it worse.

Balance your budget. Make sure you keep track of all withdrawals and deposits in your bank accounts.

Invest in hard assets. Paper money (the fiat economy as Tom called it), is susceptible to very fast devaluation, especially at the rate that the Fed has been printing dollar bills. By keeping an investment of hard assets (gold, silver) one can make sure their investment maintains its value as long as possible.

Save. Now. According to a calculation that Tom presented, if you start saving $2,000 a year at the age of 25 at 8% interest, at the age of 65 there will be over $600,000 in the account. If you start at 35, there will be just over $250,000 when you turn 65. Starting early is better.

Finances are no laughing matter. Think about your current financial situation, and about ways you could alter your financial habits to make your life better.


Materialism & Credit Cards
March 13, 2007, 6:58 am
Filed under: advice, credit cards, debt, finance, materialism, responsibility

Materialism & Credit Cards

After reading two different blog entries that shared a single theme, I took some time to think about the idea of materialism.

The United States is a very very materialistic culture. Ever since I arrived in this country I realized that this is a “go big or go home” mentality. Look at the size of the cars driving around. You could probably fit a family of 10 into an Expedition and still have room for the dog. And all you see is one person driving around in this monster of a car. Also, if you can’t afford it, there’s always car payments.

The biggest indicator of this American materialism: the negative savings rate. For the 2nd year in a row, the US Consumer savings rate has been negative. People have been spending more money than they earn. Which sounds like it shouldn’t be happening? I mean, can someone really eat 1.5 loaves of bread when they only have 1? Oh yes they can. You borrow the other half.

Credit cards are deadly. The lack of education in financial management has proven to be a downfall of consumer society. Credit card debt is ridiculously high, to the point that credit card debt elimination companies have been established. People are actually blaming and suing credit card companies for the ridiculous interest they’ve racked up on their own debt. People! Are you serious?

Moral of the story is: learn to keep track and manage your finances. Credit cards can be used and abused. Here’s a few things that I’ve learned;

1. Use credit cards responsibly to develop and mold your credit score/history which will help you acquire loans and mortgages in the future
2. NEVER spend more money than you can pay back within the next payment period. Interest rates rise exponentially, and pretty soon you will be over your head in payments.
3. Don’t spend more money than what you have in the checking/savings account.
4. Stick to one or two credit cards. It will limit the number of annual fees you pay and the number of payments you must keep track of.
5. In some cases, call the credit card company to set your limit at one level. This way, they will not increase it every few months in an attempt to entice you to spend more money.

Here are the articles: