Piotr Jakubowski – Mind over Marketing

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.