I remember the day that I realized that I needed to make it a bigger priority to teach my kids about money. I was at the local electronics store playing with the iPads with my ten year old son.
“Dad, we should totally get one of these“, my son told me.
“They are fun. But I can’t afford to buy one right now”, I responded.
“That’s okay, dad. You can just put it on your credit card.”
“Uh, but then we would have to pay it back, with some interest. You can’t just put things on a credit card if you cannot afford them.”
My response was met with a completely blank stare. He was completely baffled by the concept. He clearly had no idea what interest was, what credit was, or what it truly meant to swipe that little plastic card. It was clear that my wife and I needed to open up our kids’ tiny little heads, and start pouring in everything that we knew about finances. ..
A popular debt reduction strategy that is often repeated by the finance celebrities involves putting away the plastic and starting to pay for EVERYTHING with cash. This thought is parroted by everyone from Dave Ramsey to Suze Orman, and is based on research suggesting that the handing over of actual dollars has more of an emotional effect than swiping a card. Studies by MIT and the Journal of Experimental Psychology support this idea, but in fairness; they all focus on the “Credit vs. Cash” side of the equation. In these discussions, they seem to avoid mentioning debit cards altogether.
If you are trying to get rid of debt, ANYTHING should be preferable to using credit cards. Cut those bad boys up, or at least freeze them in a block of ice. It is my belief that the debt experts are missing the fact that using exclusively cash is also a strategy that can be fraught with problems. It all comes down to accountability. When you use cash, you leave behind no crumbs to explain where that money actually went. Budgeting is all about painting a clear picture of your money flowing in and out, and the use of cash can make this very difficult to track. ..
What a long and strange trip it has been, friends.
In January of 2012, we were living paycheck to paycheck, stuck in a cycle where the majority of our paychecks were being eaten by our debt obligations. We were considering visiting a bankruptcy lawyer to see if a vista bankuptcy was our only way out. But we decided to go a different route. By committing to climbing the mountain one rock at a time, the hope was that we could learn about finances and about ourselves in the process. We needed to make sure that we were equipped with the good habits and the knowledge to prevent this from ever happening again.
I checked our balance sheets this morning and our debt obligations have dropped all the way down from $21952 to under $3000. That’s right folks, the finish line is in sight. We didn’t have to do anything crazy to get here, we just had to believe in ourselves and have patience. We have had good days and bad days, and good months and bad months. But whenever we get discouraged, we just leaned on each other a little bit harder, and kept our eyes on the prize. ..