Until I was 18 years old, I never purchased anything I couldn’t pay for with cash. I grew up poor and started working in my early teens so I could buy things I wanted – like clothes, books and food. I saved 50% of my paycheck and spent 50%. Since I was working minimum wage jobs for the most part, I didn’t buy much.
My first non-cash purchase was signing up for student loans for college. But these almost didn’t seem real. Payment wasn’t required until far in the future. The terms and conditions were full of legalese and any print. And I had no other way of going to college so of course I was taking out loans.
Then I got a credit from Citibank with a $1000 limit. That was the beginning of 20 years of living paycheck to paycheck while paying 18% interest on maxed on credit cards. I’ve written about this before, so suffice it to say, that was not a good way to live.
Since I got out of debt 10 years ago, I never buy anything that I can’t pay for upfront. I use my credit card, but only as a transaction tool, for convenience and for security. I pay my credit card balance off several times a month.
I don’t take out loans for anything. My rule is, if I need a loan, then I can’t afford to buy it.
I would not have owned a car or a home if I always followed this approach. Or, perhaps I would have, but it would have been a used car, never a new one. As for a home, without loans I likely would never have been able to buy one.
So my “rule” applies to me today, after 30 years of working, 10 years of extreme savings and having had a long, somewhat successful sales career.
I have friends and family who make different choices. They finance cell phones, vehicles, home improvements, clothes, vacations and dining out.
I understand.
I used to do this because I wanted those things and I wanted them now. I convinced myself I needed those those things or at the very least, I deserved them.
Today, I’m so grateful that I’m out of the debt trap, I can’t foresee ever willingly entering it again. It actually gives me a stomach ache thinking about it.
I suppose if I started a business, I might use loans to invest and grow the business. But I have no experience in doing that and today, I have no plans to start a business, so there’s no point in burning brain cells thinking about this.