April 27, 2012

Credit is Not Money

Porsche 911 Turbo The following post was written by John at Married (with Debt) as part of a blog swap today. Make sure you visit his site to read my post, Addicted to Debt.

When I was younger, I’d see someone driving an expensive car, wearing fancy clothes, and think “man, I wish I had that much money.”

Now when I see that same person, they look different. They don’t look like money anymore; they look like debt.

That’s right. The fancier you look, the more likely I am to assume you are in debt up to your eyeballs. If I smile at you, it’s not because I think your car is cool, it’s because I think you are a poser.

That’s Because Credit Is Not Money
Yes, I know, some people driving fancy cars are truly rich, but I wonder how they feel knowing there are so many who look just like them, masquerading as wealthy.

These aren’t the “New Rich” or “Old Money” - they are “Fake Rich.” Problem is they all look alike. And when you are at the bottom of an Occupy Wall Street facepunch pile, it’s kinda hard to explain, “No, I’m not rich, I just look that way!”

So if credit isn’t money, what is it?

Credit is living a life your paycheck can’t cash.

It’s the idea of “future money,” that at some point down the road you will have it. It allows us to leverage our current income in exchange for not only buying the product, but an agreement to pay more for it if you give it to us now.

Wow, your expensive suit hides your poor negotiating skills quite nicely!

Addicted to Debt
I’ve heard people from older generations talk about debt like a drug. They are addicted to debt.

“Everybody is doing it” they say. “It’s the American Way,” they add.

Sadly, they are right.

Then they throw the knockout punch - “you can’t take it with you.”

This too is technically true, but they are ignoring the flipside - “you can’t leave your debt behind.” When you die, your estate will absorb the debts and ensure that your heirs receive less.

Credit Is Stealing from Your Future Self
When you borrow money on credit, you are actually stealing (from your future self).

Why are you such a jerk to yourself?

All kidding aside, borrowing until you are maxed out is an abusive relationship with your future. Debt commits us to working more than we should. Debt commits us to working longer than we should. Debt steals from our future.

Aside from trading your future money for I NEED IT NOW, you are trading away other important things, like dignity, patience, and honor.

Why is debt dishonorable? Because you are making a promise that you can’t guarantee you will keep. You are putting yourself in a situation where you might have to stand in front of a judge and undo your promise.

Is it worth trading your word for stuff?

Hoping Is Not A Plan
Instead of worrying about keeping up appearances, let’s worry about keeping up with what we have today. Personal finance needs a long term outlook, and hoping that we will have a certain level of income in the future does not constitute a plan.

Though you may look like a truly rich person while living on credit, you can’t fool yourself.

Oh and by the way, your 65 year old future self called from work at 8pm on a Saturday night and said, “I hope it was worth it.”

Readers: Is it worth waiting longer to retire in order to have things we can’t afford today? Would love to hear your thoughts in the comments section below.

John writes about debt freedom and rewriting the rules of money at Married (with Debt)


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