Two reasons why credit cards are the devil and it has nothing to do with interest rates.

Lets face it, you and I both have made purchases before on a credit card that we would later regret. It could  have been the steak dinner or the night out on the town.  If you haven’t, well good for you.  You are smarter than most.

This time of the year many people may have made a decision to get out of debt. I first want to commend you on deciding on that goal. I hope you have committed to it and are willing to do whatever is necessary to get out of that debt.  I am not a financial expert by any means, but I know some basics.  I would encourage you to go out and listen to Grant Cardone, Dave Ramsey, and Robert Kiyosaki to learn more about money, investing and debt.  To get out of debt though, I would encourage you to listen to Dave Ramsey.

There are two reasons why credit cards are the devil and it has nothing to do with interest rates.

#1.  Credit cards trick our emotions. 

The use of a credit card doesn’t actually cause us to feel any pain when we use it.  We don’t actually feel any loss at the time of purchase.  It isn’t the same as if we actually had to pull out cold hard cash and make the purchase.

It has been proven over and over again, that humans avoid loss more than they pursue a gain.  We will do whatever it takes to avoid a loss, that is why most people are risk averse. When we use a credit card, it doesn’t require us to actually lose anything.

Regardless if you need the product or thing you are purchasing or not.  The use of the credit card versus cash doesn’t create the feeling/emotion that you actually lost something.  Which means we don’t care if we do it.

#2:  The further away the consequences from a decision we make are, the less we worry about the consequences of that decision.

Another human condition that exists in all of us is the fact that we can justify most anything in our minds if we really want to.  When we use a credit card, we don’t associate the purchase we make with the payment that is required at a later date.  You wont get the bill from a purchase you make today until thirty days from now or whatever your billing cycle is.  Regardless of how long it takes for your bill to show up, your mind has already moved on from that purchase and in our heads we think we have already purchased the product.

Sounds weird doesn’t it?  In our heads we think we have already bought the product, the dinner, etc., and even though we put it on a credit card and didn’t actually pay for it, our minds tell is we have. So when that bill shows up, we aren’t even thinking about what it was we purchased, we just know we have to pay the bill.  We are divorced by that time from the actual product or thing we purchased.  It is kind of scary really.

Think about some purchases you have made on a credit card.  Did the above two conditions exist for you?  If you are human and are somewhat conscious of your finances, then I would guess you are saying yes to this question.

What do you do?  Well, I believe first and foremost that you should never use a credit card for anything.  I know that you are thinking in your head that you will pay it off at the end of the month or when you get your bill.  That is fine if you have been successful in doing so.  I just don’t encourage it with most people, because of the two reasons I mentioned above.

If you do have a credit card in your possession, I would suggest that you have some guard rails in your life to help keep you in check when using a credit card.  Things such as spending limits and certain requirements that would have to exist for you to use it.

As I stated above, I am not a financial expert by any stretch.  However, I have studied people and decision-making for many years.  And I know that anything that can trick our emotions where we don’t feel the emotions we should feel.  Or, when humans have a period of time between a decision and consequences of that decision. When either one of these conditions exist, we must do whatever we can to eliminate them or manage them appropriately.

If you want to learn how to make better decisions and stick to those decision this year.  Reach out to me and lets create a game plan. Email me at bwillett555@gmail.com

To your success and your future.

 

 

The ONE word that I didn’t really know the definition of until now.

Have you ever watched a dog chase its tail?  Come on, yes you have.  We all have. I did this for many years.  I felt like I was working hard and doing exactly what I was supposed to do. But I wasn’t accomplishing much.  Your definition of accomplishment and my definition of accomplishment can have two totally different meanings.  So you need to decide for yourself what your definition is.

Get up, take care of my family, work hard, make money, save for retirement. All of the things you are supposed to do in life.

Then I was introduced to the word “Investment”.  Now I am not stupid, I had heard the word investment before.  However, the word investment to me was a word that rich people used, not people like me.  Not people who were in my situation.  I was just a guy who worked hard.  Investment meant money, dollars to me. I assumed you had to have the money to invest.

That is what investment meant. “Money”.  If you look up the word “invest” or “investment” in the dictionary it says to allocate money into something that will provide a return at a later date.  I’ll let you look up for yourself.

Then what happened to me was I learned the real definition of the word “investment”.  I learned that money wasn’t the only resource that could be invested. Nope, I learned that if I wanted to have more money I first had to learn how to invest other resources and those investments would lead me down the path to money investments.

What I learned is that I could use the definition of “invest” and input other words instead of money into the definition.

For example: Instead of investing money with the expectation of seeing a profit.  I could invest my time in to something with the expectation of seeing a profit.

Then I learned that if I invested enough time into certain activities and actions that I could see a return, a profit, from those actions.  Actions such as investing more time in to my personal development, my continued education, my relationships, my health, my family, myself.

Once I started investing my time, efforts, and actions into the right activities, I realized that investing is the word I should have been using all along. Instead of saying I am just working at this place or another place.  I started saying I am investing my time and skills at this place until I get promoted or a better offer.  Instead of saying I have to attend this training seminar.  I started saying I am investing my day into this seminar.

When we start using the word “invest”, instead of spending, using, attending, applying, working, etc. It changes our mindset to say, “I am doing this now, to get a return in the future on this investment of my time or other resource.”

Now instead of chasing my own tail around and around, I have now discovered that when I invest my time, my skills, and ultimately my money in to the right things I can get a return that is greater than the original investment that I allocated.

Are you investing or spending?

To your success and your future.