Image source: https://d3n8a8pro7vhmx.cloudfront.net/themes/5302ef2cebad6447ea000002/attachments/original/1460529745/button.member-benefits.jpg?1460529745
Dangers of Buy Now, Pay Later
Proof of how dangerous it is to buy now, pay later is all around us. The Enron and WorldCom disasters early in the 21st century show how poor credit policies can bring on loan defaults and bankruptcies. Failed savings and loan institutions and the resulting $500 billion bailout of the 1990s placed our country in severe financial danger.
The credit and mortgage crisis of 2007 showed how relaxed qualifications and over extending credit not only affected thousands of families but severely damaged the economy. No one is immune to debt - governments, big business, families and individuals are all hurt when they abuse it. Loan defaults and bankruptcies are skyrocketing!
Easy Consumer Credit on the Rise
After World War II, greater availability of consumer credit drastically increased the number of Americans in debt. Marketing experts introduced three new credit strategies still enslaving American consumers today:
1. The Easy Payment Plan. This credit strategy was to advertise a low monthly payment instead of the total cost of merchandise. Consumers were persuaded to shift from saving to pay cash for things, to only looking at how much the payments would be. It worked like a charm!
2. Long-Term Mortgages. Long-term G.l. housing loans were offered to veterans returning from the war. Soon long-term mortgages became the standard of home finance. 30-year mortgages became the rule. Long-term car loans soon followed; many are 6 years - the skies the limit!
3. Credit Cards, Bank Guarantees, and Lines of Credit. Since no collateral was required, credit became easy for Americans to obtain. The high interest rates and fees charged made the lending companies rich. It became very easy for consumers to buy almost anything on credit.
Easy credit has also changed the way people think about and spend money. Studies show that people spend more money when they use credit vs. cash. Many consumers now consider available credit just like cash in the bank. Credit has turned the majority of individuals and families in America into debtors with all its pressure and burdens. If youre in debt, youre not alone. According to the Federal Reserve, Americans are in $1.98 trillion of debt, more than $18,000 per household.
Its ALL about Interest! People who understand interest - EARN it, people who dont - PAY it. Youre not only buying things you cant afford now - but youre paying much more than the sticker price. When you buy on credit you pay your creditor compound interest. According to Albert Einstein, Compound interest is the greatest invention known to man. But its only great if youre on the receiving end, NOT paying it! The wealthy understand this concept, see what they know that you dont at FH4L.
Be the exception! Dont buy into the mindset that consumer lines of credit and debt are part of healthy finance. Theyre NOT. Carefully managed credit is a powerful and useful tool. When used wisely, credit can be very effective in building businesses, establishing credit, and even building wealth. But unmanaged credit quickly becomes out-of-control debt. When it reaches this point it often becomes harmful and even devastating. If you dont have the cash, ask yourself do you really need it and is it really worth it. Keep your emotions in check and resist the powerful marketing and sales messages designed to entice you into buying now and paying later.
It can seem impossible to eliminate debt from your life, but you have the power within you to make the necessary financial changes, and establish new habits based on proven, successful money management fundamentals. Then you can not only pay off your debt, but youll be able to build wealth! FH4L can put you on the right path to financial health.
