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Why don't people look forward ?
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Herongull - whilst I agree with your comment I think a distinction should be made between short term and long term. Short term, without credit, my spending power doesn't increase. If I use credit in the short term, my spending power increases because I am borrowing money I don't have to do something/buy something I want or need now. The fact my car has broken down or it's holiday season doesn't increase my pay. However in the long term, you are correct, my spending power decreases because I am paying interest.
But sometimes, at least in my opinion, there are some things that warrant wracking up some interest. Take a mortgage for example - if I saved until I could buy a house outright, that might be a bit pointless. Same if I save to go on my dream holiday to climb Kilimanjaro, but I'm 70 and so I'm not going to get as much pleasure out of it as I would have done if I had taken a loan/put it on a credit card.
Surely the issue is where people spend exponentially on credit at the expense of their future, rather than those who look to enjoying a bit of the now, and balancing that with a little bit of foresight.
Sharon87 - I totally agree; I too took a short term hit in the job stakes but 4 years later, it's starting to pay off. But I wouldn't have got through it without a credit card and a decimation of my savings!0 -
I agree that an exception can be made in relation to certain types of debt, for example mortgages and student loans, and perhaps there might be other one or two exceptional categories when it is justified.
But routine buying stuff on credit and paying interest, so that people have permanent debt (other than mortgages, student loans etc) doesn't make sense. If the money that people spend on repayments with interest was diverted into a savings account instead they would have far more spending power.
And you wouldn't have to delay any purchases, once you've broken out of the cycle. Your holiday and new washing machine (or whatever) that you want this year would come of the money you already have because you didn't need to pay this year for last years holiday and last years new fridge (or whatever) and their associated interest payments.
It is easiest to avoid debt altogether at the start by spending less than you earn in your first job and build up your slush fund. Once you done this, you have permanently higher spending power for the rest of your life! (compared with people who have "permanent" credit card debt).
A very small price to pay for lifelong "extra" money (that would otherwise be wasted in interest payments), which can then be spent on nice things like holidays, going out, clothes, larger house, whatever.:T:T:T:T:j:j:j:j0 -
To chip in and add two pennies worth
I think it comes down to priorities, and in life, they are different for every person. Some people need security (mortgage free, savings for a rainy day) and some people need to feel like they are experiencing life (holidays, nice car etc).
My personal opinion is that I work hard to get a wage and I would like to spend that on experiencing some of the world, rather than putting it in a bank account and enjoying it through looking at it when I check my balance online. That said, I would also love to have a mortgage (currently renting and trying to save a deposit) and that comes with its own challenges. I'm not about to find fault with anyone who forgoes holidays in order to bolster their savings, its just something that isn't a priority for me right now.
Take your happiness where you can find it
I have always done a bit of both. Even as a child I would put half my Christmas/birthday money away and spend half! Now I am frugal in some areas of my life so I can save a little and spend a little elsewhere. Add my MSE skills to the mix and I can afford to do nice things. Obviously someone who is on a very low wage could not do that, but I am not on minimum wage.0
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