Credit Where It’s Due
Posted August 27, 2008on:
A few weeks ago I posted a YouTube video about addiction to debt. The video was quite light-hearted, but in truth, it is actually something I’m genuinely worried about. I’ve never been very good at keeping hold of money, and things certainly haven’t improved since I turned 18 and banks were suddenly very keen to let me spend their money too.
I’ve done a bit of self-analysis, and my decision-making process for determining whether to buy a particular item goes something like this:
- Do I have enough available balance right now in my bank account or credit card?
- Awesome! Buy it!
That was workable when I was about 10, but I fear that adulthood demands something with a tad more sophistication.
Recently I made what is apparently a classic mistake: The interest rate on my credit card had gradually crept up and up until it was at a ridiculously high level. I decided to get a loan to pay it all off, on the grounds that the loan would have much lower interest and because the loan amount is fixed, so I wouldn’t be able to simply borrow each month what I had paid back the month before, as has been my habit with credit cards. Great idea, right? Well, it was until I decided that I wouldn’t cancel the credit card that I’d paid off using the loan. I figured that it would be wise (ha!) to keep some credit available for emergencies. After all, it doesn’t cost anything if you don’t use it, and I might have some unexpected expenses soon. What if I needed to fly somewhere for a business meeting? (Hey, a boy can dream!)
That worked out fine… for about a month. The problem is that while I can make good decisions about money in the short term (‘keep that credit for emergencies’), those decisions can’t withstand the daily wear and tear of the temptation that comes with having a bunch of someone else’s money sitting on a card in my pocket. It happened like this: I’ve been wanting to get a high-definition TV for a very long time (like, since before they were actually available). I’ve never been able to afford one. Now, I didn’t just wake up one day and say, “screw the consequences, I’m going to spend my emergency money on a new TV”. The evil consumer credit industry is a lot more subtle than that. What actually happened is that I went to a supermarket. As part of their ongoing quest to duplicate Walmart’s business model, all the British supermarkets have started selling stuff like TVs too, and so occasionally when I’m out food shopping I go and have a wander around the electronics section and fantasize about having a TV as big as the Grand Canyon. No harm in window shopping, right? Well, there isn’t too much harm if you haven’t got any money, but if you’ve got some money that you know you shouldn’t spend, then the threat level increases substantially.
So, to cut a long story short, over a few weeks I managed to convince myself that it wasn’t that expensive, and the minimum repayments wouldn’t be that bad, and now I’m the sometimes-proud and often-ashamed owner of a high-definition television that, in all likelihood, I’ll still be paying for when I’m 30.
And what have I learned from this? Firstly, I’m simply not able to deal with having credit immediately available without using it. This has happened enough times now that I’m forced to recognize the pattern and I can no longer kid myself that I’ll do better next time. I have to get credit cards out of my life. They’re simply not compatible with me. It would seem like the best thing to do would be to get another loan (when possible) to pay off the card, but obviously that’s how I got into this mess in the first place and I could just end up doubling my debt again. I still think that’s what I’ll do, though, because as I said earlier I am capable of doing things right in the short term (and this time I would cut up the card immediately when it’s paid off). My failing is that I’m not able to withstand the sustained temptation over a period of time. I’m too good at rationalizing things, and given some time, effort and motivation, I could probably make any bad idea seem like a good one.