It is important to think over a decision to purchase when any borrowing is involved. What if credit was inaccessible to you? If you had to pull hard cash out of your pocket to pay for items you want, you would have more time to think the decision over and time has a way of allowing buying impulses to fade into reality. Without credit, affordability informs reality. When you run out of cash, you can no longer afford more than you really need. Understand this and your financial horizons will shine much brighter.

“The credit industry can harm you financially by lending you high-interest money so you can keep buying more of the things you really cannot afford nor need”.

When peer pressures turn to fear stressors
The average North American household pays out 92% of its after-tax income to service debt payments! This used to be only 4% in 1946—and currently equates to the average household carrying close to $10,000 debt on credit cards alone. If only the minimum payments alone were paid, the total payments would amount to over $25,000 and could take a whopping 38 years to pay off.

Compound Interest—Are you a debtor or investor?
Compound interest is always making someone rich—in the case of the over-use of credit cards it is certainly not the debtor getting rich. That is because he or she slips over from the investor’s earning side, to the debtor’s paying side. With the use of high interest, borrowing turns compound growth against you.

Reality Check
One will never be truly financially free when encumbered by high interest payments (as with unsecured debt while using high-interest credit cards). To find eventual financial freedom, you must first learn financial prudence by increasing your investing in wealth creating assets versus buying unsecured items. This means that all debt that cannot create wealth-creating assets should be avoided. You must think in terms of the pure mathematics and avoid debt that can never help you build net worth assets.