Sometimes you have to deal with things that you have no control over. This has been more than clear this week to anyone living in the Carolinas. And it really hit home for me yesterday.
Anyone who has visited me in my office this semester had a chance to see the wrist brace that I’ve been wearing all summer. And yesterday I finally had surgery to repair that injury. The surgery went well and now I’m recovering at home for a couple of days. And while I’ve dealt with the aftermath of anesthesia before, this was my first experience with a nerve blocker. The up side of the nerve block was that I had no pain for 20 hours after my surgery. The down side was that my left arm was completely numb for that same time. I had no control whatsoever over its movement. It was actually fascinating to me. My left arm was just dead weight (which was MUCH heavier than I would have expected!). I wore a sling to support it and just had to live without my left arm for the day. (Teeth and feet become very useful tools when you only have one arm). I just had to find ways to work around the thing I had no control over.
Sometimes you’ll face financial challenges that you can’t control. The unexpected auto repair. The annual tuition increase. The rising price of gasoline. A medical situation. The cost of the bar exam. Air travel for a family emergency. Financial stress can come in any number of forms that you can’t control. But what you can control is how you prepare for and react to these things. A budget. An emergency fund in savings. Insurance. These are all preventative measures to deal with the things you can’t control. Loans. Credit cards. Side jobs. Selling things you don’t need. These are all reactive measures you can take to relieve your financial stress.
We will all face things that we have no control over. But we all have control of how we prepare for and react to these things.
Do you remember your first loan you borrowed? Perhaps it was a student loan. Maybe it was a department store credit card. But more likely it was a loan from your parents.
My first loan from my parents is still amazingly vivid in my mind. My sister and I shared a bedroom and we really wanted to have a small black and white television in our room. (It was the 1970’s. TV technology has come a long way since then!) I think I was about eight years old and my sister was about eleven. My parents agreed that we could have the TV, but we had to pay for it ourselves. It was my very first purchase on credit. I don’t remember exactly how much the TV cost, but I think I had to repay somewhere in the neighborhood of $30 for my half of the TV. Quite a lot for an eight year old in the 1970’s. My father was very legitimate about the whole thing. He had ledger sheets where he tracked the balance due. I would save my change and make payments from my allowance and birthday and Christmas gifts. And within a year I had paid my debt.
While my father did not charge me interest on this loan, he did teach me some very valuable lessons about purchasing on credit. I learned the importance of making regular payments. I learned the joy of watching my debt amount decrease. I learned the pride of having successfully made a fairly major purchase. I learned that sometimes you have to sacrifice the things you want to make payments on debt. Debt is an obligation. Credit allows you to buy things without having the money on hand in advance, which is very helpful for expensive things like houses and cars and higher education. But paying it off…that’s freedom!
Do you pay your bills on time? Every time? If not, you really should. Not just because it’s the right thing to do. Pay your bills on time every time because that is the easiest way to establish good credit. And good credit not only makes your life easier…it makes things less expensive.
For example, Sally and Betty are each buying a new (to them) used car. Sally has great credit. She heads off to the dealership pre-approved for a loan at 4% interest. She borrows $15,000 at 4% and will pay $276.25 a month for 5 years for a total of $16,574.87 for that loan. Total interest paid=$1,574.87. Betty, on the other hand has bad credit. She is lucky that the dealership is able to offer her financing at all, since she doesn’t have a co-signer. But she is thankful to get the loan at 8% interest. She borrows $15,000 at 8% and will pay $304.15 a month for 5 years for a total of $18,248.75. Total interest paid=$3,248.75. Betty will pay more than twice as much for the convenience of financing her used car because she has bad credit.
The cost of credit is only one of the many ways that bad credit will cost you more. Want a cell phone? You may have to pay a security deposit to get a contract. Need to set up utilities in a new apartment? You’ll likely have to pay a security deposit. Need to find a new apartment? You may need a cosigner to get a lease. Have a car? You’ll likely pay more for your insurance premiums.
Do you pay your bills on time? Every time? You really should!