Do you often wonder how other people seem to make ends meet and you struggle with them? I have to reluctantly admit that over the years, I would look around and ask myself questions like, “How the hell can they afford that car?“ or “Where did they get the money for those three weeks in Europe?”
I seemed to work my rear end off and yet somehow I was never quite there—where they were. I realize now what a waste of time beating myself up about that was, but I did it and I’m sure I wasn’t alone. In my older, wiser years, I now know that big debt often is the way it was accomplished.
The secret to their big debt was usually the abuse of credit and their credit cards. My first experiences with credit were over 50 years ago and nothing has really changed for a huge number of people when it comes to credit abuse. I am glad I learned about that stuff before it was too late for me. That’s why I wanted to write about today’s subject: Credit card debt, stimulus checks, and spending.
The Credit Card and You
Believe it or not, credit cards are a cornerstone of the American economy. Even in a year of pandemic, 2020, according to the numbers, the average American held about three credit cards with an average balance about $6,000 according to Experian’s State of Credit report. The truth is that many people are in even deeper than that. But where did all the trouble with credit cards begin?
Paying with Plastic
Credit card use is so commonplace today that total U.S. credit card debt topped $1 trillion last year, according to the Federal Reserve. But have you ever stopped to think about how we ever got this way in the first place? The really amazing thing about it all is that it happened so damned quickly! Credit cards have become an essential part of our modern American life.
History traces the modern credit card to the founding of Diners Club in 1950, the first charge card that could be used to make purchases at multiple retailers. Diners Club was a new twist on an ancient practice. For thousands of years, merchants had used credit to help their customers finance purchases. Even back in our colonial times, seeds could be sold to farmers on credit terms that permitted payment after the harvest.
You may even be more familiar with one of the earliest written examples of any credit system such as the Code of Hammurabi, named after the ruler of Babylon from 1792 to 1750 B.C., in what is now Iraq. These laws established rules for loaning and paying back money, and how interest could be charged.
If not, then perhaps you can remember watching the Waltons TV show where customers during depression days like the Waltons could “run a tab” with the village store owner Ike Godsey, which is a revolving line of credit that can be continuously borrowed against and has no fixed payoff date. That was the precursor of the store credit card we have these days, not part of a big system like Visa or MasterCard.
The Evil Genius of Credit Cards
To really make the idea of credit cards explode, someone had to conceive of a financial instrument that could be used to make charges at multiple merchants. An early example was the Air Travel Card, which allowed travelers in the 1940s and 50s to purchase tickets on credit from multiple different airlines. But the modern payment card was created in 1950 by the two guys (Ralph Schneider and Frank McNamara) who founded Diners Club. This was the first general purpose charge card, and it required consumers to pay each month’s statement balance in full.
Not long afterwards, American Express and others would offer customers the option to carry a balance on their credit cards. That was the final nail in the coffin and the “innovation” that created the road to high interest rates and financial abuses that we would recognize so well today.
With all the talk about “stimulus checks” to get our economy going again, I have to wonder exactly what that money is going to do. At first thought, it sounds like someone expects us to start buying stuff that we really want and spending like it’s party time to stimulate the economy. But then again, I think with all the credit out there that so many have access to, what would prevent us from shopping our heads off online right now? And guess what…we are, aren’t we?
Maybe it’s just me, but I don’t see myself suddenly running around shopping or buying frivolously online just because a “stimulus check” finds its way into my checking account! How about you?
Basic Expenses Must Be Priority #1
In the end, the need for folks to be able to pay for all of their basic necessities has to be the top priority. We keep hearing how so many Americans are now food insecure and depending on food banks. That hasn’t been the case since the Great Depression days of the 1930s.
So let’s look at what people actually need to spend their money on these days and compare that to what a “stimulus check” really can buy?
They say the latest government monies most of us are looking at is a $1,400 check (to go with the $600 check issued in January). That does sound like a chunk of change, but is it?
The average mortgage payment is $1,268 and the average rent is $1,023 around the U.S. today, making the amount of a stimulus cover about a month or so. If you happen to rent in places like NYC or suburban NJ where I live, those rents could even be 50% higher on average. These are the types of expenses that are pretty much set in stone unless you can refinance your mortgage, negotiate a lower rent, or move to a smaller, less expensive place to live. So while a stimulus check is welcomed, it isn’t going to inspire “party time” any time soon.
What About “Controllable Expenses”?
There are the expenses where we have some control over. The average “average” person pays about $290 in utilities every month, $88 for their mobile phone service, and $110 for their cable/internet. Each of these expenses would have several months of coverage with any new stimulus amount.
I have suggested previously that when the smoke clears from this entire pandemic burden, we are going to see the spiral of an inflationary cycle that no one seems to be talking about. I see it already in the cost of fuel oil and gasoline as well as new fees on things such as using my credit card to pay my real estate taxes online which I wanted to do as a “convenience” to avoid buying checks (I stopped paying by check long ago, but now they want to charge me a 3% fee for that privilege!).
But why not take the time to see how you can lower those expenses to stretch your dollars even further. And what about eliminating some of these services or at least cutting back to save? Have you done any of that during your latest financial crush?
One way to make our money last is to find what expenses in our monthly budget are flexible.
How Flexible Are You?
I can’t touch my toes anymore, but I’d still say I am pretty flexible when it comes to money and spending.
Things like grocery shopping and personal care items are, for me, very flexible. That’s why I look for all the corners to cut and ways to save like by signing up for loyalty discount card programs, shopping for only what is on sale, and using coupons every week to significantly lower my costs. I try to make “super saving tips” my mantra.
When I stop being brand loyal and look for generic or lesser known but reliable alternatives like store brands, I always save and I mean in big numbers. If I can’t afford something, I don’t buy it. This harkens back to my earlier comments about wondering how others are doing “it” and I am struggling. Sometimes using a credit card and then chanting “lalalalala” when the bill rolls in is how they are doing it. That’s not for me and shouldn’t be for you either.
One Example of Saving Money Without a Government Check
There are expenses such as your cable/internet bill (internet is not a luxury item in a pandemic world for sure!) that also can be flexible. To test these expenses out, I called my cable company to see how I could lower my monthly rate. I was able to lower my monthly bill by $35! How?
Well, yes, I am still using cable even though the streaming services are calling my name, but that is because I love a few certain stations that I just can’t get streaming and I haven’t quite figured out how I can get them by leaving my server. Anyway, call me old fashioned, but my service includes internet and phone and cost me close to $200 a month with taxes and fees these days. Changing providers and sacrificing those channels could save me as much as $100 a month and it may at some point come to that for me!
Making that call
So I called the company and sounded like I was just a moment away from leaving them after 15+ years and wanted them to beg and plead for me to stay and lower my bill!
I had them go through every conceivable option and service deal available until they actually could convince me that they had found the perfect package for me at a lower cost that could retain me with some kind of a discount. So I committed to staying with them and reupped my contract for another year. This deal and call cost me an hour and a half of my time, but saved me $35 a month and brought my bill down to under $160 a month! Just by making that one call, I now have an additional $420 a year in my pocket. You can do similar things.
Getting Help From Them
For other utilities, check with your local provider to find out ways to save money. For example, your gas and electric bill can be lowered by doing simple things like lowering your thermostat by just a couple of degrees. Or use a safe space heater and heat the room you are sleeping in or watching TV in instead of the entire unoccupied house. Just be safe and use as directed so you don’t risk fires.
Utilities are just one way to save and they often give you help if you qualify on paying your bills. There are lifeline programs in every state that will help reduce the cost of electricity and gas cost and all you have to do is check to see if you qualify. There is help out there and they can afford it better than you can for sure.
If you lower your expenses by $20 here and $10 there, it adds up to money in your bank account instead of your providers, and it can make any stimulus money last longer.
I know that it isn’t easy these days to get by; we are suffering from more than just money issues as big as they are. The mental strain of COVID-19 is just as big if not bigger than whether you can afford the cable package you really want or if you can buy and run up credit card debt on everything and anything. But, and it’s a big one here, you simply have to become more disciplined with your budget and expenses if you are going to defeat all the temptations out there these days to spend and spend. If you think a government stimulus checks are the answer, you may be lost forever.
How are you spending your money these days? Are you increasing your debts, running up credit cards bills, and falling behind in payments? Are you working full-time and does a government check coming your way mean salvation?