On a recent trip to South America many things stood out, but the thing that was most staggering was not the adventure itself, but rather meeting people who had cashed in their 401K’s and those who were traveling across the country on credit. I also met those who were traveling across the country with the funds in their debit accounts, which gave me hope.
Traveling with your debit card
Understanding your cash flow, in and out, each month will help you with conscious spending. The use of your debit pulls funds that you have earned; the money is in your account and you are not borrowing on interest. With debit you are paying yourself and purchasing things that you want or need. Many people look at their bills and think “I work so hard for this money and still can not get the things I want” (hence the credit concerns that are currently effecting our national economy).
Allow “shift” to happen, shift your thoughts into the power of the money you have earned and the ability you have to pay your bills. Being grateful that you get to pay for electricity and water each month, being grateful that you get to pay your mortgage or rent. Shifting the thought that you have towards money allows the relationship to become positive and in turn may even increase the financial inflow that you have. Understanding the power that debit has as well as the power credit can have, when not abused, is a key component to financial well-being.
Traveling with your credit card
Is it all generational or cultural- this push for credit and purchases that we can not afford? Recently in Peru I met a couple riding across the country on their BMW motorbikes, they talked of withdrawing monies from the ATM from their card. The deeper the conversation went I realized they were talking about debit; they were using monies they had earned and saved because they had it…neither owned a credit card. They were Australian and the generalization to the country may be way off, but as an American in a debt riddled country it was an inspiration. The thought that life without credit could lead to 7 months traveling from coast to coast!
With the way our economy works, it is recommend to still have a credit card. The benefit of knowing that if you ever have an emergency–not the weekend sale at Macy’s–a true emergency you have a way to cover it yourself. Think of credit building in terms of G2 (G-squared), the 2 G’s that if placed on credit and paid off each month will help build your limit and increase your financial standing. Groceries and Gas. If you only use your credit card, outside of emergencies, on groceries and gas and pay it off before your interest accrues you will build your credit and if you pick the right card you will also earn rewards (trips, gift cards… even cash). Those rewards can even be placed back into your banking account thus creating the full circle of debit vs. credit.
Today’s post is brought to you by Danell Lynn, M. Ed. Photo courtesy of Wade Stubbs, Bergaliaboys.com