A few months ago, I wrote a popular (and controversial) post about the fact that I do not use credit cards. In that post, I articulated the the practical and financial realities of living without a credit card. In this post, I will try to elaborate on my particular philosophical reasons for not borrowing money (including for the short-term with credit cards).
Fundamentally speaking, I dislike the idea of owing another person (or entity) money. At a “gut level”, I have never enjoyed the “borrowing money-owing money-paying money back” process. I dislike the time, paperwork, fine-print, and legalize involved in the actual debt transaction. I prefer the straightforward idea of exchanging money for goods and services, without the need for complex interest calculations or signatures. Whenever I make a purchase, I simply want to consider an items value, it’s actual cost, and the long-term benefits of the purchase. I do not like thinking in terms of payments, payment plans, and payoff dates.
I also enjoy the “simplicity” of using cash and I dislike the “emotional burden” of owing money. For the first 14 years of my adult life, I lived in a cycle of borrowing money, making payments, borrowing money, making payments… Now, I have the ability to save money and make a purchase, without the burden of interest charges or finance fees. The past two years of my life have been the most emotionally satisfying, spiritually fulfilling, and financially secure years of my life. Getting out of debt was the first step in a multi-step process towards financial security and long-term financial stability. I see no reason for “moving backwards” and borrowing money. As for the credit card miles or bonus points, I would not trade the “emotional reward” of being debt-free for all of the bonus points in the world.
I have a wonderful, rewarding job and I love the people for whom I work, but I would not enjoy my work if I felt obligated to stay with my current employer. In other words, being debt-free with an emergency fund allows me the freedom to work with passion and commitment, and to avoid working out of fear and compulsion. I have enough money in savings that I can “follow my heart” and work where I feel that I am needed, instead of working a job that I hate, simply because I need to “make my payments”.
Making a commitment to live debt-free and credit-free forces me to focus on my financial decisions. Day-to-day decisions, about how much to spend and what to buy, must be made with “real dollars” and not with hypothetical future dollars. Real story: Fifteen minutes ago, I got off the phone with a good friend who told me that a friend of his, a young man about 30 years old, was killed in a car wreck. The young man’s wife, also in her 30’s, is now facing the reality of life without her husband. Reason for this story? It is impossible to predict the future. Whenever you use a credit card (or borrow money) you are DEPENDING on NEXT MONTH’S PAYCHECK. Now, I’m not a doom-and-gloom kinda job, but I never want to put myself (or my family) in the position of DEPENDING on NEXT MONTH’S PAYCHECK. Now, I realize, of course, that in some ways, we all “depend” on next month’s paycheck, but you can clearly see my point. I refuse to be in the position where I am spending money that I “might” have in a month, a year, or a decade. I want to spend money that I already have, that I have already earned, and that I have already deposited.
I enjoy being different. There is something exhilarating about “swimming-against-the-tide”. In a SEA of personal finance bloggers (many of whom I admire and respect!) I am one of the very, very few to advocate against the use of credit cards. Clearly, there is something a bit “novel” about my approach to modern personal finance and I enjoy being a bit of a maverick. But, my “way” is working, very, very well, for my family and for our situation. After getting out of debt, a process that took less than one year, I have managed to save up a sizable emergency fund and I am currently on-track to save more than 50% of gross income in various retirement accounts. Having divorced myself from the notion that I would ALWAYS “live paycheck-to paycheck and borrow money” I have managed to, quite LITERALLY, change my life.