Friday, January 30, 2009

Be Financially Educated

It's Frugal Friday over at Biblical Womanhood. I had dozens of little tidbits and tips floating through my brain that I considered sharing with you all today but, ultimately, I realized that this post had to be written...

In order to be a good steward of your finances and to make sound money decisions, you need to become financially educated. It is so important that we all truly understand how debt and credit and interest and FICA scores and all the rest really work. It is only when that happens that we'll get out of this mess as a country. Spending billions on a bail out? I'd rather see it spent on educating future generations so they don't get into this same mess. Because, at the end of the day, it's personal irresponsibility far more than predatory lending that caused all these problems. Let's just step up and admit that first of all.

I actually worry a little bit when I hear statements like the following:

  • "People who use credit are financially irresponsible and stupid."
  • "Renting is always throwing money away."
  • "Anyone can be a homeowner."
  • "Credit cards will be your downfall."
  • "A debit card is just the same as a credit card."
  • ... and on and on
Because, you see, not one of those is really true. Can credit be a dangerous, slippery slope if you're not careful? Oh, yes. Does it make sense for some people to stop renting and build equity? Of course. But it's important that we all realize there is more than one way to be responsible.

If you choose to live a cash-only lifestyle, I salute you. You will certainly avoid many of the traps others will fall into. If you carefully monitor your credit card spending and manage to build up enough points to travel, get free gas, or gift cards... well, I tip my hat to you too. Wisdom and responsibility can be displayed in many ways. There is no "one right way" to manage your money.

Educate yourself. Find your groove. Pick something that you can live with and work into your lifestyle. That way, in case something crazy happens-- like you have a baby four months too early-- you'll already have established the habits that will ensure you don't end up drowning.


Heather Benza said...

I think the most effective use of credit cards is to pick one that earns something you need (I had a reader's rewards that earned me FREE books! woo hoo); charge all your expenses (like groceries, not electricity); pay it off every month: you keep track of it all in one spot, you earn lots of free books or whatever and you never pay interest. Win Win Win!! And of course you build a high fico score so when something comes out of the blue it's no problem to get a low interest loan.

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