Did you know the average Canadian has five credit cards? This includes the traditional credit cards and also cards like HBC, Best Buy, Citi Financial and so on. How many do you have?
Credit cards have helped contribute to the 'now' environment of our society. Drive throughs, microwave meals and instant downloads. On average, we spend more than we earn. Want more than we need. It's no surprise pay-day loans have become so popular, but also at the same time, so have consolidation loans and credit counsellors.
I once had it explained to me that being in debt is like being a slave. Think about it. What would you call working but all your earnings go to someone else? A slave. If you are caught up in credit so much, you become a slave to your creditors.
There are some simple principles that we can apply in our lives, so that we don't become slaves to creditors.
First, start saving. The average Canadian saves only one per cent of their yearly income. That's it. This is why I believe so many Canadians get in debt, is because we don't save for a rainy day. The hot water tank goes, we put it on credit. The car needs to be fixed, put it on credit. We need to start saving. It is recommended that we save 10 per cent of our income.
Second, there are only two, maybe three things worth getting into debt for: house, education, and car. The car is the maybe. Sometimes we try to get a car that is an extension of our personality, and spend way too much on it. Always, always, get a vehicle you can afford. The same goes for your house you can afford. It is recommended to get a house that is two to three times your yearly income. As for education, work if you can, but don't sacrifice your grades.
Third, pay off unnecessary debt as soon as possible. It is so easy to put dinner, or a movie on your credit card. But if you don't pay the credit card off immediately, that $50 meal at 20 per cent interest, becomes $60 in a month, and it keeps increasing. That meal ends up costing you more had you not used cash. Avoiding this kind of debt in the first place really helps.
Fourth is patience. A study was done using marshmallows and kids. The kids were put in a room with a marshmallow, and were told if they could wait 15 minutes, they would get another marshmallow. The kids that were able to wait, the study showed in later life they were positive, better motivated, had higher incomes, and healthier relationships than those who couldn't wait. Patience can be self-taught. If you can use patience and self-control, you will be able to prevent yourself from purchasing items you can't afford, and avoid putting yourselves into unnecessary debt.
Lastly, if you are caught up in debt, you can seek help. To get out of this trap, you will need self-control. If you have several debts, do what you can to meet all the minimum payments monthly. Use any extra money you have left over at the end of the month to pay off your highest interest loan. Once you are done that one, cancel it, and move onto the next one.