My friends, we, as a society, are on the wrong path when it comes to personal finance.
Before the rise of easy credit, we did something interesting. If we wanted to buy something, we saved our money until we could afford it. Consequently, we tended to live more economically grounded lives. Though we may have lived more humbly, I do not believe we had any less fun. We did, however, have a greater sense of living within our means.
Sometime along the way, credit cards entered the picture. Getting credit in stores became easier. Buying cars with credit via leasing came into vogue. The importance of savings dwindled. Getting credit cards became easier. Getting mortgages got easier.
It is interesting to note, that even though we received a generational wakeup call with the financial crisis of 2007–2008, we seem not to have woken up. Oh sure, for a little while some of us economized, paid a bit more attention to our spending habits and cut back on our credit utilization. At least it seemed that way to me. However, that was short lived.
Just after the worst of the financial crisis I remember reading an article in a prominent financial publication. In it, they interviewed an older money manager whose name I wish I could remember. Recall that the last crisis was caused by far too much leverage, as Wall Street calls it. Most people simply call it debt.
The interviewer asked the gentleman, who must have been in his mid-70’s at the time, how much we as a country would learn from this most recent financial catastrophe caused by too much borrowed money. He answered, that in the short term we will learn a great deal. In the medium term quite a lot. And in the long term, absolutely nothing.
He was right.
Fast forward ten years. After what was arguably the greatest economic meltdown since the Great Depression, we are back to our profligate ways. What is worse, it has become clear to me that powerful institutions want to keep us set on a path of rampant consumerism and addictive credit, in service to peddling their products and services.
Consider the notion of the credit score. Like all of you, I am sure, I have credit cards. What I started to notice is that, one by one, my credit card companies have begun giving me the opportunity to check my credit score when I am reviewing my account online.
I have no objection to this “service” provided by my credit card company. After all, having good credit is important when it comes to getting a mortgage. So too, a good credit profile can be important for someone looking to rent a home or apartment or get a job.
But looking around online, it now appears to me that this whole credit score thing has become a perverse personal finance game. We are a society that now clearly puts our creditworthiness ahead of our savings worthiness! I mean, why are we so obsessed with our credit scores anyway?
Yes, I recognize that good credit helps to get a good mortgage. I acknowledged that earlier. However, if we became consistent savers, and lived within our means, wouldn’t that lead us in a better direction than being fixated on credit? Credit is the province of the debtor just as interest is in the interest of the lender!
I cannot think of one bank that offers a saver’s score as opposed to a credit score. I do not even believe a saver’s score exists. Why is that?
We have been socialized, over time, that if we want something we can finance it and then pay for it, rather than developing goals consonant with our present financial reality, saving our money and buying it.
I am not writing this out of sour grapes. My credit score is over 800. I pay off my credit cards in full every month. But the reason for that, I believe, is that I pay attention to saving money and living within my means. I am not fixated on how good a debtor I can be. I don’t require a pat on the head from a financial institution for being a good little interest payer. I am fixated on how good a saver I can be and, consequently, not need credit.
Powerful, wealth building savings plans exist that can help a person craft a better financial future and present. You might want to discuss that concept with a qualified financial services professional. Improve your life. Take action now!
Scott R. McGimpsey January 16th, 2018
This material was prepared by Scott McGimpsey and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy. Neither Summit Brokerage Services Inc. nor Scott McGimpsey is engaged in rendering legal, accounting, or other professionally services. If such assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any federal, state, or municipal tax penalty. Moreover, a diversified portfolio does not assure a profit or assure protection against loss in a declining market. UNIFIED PLANNING GROUP is an independent firm with securities offered through Summit Brokerage Services Inc., Member FINRA, SIPC