America hasn’t always been a credit card society. But something changed in the 1980s, and it has created some unintended consequences that everyone needs to consider in preparation for retirement.
Over the next two minutes, Steve McDonald reveals what these consequences are and also what habits you should start to get to and through retirement.
Most of you watching this can remember, I’m sure, when we weren’t a credit card society. The only time credit was used in our home growing up was to buy a car or a house, maybe airline tickets on the phone, if it was an emergency. Otherwise, we paid cash for everything.
And you know what I’m talking about. We paid cash for groceries, gas, utility bills, you name it.
Somewhere in the ‘80s, though, things changed. Credit cards suddenly were everywhere. Going out, food, shopping, gas – everything was just a swipe away. And it has cost a lot of people a lot of money in interest. I’ve never seen a total, but it has to be gigantic.
Yes, they have been a huge convenience, I know that. But they have also had some unintended consequences that we need to consider in preparation for retirement.
The first unintended outcome is that almost no one has a budget anymore. Why bother? Cards have eliminated the need.
Don’t have the cash? Charge it. You’ll get to it, right? But we never do.
Don’t have the extra money to eat out? It’s OK, I’ll put it on my card.
And the next problem we never anticipated from this card society: Nobody saves to buy nice things anymore. Remember when you had to save to buy a new sofa or TV?
Want something you haven’t saved for? Charge it. Pay it off later, which few ever do.
Vacations? Give them your card number. Have fun now. Worry about it later.
And the third effect of our card society – need. It isn’t a word we use a lot when it comes to spending. The focus now is on the things you want. The good life is yours with the right card.
Well, when it comes to our spending and credit practices, most of us have been operating as if our earning years are infinite, and they aren’t. We wear out after a while.
But the really bad news in all of this?
Not only are there a lot of folks carrying a lot of debt into retirement, they don’t have any idea how to live on a budget. They never had to. And unless you have socked away a fortune, if you don’t have a budget in retirement, you are in a lot of trouble.
Our earning years are over. What you have now is it. And getting used to having to say no to yourself is a lot harder than you might think.
If you have been on the spending jag most of this country has enjoyed for the last 30 years, I’d start practicing budgeting and saying “no.”
Start training yourself to think in terms of – except for your monthly Social Security check and what you can earn on your investments – there isn’t any more coming in, ever.
The buck has finally stopped and it’s right on our laps.
The first step to shifting gears from the “spend now, pay later” thinking is to begin to get an appreciation for how hard it is to set up a budget and live on it. Go back over the last three years of your credit card statements, bank accounts, especially your checking account – anywhere you spend money – and add it up. Don’t forget your ATM withdrawals.
Get a monthly average. That alone will give you a great idea of what it really costs to live. Most of us just add up the utilities, taxes, mortgage, car payment, insurance, etc. It’s actually a lot more.
Compare that monthly average to how much you expect to take in each month for the next 20 to 30 years of unemployment. That’s what retirement is: 20 to 30 years of being out of work.
I think you probably have the idea now.
Now, go back over those card statements and see what you have to eliminate.
Credit cards look a whole lot different from that perspective, don’t they?
Start preparing yourself mentally for the other side of this life. It’s going to be a lot longer and a lot more expensive than you think right now. And if you can’t learn to budget your money, you may have a real disaster on your hands.