Happy (Financial) Independence Day!

by B. Rich on July 4, 2012 · 0 comments

in Finance

Today is the day that Americans commemorate the adoption of the Declaration of Independence that occurred on July 4, 1776, declaring Independence from Great Britain.   While I’m thankful for the privilege of living in the land of the free and home of the brave, on this day I celebrate a different type of Independence.   If you don’t mind, I’d like to share a story with you:

Chapter 1:  Once upon a time there was a little girl born in a small town in the wonderful state of Georgia. She was an only child raised by a young, single mother.  Fast forward 17 years to when she got her first credit card, which was a Discover card.  Needless to say she “discovered” just how high it could go.  ”Wow” she thought, “this is so much better than layaway.  I can have my things right now and pay on them later.”

Chapter 2:  Throughout her college years she continued to accumulate more credit card debt, various Visas, Mastercards, store credit cards, and of course American Express – but not the traditional green card that had to be paid off each month, American Express Optimum, the AmEx card at that time that allowed monthly payments without penalty (so she thought).

Chapter 3:  Like many other college students, she graduated with student loan debt, a car note, and mounds of credit card debt that she could not account for.  Suddenly she had what seemed to be a great idea, “okay, let me go down to the local bank and see if they’ll give me a loan to pay off these credit cards.”  Prior to this time she had no idea or knowledge of the term debt consolidation.  Yep, the bank approved her loan request and she paid off all the credit cards.

What happens when you try to change the outcome without changing your actions?  You will find yourself right back in the same situation if not worse.  She was no exception, her actions did not change so she found herself back in debt, more than she was previously.  Now she had the bank loan plus new credit card debt.

Chapter 4:  After two failed debt consolidations, she was still oblivious to the root causes of her debt issues, her mentality and her behavior.  I guess you can say that she was treating the symptoms and not the problem.  Her next brainchild was to increase her income because “obviously she was not making enough money.”

You know how it goes, a friend invites you over to hear about this great business venture that he or she has recently joined.  You get there and the presenter begins to tell you how much money you can make, how easy it is, how little you have to do and before you know it, you sign up and pay idiotic start-up fees.  Months went by and fees associated with joining the business were paid, products were purchased, miles were driven, and very little income was produced so guess how all of this was financed…credit cards!  Since I have the inside scoop on this young lady I can tell you that she made purchases without much consideration because after all, this was for her business and oh, let’s not forget the almighty tax break that comes along with spending money for business purposes (please note that I’m being very cynical here ;-) .  When it was all said and done, the only thing that came out of this attempt to produce more income was an increase in debt.

Chapter 5:  Through a series of what appeared to be unrelated incidents, she stumbled across several resources about personal finances.  The Light!  She was beginning to see it.  During this time her job required a lot of travel so there was plenty of time for reading on planes and in hotels.  She read everything she could and began to take pieces of this and slices of that until she came up with something that worked for her, oh wait, me;-)

The End:  Today the only debt I have is my mortgage and I am working on paying that joker off as well!  There is abbbbsolutely no freedom like financial freedom.  What’s the point in being physically free and economically bound?  That lifestyle didn’t work for me so I had to change it.   Guess what, you can too.

Happy (financial) Independence Day,

B.Rich

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