May 29, 2012

Breaking Through the Plastic Ceiling and Reclaiming Your Money

Isn’t it amazing how we buy and sell?  In the days of old, the family who raised chickens would head on over to the cobbler and swap some eggs or a few scraggly old chickens for a pair of shoes.  Money popped onto the scene and all of a sudden we started swapping shiny stuff instead of hauling poultry around.  Money acts as a store of value and a medium of exchange.  In the past few decades, credit and debit cards--“plastic”--has taken center stage.  The commercials for these credit card companies boast of the convenience, but these cards may be a plastic barrier between you and your wealth.  

Last week I was in Denver seeing family and doing some work.  I had a break and decided to spend a bit of time writing.  I prefer to find local hang-outs and stumbled across a quirky little ethnic coffee shop.  I ordered their house Turkish Coffee and a pastry.  When I pulled out my credit card to pay, the Lebanese woman who owned the coffee house gave me quite a lecture.  I let her vent about the younger generation and their credit cards.  “No one carries real money no more,” she told me.  I would have gotten defensive had it not been 100% true.  You can read about similar issues of mine at “The Cash Only Bakery.”  It turned into a nice conversation and the food was great.

When we stopped swapping chickens and started swapping currency, a barrier was created between us and the value of our stuff.  Plastic adds yet another barrier that further complicates the issue.

Put another way, imagine that I want to translate a book from English to reach French and Spanish-speaking readers.  The book will make the most sense in its native language because of issues with vocabulary and context.  It would be a challenge to take the book from English to French and to make it as meaningful.  Even with good translation, it would be hard to avoid some minor issues. Now imagine that you begin your second translation into Spanish.  If you were to take the newly translated French edition and try to translate that to Spanish, the minor issues from the first translation would be magnified in the second edition.

This is the problem that we see when we replace cash with credit cards.  We are replacing a store of value with a dynamic account meant to track a pool of some store of value.  To complicate matters even worse, we add in layers of complexity--interest, due dates, points and miles, cash back and other rewards.

We see folks who manage their credit cards well, paying them off each month.  We also see folks who become trapped below the plastic ceiling, always struggling with debt.  Growing up I was able to see both sides of this credit card conundrum.  My earliest memories of money were of my parents in debt up to their eyeballs.  At some point and for some reason they made a change.  I haven’t asked what prompted that; maybe this will remind me to do so, or they can leave a comment for everyone.  I remember them getting serious about paying off debt and using every opportunity to scare me to death about debt.  By the time I moved out of their home, it was paid off.  It stuck with us.  My wife and I use a credit card but have never carried a balance.  However, some months when we get ready to pay off the bill, we wonder if we could do better.  We feel that plastic barrier separating us from our spending, stunting our savings and standing in the way of our stewardship.

I thought we’d talk about some small steps, some more drastic moves, and some game changers that will help us to break through that plastic barrier.

Baby Steps.  Consider using debit cards tied to real money.  A debit card tied to a bank account has a real financial limit, a certain amount of money before it gone.  Credit cards with huge limits are much less pressing than debit cards tied to a real pile of cash.  When I spend on our debit card I have to call my wife and tell her, “Sweetie, I spent $1.12 on a cup of coffee,” so that she can deduct it out of our checkbook.  Accounting for that spending changes your attitude.  Debit cards are also offering rewards these days to reduce the excuse to use credit.

You can also sign up for free services that help you track spending.  My wife and I use Mint Personal Finance and check frequently so that we don’t get any surprises when the bill rolls around.  Every major credit card has an app. These online services and sites keep you up-to-date with real time info so that you don't fall behind.  The more you know about your finances, the better you will manage them.

Bigger Changes.  The video above cracks me up. It is an interesting concept, but there may be easier ways to reconnect.

Consider Crown Financial or Dave Ramsey's courses.  These organizations have some excellent tools and resources to dig in and make improvements to your budget, debt elimination or savings.  They offer their proven envelope system which allows you kiss the credit cards goodbye and use cash to make your monthly budget sing.  This system has been so successful that wallets have been created around it.  You can also bring in today's technology by using their electronic Mvelopes system. Get a free trial here: Crown Financial Ministries - Mvelopes. 

Drastic Changes Needed!  Sometimes we see folks that jump in with both feet.  They cut up the credit cards, sell everything that isn't stapled, glued or bolted down, and put it all toward paying off debt or giving.

The truth is, it can be downright scary to jump in with both feet, to cut up the credit card, or to quit 'cold-turkey' on the spending habits.  Drastic changes can be a bit easier if you can create meaningful and attainable goals.  Instead of saying, "I will never use my credit card again," start with something more attainable.  Commit to a one month spending freeze.  Write down the necessities, commit to cash, and only purchase what you need.  After all, it's only 30 days.  My brother and sister-in-law just made this commitment and are putting their savings aside for giving.  After 30 days, you may find that it wasn't as tough as you thought.  Discipline and reaching your stewardship goals is worth the effort.

It is important to dream big and to make big goals, but each goal is comprised of many smaller actionable steps.  Pinching a few pennies in every area can add up.  Read about a few more ideas here.

Are your credit cards, even the ones you pay off each month, acting as a barrier to your budget?  Take a few steps today to reunite your family and your finances, and to reduce plastic's capacity for distraction.  Whatever you do, don't wait.  Share your ideas with other readers.  Post the links to your favorite tools and tell us about your experiences.  Don't be afraid to steel stewardship ideas from the comments.
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