BUDGET BLAME GAME
When shoppers depend on credit cards to use money they don’t have, the issue isn’t the spending plan.
People are delusional. Helped in large part by access to credit, folks think they can afford stuff they can’t. Thinking that they are richer than they actually are drags them deeper and deeper into debt.
More than half of Canadians are living paycheque to paycheque, many saving nothing for the future and many more spending money they have yet to earn. And when I start talking about budgets, it’s these very people who tell me budgets don’t work.
Hey — making a budget isn’t an exercise in theory; it’s an exercise in practice. You have to live within the budget for the exercise to have been worth the effort.
If you plan to spend $450 a month on food but you end up spending $600, it’s not the budget, it’s you. Run out of stuff and head to the stores to restock without an eye on the budget, that’s you. Friends pop over and you run to the store for supplies, that’s you. The kids are having a bake sale at school, so you run to the store to do your bit, that’s you. And then there are the unconscious shopping trips you make; the extra bag of milk at the convenience store, where you also grab a candy bar and two bottles of juice; the salad dressing you forgot on the last trip that takes you back, which gives you the opportunity to add croutons, six tins of tomato sauce (on special) and a brick of cheese to your cart.
Using cash helps. When you take a certain amount of money out of the bank and stick it in a jar on your counter, you tend to be more conscious about what you’re spending, since you can actually see the money running out. That’s the magic of the jars: They remind you that money is an exhaustible resource. So, the jars are the very antithesis of credit, the purveyors of which want you to believe you are richer than you are because you can pay for anything you want whenever you want it.
You aren’t paying for anything when you put it on credit. That vacation on your line of credit isn’t paid for yet. Those shoes on your credit card? Not paid for. The groceries you put on your card for the points, but didn’t pay off in full when the bill came in? Not paid for.
When you put things on credit, you aren’t paying for them. You’re promising to pay for them at some point in the future. And since someone else is paying for them on your behalf — they’re renting you their money — you’re going to cough up good money for the privilege of not having to pay for the stuff you brought home.
So, here’s my big question: If you can’t afford to pay for the stuff you are consuming today, how can you be richer than you think?