Monday, July 6, 2009

"Super Sized? Sure! Cash or Credit?"

I hope that everyone had a wonderful Fourth of July holiday weekend! Here in the northeast, we actually had some nice weather!! We had a couple of days with no rain - (See, miracles really do happen!!)

While at church yesterday, I was speaking with someone who works at McDonald's. He said that it was very busy there over the weekend because of the holiday. Then he added that the orders were larger than usual because of the number of kids and the size of the families who came in.
He finished by stating that "a lot of people paid by credit card." He probably said that for my benefit. He knows that I write this blog and that I cringe when I hear about unnecessary use of credit. So I thank him for sharing; he is the "inspiration" for today's post.

Folks, think about the philosophy of paying for "fast food" with "LONG TERM debt." It makes no sense! While parents may, in fact, have gone into McDonald's with their kids, they (the parents) had to know that they were going to stop some place for lunch or dinner. Likely, they did not think twice about pulling out the credit card and putting off payment until a later date. The problem with this is that frequently we buy more with credit cards than we do with cash for the simple reason that no dollar bills are coming out of our wallets or purses. We overindulge, thanks to MasterCard, Visa, etc, so we can get instant gratification and immediately satisfy the kids. But the credit card companies "get the last laugh" when the bill comes due becuase there is a very good chance that that McDonald's purchase is not the only one on the current statement. How many other purchases were made during the month for instant gratification or to satisfy kids, friends or somebody else?

You can pay the bill in full every month? That's great! Chances are, this message is not meant for you. At the same time, let's say that money is tight and an unexpected expense or an emergency comes up later in the month. As a result, those unnecessary credit purchases now make it difficult or even impossible to pay the bill in full. We cannot predict the unexpected; we don't know when emergencies will occur. However, we do know that they may occur. So we have to be prepared, financially and other ways, to tackle those events without putting ourselves in debt. That's why an emergency fund is so important. It should be a liquid, cash fund, not a plastic, credit card.

Fast food is fine in moderation. An occasional "super size" is ok. But using credit while placing the order is absurd. As financial consultant Dave Ramsey says, "Cash is king!"

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