One of the most important decisions that everyone must make in their financial plan is how and when to use credit cards. Credit cards are an important part of personal financial planning and are normally used wisely and cautiously, but when there is a loss of income or a job is lost, the first thought that most of us think is, “I must use my credit cards to pay the bills.”
It represents immediate cash flow and when family income is erased or almost completely erased, a credit card can buy gas and groceries and even make a house payment. It can keep the household running until normal income is replaced. The fact that credit card debt can be an overwhelming experience itself is often completely overlooked. Survival at any cost is the name of the game and that thinking process can make a critical situation, devastating.
When a job is lost for whatever reason, it has a dramatic affect on the entire family. The normal lifestyle and amenities that are part of the daily living experience become almost impossible to maintain. Car notes, school costs, utilities and other monthly expenses continue to accumulate and the stress related with the inability to pay them, does have an affect on decision making. Rather than analyzing what the choices are, a knee-jerk reaction takes place and credit card use becomes part of that reaction. Credit cards appear to help the situation, but in reality they create more issues and have a major impact on future cash flow needs, due to payback requirements and higher interest rates.
The recent economic dilemma is forcing the banks to rethink credit cards and how much to charge for using them. Deficit financing has been the American way to pay for the lifestyle that is considered normal, but that system is being reworked because it has some major flaws. A large percentage of consumers and some lending institutions have been hurt by the credit card structure. The credit card system that is in place now, is not an asset or a help for consumers, it’s another way for them to acquire debt that affects a family’s cash flow. Using credit cards to get by is not the only solution when income is lost through unemployment or pay cuts.
The big question is how do I live, if credit cards are not the answer? The answer varies based on each individual situation, but there are alternatives. The first step is don’t panic, it’s a temporary situation and it will get better. Call your creditors and discuss the situation and ask for help. The next step is to evaluate your assets and see what can be sold to generate income. Most families have accumulated things they can be turned into cash. Another step is to find help. There are several agencies available that could help work through your current situation. Talk to family and friends, there is always help of some kind available through the family network. Continue to look for employment and pray. See yourself working and making money. That thought and prayer will help you more than anything. Believe in yourself and throw the credit cards away.
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