While most Americans are saddled with credit card debt, student loans, and monthly car payments, the underlying issued usually relates to how we view money in general. Most people would like to say they are responsible with their finances, but their actions tell a different truth.
Out of this basic mentality toward money often comes many damaging habits we see today. For example the uncontrollable, erratic spending that characterizes consumers can go back to the root cause of lack of responsibility.
Responsibility over every area of your financial life, especially what is in your wallet, comes from an understanding that personal finances are a crucial area to match with your values.
When someone takes responsibility over their wallet they should be aware of three items:
1. Cash
Most have heard the saying “cash is king” whether on the Dave Ramsey show or elsewhere. But is cash really that powerful? The truth is that sometimes yes and sometimes not so much.
For example if you’re buying a table on craigslist, cold, hard cash will probably be the most powerful negotiator. However if you’re buying a home, pulling out cash might make you look a lot like a drug lord…
Make sure to always have a good amount of cash in case an expense comes up that you can’t use your cards for.
2. Debit cards
Even more important than the credit card is the debit card. A debit card gives you access to your bank checking account and can often be the most popular means of payment. While you certainly don’t need to have multiple debit cards and different banks, there is certainly a case to having at least one.
3. Credit cards (maybe)
Some of the most daunting debt in the US is the credit card loans. According to the NY post, credit card debt in the US is approaching $1 Trillion. Why would you want to have a credit card?
When it comes to credit cards I believe that about half of people should not have them because of lack of discipline. The other half of people should have a few quality cards that are used regularly but sparingly to build credit. There might be some points or cash back in there, but that’s just icing on the cake.
Ultimately your use of credit cards should depend on your discipline and self-control. Everyone should have debit cards. And everyone should carry an adequate amount of cash in both fives, ones and a ten (maybe $50 total?).
Besides the payment-related items there are of course things like ID and insurance cards but I hope you have enough common sense in those areas. I hope this helps your spending habits on your financial journey for many years to come.