Personal Finance: Key facts to consider before opting for a credit card

If you are new and considering a loan or credit card, think very hard and fast about it before you even contemplate requesting a Salary Certificate from your employer, or submit your 3 year business bank statements to any Financial Institutions.

A scary fact I got off some other article is as follows:

“A sizeable 42 per cent admitted to making only the minimum payment on their credit cards each month. This is often a lot more expensive than people realise.

Taking into account compound interest, a debt balance of Dh100.00 on a credit card with a monthly finance charge of 3 per cent will increase to Dh142.5 by the end of the first year, and Dh203.00 by the end of the second, if only the minimum monthly payments are made. So 3 per cent is not 36 per cent a year, it is 42.58 per cent.”

Now you could imagine that loan was Dh100,000.00 and you can see the staggering amount of money you will simply lose and never be able to recoup.

The problem with new clients is a huge combination of consumerism, a clear lack of awareness of actual Financial Institution and Legal Policies, the ‘attractor factor’ of ease of obtaining credit especially if their employer companies are highly rated by Financial Institutions, then the many special offers and attractions to secure huge credit and finally the low rate of financail literacy, resulting in the automatic signing of legal contracts without taking the time to review them and be aware of the consequences in negative situations.

Most of the time human nature dictates we are easily influenced and this applies to a variation of facets of our lives, not just money and they all have the same form of negative impact when it happens, just in different forms and outcomes.

Money is most probably the harshest impact because when our sustainance is threatened, we cannot survive or thrive and then life is impossible.

Therefore, debt must be controlled and the fallacy that debt is bad, is just that, a fallacy.

Sometimes debt is necessary to acquire the things we need and not necessarily just want.

However, we need to ensure we are able to meet our commitments comfortably and still continue our monthly savings plan.

You may say ‘What savings plan?’ Well, if you are asking, then I advise you to lose the debt idea, start on your plan right now because it is clear you don’t need the debt!

We all wish to be wealthy so why not just focus your ultimate attention to Wealth Creation in all its forms where true wealth is achieved when your income exceeds your expenditure to the degree that when you desire or need something, you can go and buy it cash, or use your one and only credit card and pay that balance at the end of the current due month.

I imagine that there would be all forms of excuses as to how an employee, who generates a fixed monthly income can become wealthy where their income exceeds their expenses.

Well there is absolutely no room for excuses, you simply meet with a Financial Advisor, plan your Wealth Creation to invest in plans that ensures your additional income, based on your investment growth.

Or you acquire the vast available online knowledge of investments and you opt for the few good choices to invest in fixed assets that yield you a good income and exponetially appreciates as time progresses.

If you were to ‘Invest in a credit card’ then you are throwing good money after bad, especially if you cannot clear that total balance at the end of each current month and realistically, if you are able to clear the current balance at the end of each month, why incurr the credit card debt?

Patience is a virtue, always, So wait until you have the money and then feel totally comfortable to acquire your purchase, in cash, with money that you have in your hand, not from a credit card or a loan that could destroy your life if you are unable to control it in the future.

As humans, we always want things right now, we can’t wait, especially if we exist in a competitive environment where we must have the latest and greatest of the next new gadget or thing that appears on the market to create an image of being better than the next person, like the saying goes “To live like the Jones’s’.

Steer away from that mentality, learn to discipline yourself from an early age to save for what you want and when you are ready, you will feel better about yourself, appreciate the purchase more because you sacrificed the time and effort to acquire the amount you needed.

It is very easy to go on multiple spending sprees with money we have not yet earned where most of the time we buy things we really don’t need and there is no appreciation for the value of what we just purchased.

This is how the bad habit of debt starts festering and it becomes a part of your nature to just spend, until you find yourself in the web if debt and trust me, you don’t want to go there if you can help it!

The discipline of saving and not just spending is actually and educational cycle of learning for your entire life because you learn to practice patience, tolerance, respect for things and appreciation for what you finally acquire through this process.

Means you start applying those same principles to every action you take in your life and indirectly it has a huge positive effect on:

-        The quality of your buying power.

-        The power of your buying power.

-        Your attitude of how you conduct your life.

-        The people you call into your life.

-        The lifestyle you learn to adopt.

-        The partner you eventually settle down with.

-        The principles you teach your children and family.

-        And finally the legacy you leave.

So being diciplined in life means you lead by example, people will learn to automatically respect you because of the image you project, the way you conduct yourself, the lessons you teach others just by being you and so you will be paying it forward not just within your upcoming family generations, but also with those who come into contact with you, because good is also hugely contagious.

You should never forget that whatever we do in our lives, leaves a mark, so you decide what kind of impression you wish to leave behind.

What would you like people to say about you?

How would you love to be remembered?

Would you have wanted to make a difference, even a small one?

Would you want to be an unforgettable memory?

Would you like your children to remember the principles you instilled in them, ensuring they pay it forward to their generations?

There is so much that can result in bearing good fruit if we take the first step in the right direction that can serve our lives and the lives we touch during our lifetime.

It has nothing to do with debt, but it can start ther where you take the wrong path and change the entire course of your life and those of your generations.

Definitely ‘Food for Thought’, I would say?

[Note 1:  Theda Muller is a UAE-based author of two books: Embrace Financial Freedom Volume One: 10 Proven Ways To Release Debt And Emotional Fears In Today’s Economy, and Volume Two: Releasing Fear And Bouncing Back From A Debt Crisis.
She also conducts webinars and workshops on debt recovery.]

[Note 2: The views expressed are the author’s own and do not reflect in any way, the views of Emirates 24|7. Readers are advised to carry out their own due diligence before taking any decision.]

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