Maybe that shocks you. Maybe it doesn’t. That’s why I think it’s time to have a talk. Meet the Credit Card mafia, aka the Credit Card Companies, aka the Brain Trust. I know what you’re saying in your head:
You: I'm good with numbers. I know I won’t live paycheck-to-paycheck. I’ll get my financial plan together once I (start work/get a better job/get a raise).
Credit Card Mafia: “While you wait, have we got a card for you! We know you have plenty of time to get your act together. And don’t bother reading those pesky quotes down there...”
According to 2003 MetLife Study of Employee Benefits Trends, 52% of Americans live paycheck-to-paycheck. Nearly 50% of all Americans could not cover their expenses if they lost their income tomorrow. Among highly-compensated employees ($75,000+), 34% fall into this trap.
- via mdmproofing.com
This is a serious concern. Americans are saving less and using more credit. 25% of all Americans say they have no spare cash at all, and even fewer. Not even the high-earners are resistant to this phenomenon. So don't think that $80,000 starting salary will save you from yourself. If you have no financial education and a sharp eye, you will be swimmin' with the fishes and not even realize it.
You: “I can start planning how to save when I start my career/better job.”
Credit Card Mafia: “You probably won’t. Probably because you won’t think you can afford to ‘save.’ With an increase in salary comes an increase in costs—meaning insurance, social security, taxes, etc. You’ll want a new car. Credit card costs generally increase with income because you’ll feel as if you have more money to spend.”
Indeed. To note:
Approximately 60 percent of Americans revolve balances. The average revolving balance, among individuals with at least one credit card, is now $3,815. Households in the $75,000-to-$100,000 income bracket carry the heaviest debt loads, shouldering nearly $8,000 per person.- CardTrack, April 2004
Unless urged, I won't say too much more about credit card companies. Just realize you're up against the smartest minds on the planet. They've sat down and calculated every human tendency, finance behavior, and studied every demographic spending trend. They know students tend to wait until the last minute to pay. They know you wait until you're done with class to pay your bills online, so they have in the past made the payment deadline at 10AM (becuase most students are in a class at this time.) Trust me, they know how average people tend towards the "mean." If you think you're "beating the system," remember who the multibillionaires are. The Laws of Averages are against you.
But alas, there have been plenty of people who are out there to help. My next article will get you on the path assuming we start from square one. With a little encouragement, I think you, I, and our Allies will have a great relationship in the future. Next time, we talk about Spending Plans! As always comments, criticisms, and differences of opinion (because I'm always respectful of another viewpoint) are encouraged at the Comments section!
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