Straight Talk from Al Jacobs

 

A LESSON IN FAMILY SPENDING

The number of people that live paycheck-to-paycheck is frightening. If there’s one reason, it’s because of credit cards. I’ve heard that a third of American families couldn’t meet their household expenses if family income stops for sixty days. With the universal use of the cards, on which a flood of interest continually flows, together with consumer borrowing for every impulse item the marketing industry can devise, it’s no wonder.

 

Life in America was once quite different.  As a young adult, like so many of my friends, I possessed no credit cards.  We all met our walking-around expenses with the money in our pockets. The only installment purchases we made were for a mortgage on our home or perhaps an automobile loan. The bulk of day-to-day expenses were covered by cash or check. You may consider this overly restrictive, but the benefit is obvious: When purchases are restricted by your cash on hand, there is a built-in limit on what you can spend.

 

I believe the overuse of credit is America’s worst habit and that the banks, which have been encouraging everyone to borrow, are mainly to blame. Consider one the nation’s largest banks, Bank of America. On money you loan to them, in a savings account, you receive interest of four-hundredths percent annually.  However, on loans to you through their Visa card, the rate is 23.49 percent.  Do you see how the board is tilted?

 

The lesson is simple: Avoid borrowing whenever possible. To prosper in this world, don’t pay interest.

 

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

You may view them on http://www.roadwaytoprosperity.com