My husband taught me this simple but powerful lesson when we first met.
Luiz has never had credit card debt. His father was a gambler by 'profession' so Luiz learned hard lessons about money from an early age.
Paying off my student loans was his mantra to me when he discovered I owed thousands.
Luiz and I have not had debt for more than 10 years.
Now we are hearing that the banks (aka: thieves) and stores in Brazil are "offering" such easy credit that more than 50% of Brazilian families struggle with debt. It seems easy to buy that plasma TV, or that first car, or those Nike sport shoes. But the deception is "just R$35 a month for six months" but if you were to pay in cash it would be just R$175. Sounds good, but you wind up paying R$35 more... [for example - more, obviously, for cars and electronics]. Even the credit card companies cooperate by automatically slicing your total purchace into pieces and not charging you at once, but rather, in monthly installments.
I am glad the growth of the economy in Brazil has helped so many people rise out of destitute poverty -- but to then get saddled with debt, well, that's another struggle.
Just keep repeating to yourself: "Don't put your hand where your arm cannot reach!"
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14 comments:
I love the saying....gonna use it!
Great advice, Jim... one of the huge disappointments about "first-world living" is the incredible amount of debt...
Ps I opened my new blog now if you're interested!
gringaincanada.blogspot.com. :-)
I don't know if things have changed but a lot of times when a store would offer "interest free" installments, you couldn't actually pay less "a vista". Of course, you know that there should be a discount for prompt payment but if it's not available then, mathematically at least, you're better off using the installments.
Thanks for the comment AF. I have found that with big purchaces, like kitchen appliance or furniture, there is a discount for paying 100% right then. But for department stores where you are bhuying clothing or housewares -- not so much. You can also negotiate with small shop owners because they will save the 3% fee they have to pay the credit card company...
Jim, don't trust some of the news you hear, especially the ones about families in debt. We are going into election time and the opposite parties always pay the media to write negative things about the current government. It's true that the families are in debt but it's not because of frivolous impulses. They're in debt because now they can afford living at a house and not at a "barraco" in a favela, so they have a mortgage to pay. They can buy a car, which was a dream just a dream some time ago. Of course there are people buying LED TVs and can't afford it, but most of the people are in debt because they're paying for essencial services. And I don't consider it a bad thing.
Claudia - I understand the advantage of buying on credit to improve your life. But I also understand the difficulty of trying to get ahead when you have too much debt. And I see too much how the banking - credit industry sucks people into untennibal situations. Credit is not bad - but too much credit is a trap!
So many times I've gotten excited about the "cheap" price of something I see in the mall, only to realize that I'm looking at the MONTHLY payment, if I buy it and break it into 12 payments. It's crazy!
My husband and I don't use credit cards- we only buy something if we have the cash to pay for it. And when we move to Brazil next year I hope we can still do the same, because you are absolutely right.
Long time readers will know this - we have two pigs. (Piggy banks). We have one that collects all the 1R$ coins we accumulate each day, and another that snatches up every R$100 note take caomes our way.
Together, they pay for our international tourism.
Make a plan and stick to it!
Laurel, I see a lot of people that say they don't use credit cards and I don't understand why. Do you worry you will overstretch yourself and spend more than you should? My wife and I use our credit card for everything we need and at the end of the month we pay the full balance. We don't spend more because it's a credit card, it's just a convenient payment method that has additional benefits like air miles. Not to mention building up a positive credit history.
Andrew - you have discovered the beauty of credit cards - PAY THEM OFF EVERY MONTH! Abnd get the flight miles!!
Use your credit card like a debit card -- only the money you have!
It's not even that. It's just that I pay every other bill in full. I don't pay half of my gas bill or only 10% of my phone bill. And just because the phone bill only arrives at the end of the month doesn't mean that I spend all month racking up a huge bill, using every possible paid service. I use the phone in a sensible manner that I know will roughly equate to a reasonable bill. Why would I do any different with a credit card?
when I buy the smallest item in Rio I am offered payments - and I say no....they look at me like I am crazy - literally. C and I haven't used credit for years (and Years) we use our credit cards like checks - a convenience. I love my debit card and was (am) really irratated because I got a 'new' on from the bank and it can be used as a credit card and they charged me $R180.(per year) for the privilege of carrying it in my purse. C wasn't bothered at all he says they have to make their money somehow.... My thought is that you can't afford something you can't afford 20% more in interest.
Ginger - we REFUSE any card with an annual fee - and often times they will wave the fee if you scream loud enough (and tell them to cancel the card).
I do pay a fee on my card in the USA, but because of the flyer miles, it still works out in our favor.
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