Stupid Experts

Econo-Girl grunts with disgust at these foolish financial advisors who say people should take good savings and pay down credit cards under any and all conditions. First, you need to make sure that you have a prudent reserve of money for unforseen events, like losing a job. Then you worry about paying off credit cards.

Because if you just pay off the card, then when something goes wrong, you will have to debt again. It is a cycle, and the credit card companies know it. Impulsively paying off debt leads to impulsively getting it back again. They don't want you to escape that debting cycle.

So the idea is to change your overall consuming and spending habits. Ask yourself: how long would it take me to save this kind of money? It is a valid question. If you have enough left over to cover six months worth of living expenses, then go for it. Pay that credit card off.

Those who recommend taking all monies and paying off credit cards are not thinking of the human animal. They are thinking instead of some mathematical equation. Just because one interest rate is higher than another, don't throw your nest egg away. Yes, it may cost you. But the goal is to break free of the debting cycle for good, not just for now.

Practice with Econo-Girl the habit of saving for something you want. It gets kind of fun to shop around, compare, and then tell the salesperson "No." But maybe that' s just me.


The Lazy Iguana said...

Someone should put you on MSNBC or better yet, Bloomberg. This is the most realistic credit advice anyone has ever said!

Why are so many finance people obsessed with all those dumb formulas? They all get on TV, start talking about simple things (like the time value of money concept) but they try to make it sound complicated so that the viewers heads will spin and they will think they must rush out that instant and hire a consultant. Then the consultant, after cashing many checks, gives simple advice. Spend less, save more, and pay off debt BEFORE running up any more. Well Duh!

Anonymous said...

You should be on a business show. You got punch.