Theft by Credit Card
Champagne taste on a beer budget presents a real paradox in the search for happiness. Theft by credit card is not just a legal crime associated with identity theft. In terms of financial health, it can be a moral crime you commit against yourself. You do it out of a sense of entitlement, to support an aspirational lifestyle. It is hardly surprising that people who rationalize excessive feel-good purchases are drowning in credit card debt.
Your “Need” is My “Excess”
Aspirational purchasing may be good for the economy, but it isn’t good for you. To understand why, you have to understand the concept. Aspirations refer to what you would like to be, or how you would like to live. Aspirations could be related to a specific plan or goal, but more often they simply convey a dream.
The aspirational lifestyle is based on a distorted sense of need. Aspirational needs are fueled by:
• Wanting to live like one’s parents, without the 20-30 years it took them to achieve that lifestyle.
• Peer comparisons. In a competitive society, too many people judge their self value not by how their own real needs are met, but by whether or not their friends or neighbors have more.
• Short attention spans. Special events have become ubiquitous, so that nothing is truly special anymore. That makes it harder to be patient and delay gratification.
• Controlling ads. Advertisements sell by creating dis-satisfaction (“You deserve the car of your dreams”) and fear (“You are a bad mother if you do not use anti-bacterial soap”). And though you may initially resist the attempts of advertisers to control you, their persistence has a cumulative effect on the subconscious mind.
These are the types of influence that cause one to go about acquiring the trappings of wealth prior to acquiring an occupation or resources sufficient to fund those acquisitions. And ads support that as well by suggesting that short-term debt is really just a matter of convenience. So you put yourself in debt on the presumption that 1) the terms will make it easy to pay by installments, 2) your aspirations are to increase your income, making the debt a temporary inconvenience, and 3) if all else fails, positive thinking will present a solution if it should become necessary to really pay the debt off.
Bottom line, such rationalizations only mask an attitude of “I can’t wait, I need it now, and I’ll have it despite the potential consequences.” And that is what makes such spending excessive. It is not the amount. It is not the nature of the purchase. It is the impatience and imprudence of acquiring debt to satisfy short-term desires.
Don’t fake it till you make it
Some wealth advisors advocate living the lifestyle you desire, on the presumption that new avenues consistent with the way you portray yourself will open. It can work…but rarely. Few people have the demeanor or desire to exert the effort that must accompany this approach. Even assuming that wealth production might follow the mere appearance of wealth, at what point does one attempt to stop spending beyond their means? It is a hard habit to break.
More important to Be than to Aspire
Aspirations are good and positive. They contribute to happiness if they are realistic, you have a plan, and you are willing to exert effort in that direction. But living the life of your dreams, in a way that creates an ever-deepening pool of debt, becomes a nightmare.
It is important to plan for the future, but live in the present. Credit cards are not inherently evil. They are indeed convenient. Particularly if you have the resources to zero out your account each month. But the current economic conditions may force credit card issuers to find new ways to charge even those of us who pay off the balance every month. We may not like it, but they provide a service and should get something for it.
The thief to watch out for is yourself
It is easy to blame credit card companies for the hole many people find themselves in. But far too many people dug that hole with no assistance. Aspirational spending steals from your future. Only in the most euphemistic terms can it be considered any type of investment. It is money you will never see again. And with credit card interest hovering around 26%, aspirational acquisitions end up with a real cost of around twice the purchase price. So remember, for that finger pointing blame at the credit card carriers, there are three fingers pointing back at you.
If you don’t believe it, try living on cash for 6 months.