Make It Simple and Cut Those Plastics in Two

The past couple of weeks, the word "simple" keeps on bogging my head once in a while especially on my devotional time. It was confirmed last night with the illustration of Pastor Edward Barcial during his exhortation at our midweek service.

When he related to us one of the email messages he received from a friend, I recalled that sometime March 2009, I also received from my sister the same email message, though a Cebuano version. The story speaks of the simplicity of life for all that were born in the 1950's, 60's, 70's, and early 80's. It was such a detailed narration of how we, as I am one of those born during those years lived our life very simply without the inventions and innovations enjoyed by kids these days like internet, playstation, xbox, iphone, cellphones and other gadgets that most kids are enjoying in this new millennium.

To add to that simplicity of life, I could vividly recall that my parents and grandparents were living life without credit cards. My fraternal grandfather, to whom I consider as my first mentor in personal finance did not even have any form of major borrowing from any financial institutions as he vehemently discourages resorting to any form of borrowing.

Without credit cards or borrowing, I am proud to say that my grandfather acquired properties and other stuffs so precious in the 1970's such as television, refrigerator, or even a car. His main secret is save, save, and save. And the simple formula is to spend lesser than what you earn.

Let me now stress on one of those innovations that has been introduced to give convenience to the consuming public, the credit card. Major credit card providers are marketing this product to provide convenience as one can purchase cashless, easy payments, deferment of payments, and many other perks and rewards system. Behind those convenience and comfort, are the evils that it carries and are not disclosed. For this, everyone fairly knows what I am trying to say.

In the previous article, I made mention that my little gold cards have already undergone plastic surgery. I just decided to make my life simple, especially in the area of spending. Simply put, my family and I will only be spending on things that are on budget and on cash basis.

Aside from the fact that in 2010 the bank that issued my credit cards will start to impose a AED10 ($2.50 approximately) per month as charges, where it was marketed as free of membership and annual fees for life, I decided to cut these in order to show an example to my children. I am now walking my talk as I kept on reminding them the dangers of spending on credit cards and borrowing.

The following are the dangers of using credit cards:

• There is a tendency to spend more than paying your purchases and other spending by cash. Swiping those plastics in lieu of cash takes away that physical sign that will signal you to stop spending. Spending now depends on the credit limit rather than the available cash.

• Swiping those plastic money also tends you to pay more. Some establishments are adding up a percentage of amount billed, like the gasoline stations when paying with your credit card. And if your total spending exceeds your available cash, you may not be able to pay for the total amount billed, hence paying additional interest and other finance charges.

• Depending on your credit card as a mode of payment, your purchasing decision is based on a synthetic value, rather than the true value of the item. Decision is now based on whether you can afford the monthly installment rather than the total value of the item.

• It is very difficult for you to trace your spending and purchases if you are dependent of the plastic money. You will just be surprised one day, upon receipt of the monthly statement how much you had spent, and mostly on unnecessary items. Hence, your budget is already ruined.

Having narrated all these dangers, the only question I would leave here is: are you ready to make your life simple? If yes, cut those cards, claim the rewards points, and settle the full amount.

If your answer is not, good luck to a complicated life.