ICFE eNEWS #15-31 - October 29th 2015
Credit - The Great Illusion
Of all the great things that credit does for us, there is
something even greater that credit does to us! Credit creates an
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors
Let me illustrate. Years ago a retired
gentleman came into my office for financial counseling. As he
was seated he said, “I do not have any financial problems. I am
current on all my bills. I have a high credit score, and I can
get a loan from any bank in the city. I am just having trouble
paying off my credit card debt!” And with that, he produced 54
credit cards with over $227,000 worth of credit card debt! True
His debt had accumulated rather quickly (I
suspected from the casino), and he had already borrowed against
his home a second time to try to win back his losses. Seeing his
monthly income, I knew he must be presently using his credit
cards to the tune of $5000 per month if he was staying current
on his bills.
I casually asked him, "Are you still using
your credit cards?" He answered, "Yes, but not like I used to."
That's like asking a man, "Are you still kicking your dog?" and
he replies, "Yes, but not like I used to!" Not a good answer,
but it shows the part that perspective can play in allowing us
to look at things realistically - or not.
Credit had done
to him what it does well; it had created an illusion! Because he
was current on his bills, had a good credit score, and could go
out and get more credit, he was deceived into thinking he was
financially healthy. In his perspective, he had debt, but he was
Although more extreme, this man represents
many Americans who have also been deceived by a constant use of
credit. They measure their financial health with false
indicators and see themselves better off financially than they
actually are. They are like a person who determines his
appearance by looking in a fun house mirror.
being current on bills, having a good credit score, and being
able to borrow more are not necessarily accurate indicators of
our financial health. We must look below the surface and ask,
“How am I accomplishing these things? Is it because I have
enough real money to pay my bills, or is it because I use credit
to make up the monthly deficit?”
To tell the difference,
put all your credit cards in a drawer for two months and see how
hard it is to pay your bills. If you run out of money before you
run out of month, you are probably spending more than you earn.
You must then decide to either make more or spend less.
Continuing to use credit like a “lifeboat” is not a good
alternative. Eventually, the “lifeboat” will sail into the
horizon, and we will “sink” financially!
enhance our lives for the good, but it can also ensnare us by
creating an illusion and hiding the reality of our true
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023
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Also, visit the ICFE's new Web site: StudentDebtHelp.org
Paul S. Richard
President - Executive Director
Institute of Consumer
Financial Education (ICFE)
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.