Spending What You Don’t Have

I know that I said at the beginning of the year, all those days ago, that our year off from shopping was not about saving money. And it isn’t about that really. Or so I thought. Afterall, if I am not “in debt” then I am surely living within my means.

But over the past weeks (has it really only been 15 days?), as I consider needs versus wants and the huge blurry line that exists between the two, it sort of is about money. I mean, who wants to waste money on things that you are just going to turn around and give away?

The Secret History of the Credit Card was a PBS Frontline special a few years ago. The average American has $8000 of credit card debt and 35 million Americans only pay the minimum payment every month, which is only the interest.

Credit is no longer viewed as an earned privilege, where you had to have a job and demonstrate that you were worthy of a loan, Manning says. “This generation has been socialized [to feel] that it’s an entitlement to have these kinds of lifestyles. They don’t have to earn it. They don’t have to be disciplined to save. As a result, credit cards have become a kind of ‘yuppie food stamps.’ That’s a real serious impediment in terms of trying to inculcate basic financial literacy skills on this generation where they see all these abundant things in society that they think they deserve.”

Most people when questioned say that they didn’t use their credit card to survive during a crisis, rather they built up that huge debt one $30, $100, $200 purchase at a time. I can see how easily that could happen, remember my Target purchases for those 4 days right before Christmas? I do. I am still appropriately horrified by myself.

We carry no credit card debt. We pay the bill off at the end of every month. Now, there have been occasions when we have needed to make a large purchase, a new furnace comes to mind, and we have charged it. But every spare cent we have goes to pay it off as quickly as possible. Those interest rates will bury you faster than you can dig out.

Now I am hoping that we don’t even have a balance to pay off at the end of the month.

35 Responses to “Spending What You Don’t Have”

  1. Lilly Says:

    But will you have a balance on your card for necessities at the end of the month?
    ..We pay for everything including groceries with our credit card. We pay it off monthly also but there was a time a few years ago when we could only pay part of the monthly bill for a while and it was scary how fast the balance to be paid grew!

    Chris says: Probably not. I am the one who uses the credit card because I have this irrational fear of overdrawing our bank account. Even though my husband would tell me all the time to stop using the credit card and just use the debit card. I could not bring myself to do it.

  2. Another Chris Says:

    Our bank allows you to put a savings account or credit card as your “fall back” for overdrafts. Granted, it charges you for using it but it still makes me feel better in case of an unplanned overdraft.

    We use our debit for most things but use credit for things with security concerns like online purchases or car rentals, etc.

  3. Alissa Says:

    we just use the debit card… and spend less than we have. it’s working so far, lol. credit cards are SUCH a slippery slope. we had a rather expensive car repair this month and it was SUCH a relief to be able to pay for it out of our bank account… incredibly liberating.

  4. Rae Says:

    This is inspiring. Up until about a year ago, my husband and I had never had any kind of credit card. We had no debt at all. But it seemed wise to build some credit, so we could do things like rent a car or eventually, maybe even buy a house. Then a couple of car emergencies came up and suddenly we have balances on our cards. They are low balances, but they are balances. I absolutely need to get them off- I don’t even want to start living in that way.

  5. Amy Says:

    hi chris- i really, really like your new site. my husband and i used to be carriers of 4 credit cards and paid the balance off every month- but i never carried cash and put everything- every single purchase- on those cards. i wouldn’t remember what i had spent the money on when we’d get the statements. that all stopped feb. of ‘07 when my husband and i went on the dave ramsey financial plan (cash for everything, a cash “envelope system”, no credit cards, no debt, etc) and started doing a written, cash-only budget every month. i get all the cash i will need for the month out of the bank on the 1st day of the month- OH MY what a challenge it has been! We now only have a visa debit card, no credit cards. i know where all my money goes because we “give every dollar a name” during our monthly budget time. it has been proven in studies that one spends more money using a credit card rather than cash to pay for things. now, when i go to target (i have such a love-hate relationship with that store!), i have my cash that my husband and i budgeted with me in a check organizer and i no longer have the money for the 90% off cute christmas stuff UNLESS i planned ahead for it.

  6. dynamitt Says:

    I am totally opposite of you Chris. I never had a credit card and hope I never need one. Credit cards scares me. I have a debit card and it works find for everything I need. In the case we need something bigger we dig into our savings account. Granted we do not have a mortgage yet so I don’t know how it will go when we have that to pay of too.

  7. Angela Says:

    Wow…can you imagine, not using the cc for a whole month and having a totally zero balance? How awesome would that be?? That would really be a fund challenge…I wonder if I could pull it off.

    We too use our credit cards for everything and pay it off in full every month. I remember when I first met the DaddyMan and I learned that he had a $400 balance on his credit card bill. I was horrified! I almost took him out of the running as a potential mate because he didn’t pay his card off in full every month! LOL

  8. Angela Says:

    Fun challenge, not fund. Duh.

  9. The Simple Family Says:

    Growing up, I saw first hand what can happen when credit is used when it shouldn’t. Thanks to having to see (and live it), I didn’t do credit cards in college. My husband got one when we married and the only time we’ve used it is when we’re renting cars and they require it.

    Even then, I HATE pulling it out and using it.

    I see this happening a lot– people who use it when they shouldn’t, when they can’t (or don’t) pay it off.

    Unless it is said furnace (or another purchase similar), I subscribe to the “only buy what you can afford” mentality.

  10. LDH Says:

    I know for me and I’m sure for other people, that’s part of what makes decluttering so hard. “But I paid $xxx for it…I can’t just get rid of it now!” Best solution is to never accumulate in the first place. not only is it not there to be cleared out, but there’s no guilt in buying it, having it, or then giving it away before you feel like you’ve used up the “value” of it.

  11. Heidi Says:

    Interesting thing in the comments about the credit vs. debit debate. I think they both have correct uses, and just read about how you should always use a credit card and not debit when traveling (in Readers Digest, it is in regards to the huge “block” a hotel, car rental company, etc can place on your bank account).

    But anyhow, I think you hit the nail on the head about entitlement. While we all believe that everyone is entitled to the basic necessities of life, you rightly point out how our culture feels entitled and needy of much more. Excellent observation!

    Chris says: Oh I have nothing against the actual using of a credit card if you pay it off. I used my debit card at a hotel and had that HUGE “block” placed on it. I had to talk to a manager to get it removed so that I could access my cash. It was something ridiculous like $1000 OVER my hotel charges.

  12. Sarah L. Says:

    We used credit cards primarily for convenience, and we did pay the entire balance each month. And each month we’d look at the statement and say “Hmm, we overshot the food budget again this month, and the clothing budget, and the beer/wine budget,etc…” and then we’d go on our merry way and do the same exact thing the next month. So, now we are trying the Envelope System for some budget items like groceries, takeout/restaurants and beer/wine. On the first day of each month I fill up the envelopes with the monthly budget and that’s it for the month. It really has forced us to look at how we spend our money and, 2 months into it, we have managed to stick to our budget.

  13. Ln Says:

    My concern about credit cards is that so few people really understand compounding interest. I went to school in Delaware, home of many credit card providers,, and had friends who worked as customer service people, explaining things like “no, you can’t spend as much as you want as long as you pay the minimum payment”.

    Honestly, I think the home loans that encourage you to tack on your “high interest credit card debt” are at least as bad. Nothing like spreading out the payments on a pile of junk you never needed over 30 years.

    My children occasionally get to listen to me rant on this topic. :^)

  14. KS Grandma Says:

    Having an aging brain has several disadvantages. One being that I can’t remember where I recently read about the credit vs. debit card issue. (One of my old codger magazines? Was it part of that reader’s digest article already cited?) Anyway, the emphasis was definitely against using debit cards because if someone uses your card number fraudulently, you have basically no recourse, whereas with credit cards, most have an appeals process where you won’t lose your shirt if you lost your card - or simply had the number ripped off. I use a credit card issued by the same credit union where I have my checking account and a savings account. I don’t even have to write a check to pay my balance off monthly. I can either do it with an online transaction or with a phone call. I pay the balance in full each month. I’m retired and there is no money to speak of going into savings, so I simply cannot take money out for frivolous purchases. Plus I’m trying to de-clutter 3 generations of stuff in this old house. I say no one ever moved out, they just died and left their sh*t behind. What was trash, I tell you trash in the 30’s - valentines my dad and his brother received from their school mates for example, now look like family archives. UGH! So, I don’t need more stuff. But I am oh, so fond of electricity and running water and being toasty warm on cold winter days, and being comfy cool in the heat of the summer, groceries are good. . . So, yes, still plenty of ways to spend money, doncha’ know. And the closest town is 20 miles away, and how about those fuel prices? Sorry to be so long-winded and barely coherent - I don’t interact with people much and my dog doesn’t really care about my grammar skills. Feel free to delete me!

  15. Janssen Says:

    This blog is just brilliant. We don’t use cash at all, but pay all our expenses (except the mortgage) on the credit card in order to get free airline tickets. We have never carried a balance and we try to be as frugal as possible.

  16. Lazy Organizer Says:

    My husband and I use a credit card to pay for everything, including all our household bills, and then it is automatically paid off every month. Credit cards are great for backing you up if you have problems with an item you want to return and the store or company hassles you about it.

    One time my husband bought a calling card that didn’t work and then we could never get a hold of the company to get our money back. We just called our credit card company and they refunded it for us. Then it was up to the calling card people to defend themselves which they never did.

    Also you get extra insurance when using your credit card for some purchases like rental cars and such. We hit a deer in a rental car and the rental company charged us for the days the car was out of commission. We didn’t know it at the time but our credit card insurance would have paid that for us when our regular insurance did not.

  17. Stephanie Says:

    You are inspirational.

    We never had debt until last year. Last year, I was pregnant, on bed-rest, and not paying attention to what was happening outside the walls of our house.

    Instead of buttoning down the hatches since I was on bedrest (i.e., not working,) Shopping was still going on, and my husband had the “I’ll never get to buy this once we have a baby, so I better get it now,” mentality.

    I had the, “the baby is going to need 12 onesies, because they spit up a lot, so I better order these online,” thought process.

    We are now in a complete spending freeze, and by freeze, I mean, we are buying NOTHING but food and paying the bills. We’ve canceled everything that would be considered a luxury, (cable TV, netflix, etc.) We sold my cute little Jetta and bought an older, base-model Jeep (since I don’t commute anymore and my husband works for Jeep, so we could get one cheap)
    I don’t drive anywhere during the week, unless it’s a necessity (to save gas,) and we’re eating very basic, cheap meals (casseroles, ziti, soups, etc.) that can be stretched and eaten on all week. No more beer/wine. No more good ice cream. No eating out whatsoever. No going to the movies.

    It’s going to take us a while to dig back out, and once we do, I can tell you, this surely won’t be happening again.

  18. Ladybug Crossing Says:

    I use my discover card for everything - it’s all about the cash back… I pay off the balance in full every month. I live in the sticks so we always gasoline on that bill… I will never have a $0 balance, but it sure is nice when it is a small balance. I have a visa - that balance is notoriously $0 or $50 - I use it to fund the kids lunch money accounts. It’s totally separate so I can see what is going on… Again, I pay it in full.

    I purchase things on sale year round for Christmas - but since I live so far out, my trips to the store are minimal. It saves me a ton of money in December!! I don’t have to pay $25 for a present in December that in January cost me $2.50. It works for me.

    It’s all about being careful… And not overspending.

  19. ArdenLynn Says:

    We use a cash system for all household things like clothing, shoes, entertainment. We did exactly what the other poster did - over spend and not correct it then have to pull out of savings every other month. In a household of 7 children, there is always something you can justify buying.
    I have a checking account for food and thrifting. I get $900 a month which sounds amazing but it goes so fast. I only have two teens but they really do eat insane amounts of food. It seems like the more they eat, the skinnier and hungrier they get.

  20. jody Says:

    We don’t use credit cards either. We have them for emergencies, but use cash for everything else. If we don’t have it, we don’t buy it. Mind you, I use “we” very losely…Bill is the driving force behind our financial responsibility.

    I have never understood people who charge up 10’s of thousands of dollars on credit cards. I do believe that “want” seems to win in these cases, unless they are using them for survival (paying rent, car payment etc due to no job).

  21. Christina Says:

    A few months ago, I did an total overhaul of my finances. I have $12,000 in credit card debt and while I pay this off, I will not use a cc. For the first time ever, I used only cash and my debit card at Christmas. I also have a spreadsheet on which I put every single penny I spend.
    You are a goddess to me and I can’t wait to see how your year goes and look forward to also having no balance this time next year.

  22. christine Says:

    We do the envelope system - our weekly allotment of cash in snack baggies - for groceries, miscellaneous and dining out, etc. We used to charge and pay off everything, but we could go over if my husband and I didn’t communicate well.

    This has done so much more for our family than just eliminate debt. It has shown us how much we actually need to live on, and guaranteed us a nice portion to give - to those who have less. We try to sit down as a family about once a month, and choose together something we can sacrifice to give a little extra (especially when we hear of a particular need). It has also kept us accountable to not falling back into the rut of buying so much useless crap!

  23. Sister Honey Bunch Says:

    We are a cash-only family. Have you read the book Maxed Out? Really, really good. Love your blog!

  24. Penelope Anne Says:

    I have watched my in-laws literally dig themselves into a huge pit of credit card debt, and yet they wonder why we never have money….because we have no credit cards. None. Our debt is medical, utility, or frivolous as we deem it.
    I still hope we can put a dent into that debt this year.

  25. Maine Mom Says:

    I hate to admit that we are one of those 35 million Americans. Good for you for not being in credit card debt. I hope to be there too someday!

  26. Melissa Says:

    I love reading all of the comments, and your observation is right on, Chris.

    Unfortunately we do carry balances, and while I try to blame it on adding two family members and losing one full-time income, it’s due to NOT making adjustments to our spendy lifestyle to account for those changes. I never used to carry a balance and paying those interest charges is ridiculous…but until BOTH my husband and I stop spending money unnecessarily, we’re not going to get out of the hole. Kudos to everyone who is demonstrating that you should live inside your means!

  27. Susana Says:

    Great post! Errol Morris has a great First Person doc on this topic.

  28. crockpot lady Says:

    we were those Frontline people at one time. when my husband and I were dating we would sign up for the credit cards at school because they’d give us a “free” hacky sack or king-sized hershey bar.

  29. cristen Says:

    I have recently (early last year) started using a credit card for everything, which is a lot per month. I pay it off every month as well, and we put something in savings every month. What I have been wanting to know is more about credit cards that give rewards…since I am using one so much, I feel like I should take advantage of those kinds of cards, but I don’t know which one…

    Really enjoying this new blog, Chris. I’m proud of you guys for what you’re doing/attempting to do. It’s inspiring.

  30. V. Says:

    I look at pictures of my parent’s home when we were wee ones. I see a sofa, a coffee table, a lamp, curtains and a TV.

    Fast forward to pictures of our home where our son is growing up.

    It’s easy to see why we have ‘no’ money.

    I’m afraid for the retirement years of today’s Gen X and Y’s.


  31. carrie Says:

    Hear! Hear!

  32. Deborah Says:

    I’m with Janssen, I use my AmEX Sky Miles card to pay for everything that will let me (I don’t use it if the utility or such assesses their charge onto me) and then I use the approx 2-3 free tickets I get each year to visit family and friends. The deal is, as many have pointed out here in the comments, you have to pay off the card each month to avoid finance charges. That folks, talkes discipline. And a budget. And the discipline to stick to your budget. We budget all our monthly expenses, charge them, then pay them off.

    Cristen, the card you use should depend on your spending and what you want - free flying miles? cash back? stuff?

  33. Daisy Says:

    When we were poor (college graduates during the recession of Reagonomics), I remember the excitement of getting approved for our first credit card — a Sears card. I still have trouble buying things at full price or paying for something unnecessary. Buying second-hand and outlet shopping became so ingrained that I feel like a fraud walking into Macy’s. The philosophy does come in handy; and I learned it from experience because we had to economize. It wasn’t a choice.

  34. peepnroosmom Says:

    Wow. This is really inspirational. Sadly we are one of the 35 million, too. This year we have decided to dig out. We have stopped using our gas cards & credit cards. We are using cash for everything and that is H.A.R.D. Very Hard. We have come up with a plan for eating out, though. We have a Paypal debit card. When we sell something on EBay the money goes straight into the account. The card acts as a debit card straight out of that account. So it’s a win win situation for us. We get rid of alot of our un-needed stuff AND we get to eat out credit card free.

  35. Stephanie Says:

    I’m working on my husband on the no balance thing. I don’t use credit, unless absolutely necessary- and like you, pay every cent off as fast as possible. I keep the cards open, though, so i have them in case of need. My husband has a really low, fixed interest card-for the life of the balance. So we keep a small amount (bout a couple hundred) on that, to keep the low interest rate.

    I had a friend once who cut up all her cards when she had them paid off. problem was, then she couldn’t get credit when she needed it, b/c she hadn’t used it in so long.

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