many people think of them as an extension of their income, a way to purchase something that they really can’t afford.

 

That’s why the title of this book is “Credit is a Four Letter Word” because credit is really debt, once you’ve used it, and count the letters in “debt”.

 

Proper use of credit (regardless of whether we’re talking about student loans, secured loans, mortgages, debt cards, or any other type) is a skill that is essential to financial survival.

 

Let me give you an example.

 

Until recently, I owned and operated a small retail store, and for 13 years talked with customers from all walks of life.  Our store catered to repeat visitors and the type of merchandise we sold was definitely not essential (we sold collectibles).

 

One of my regular customers that came in frequently lived in my town, and I got to know him fairly well. Tom (not his real name) had a nice house (but not overly extravagant) in our middle-class town, a wife, two kids, two cars plus an old Mustang convertible that he only took out in nice weather.  Tom had season tickets for the Jets.  His kids were well dressed, polite, went to the public schools.  As far as I could tell the family was happy in every way.

 

When Tom shopped with his, he always paid cash, never wanting to spend recklessly.  He did make large purchases over the course of the years, but he weighed each purchase and didn’t make it until he had the cash.  Iremember he always started his holiday shopping in September or earlier, again always spending cash.

 

A few years ago, Tom’s company was sold, and his department was put on notice that their function was soon to be outsourced.  Most people might have been devastated.  More about that later.

 

Another customer, Frank (again, not his real name), always wanted the latest and greatest fads.  Iknow he earned a very good income, much higher than Tom’s I’m sure, but he always used credit cards, and spent as if money was no object.

 

Occasionally Frank’s credit card purchase would be declined, meaning that it was either maxed out, or a payment was delinquent, and Frank would write a check instead.  And, as often as not, the check would bounce.

 

Back to Tom. Tom took his job situation well when his company was sold.  He sat down and figured out his expenses, his assets including his equity in his house that was almost paid off, and the severance package the company was offering.  He realized happily that he could build a new house out west, pay it off completely out of the equity in his home here as soon as he sold it, and retire fairly well while still in his mid-50’s.  Not bad for someone who was making a moderate hourly wage, and whose family never wanted for anything.

 

Frank, our upper middle class friend, is not quite so fortunate.  From what I hear, he still spends more than he earns, and is deep in debt. Frank just went through a nasty divorce (financial problems can cause marital stress, as most are aware), and most likely the divorce didn’t help his financial situation.