Line of Credit: Is it the Right Choice for You?

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It is that time again- Time to talk MONEY!

 

I know. I know. Not everyone feels comfortable talking about it, and some of us do everything we can to avoid it, but hear me when I say financial responsibility is essential to healthy living. Treating your finances with TLC is a vital part of self-love. Money plays an important role in all of our lives. Taking care of your finances is as important to your health as healthy eating and exercise. It is a crucial part of leading a more peaceful life with far less stress.

Here is the disclaimer again because I think it is important that you know exactly where I am coming from: I am not a financial expert. The information expressed here are my opinions based solely on personal experience.

It would be a lot more fun if I was here to give you some fabulous investment tips, or great ways to make money quick, but the fact of the matter is I believe setting yourself up for a lifetime of financial freedom is about making good decisions with money slowly, week by week, month after month, year after year. This is essential no matter what your income level.

There are two key components in managing your finances:

1. The first is careful budget planning done before spending any of your income. This should be evaluated weekly or bi-weekly because some items cannot be accounted for too far in advanced. Your budget may need tweaking to fit your overall goals. It should also be carefully tracked. Have you tried my simple and effective sticky note budget tracker?

2. The second is to set yourself up for financial success. This includes not giving yourself easy access to money not yet earned. When you give yourself access to money you haven’t earned it is similar to surrounding yourself by all your favorite junk food and expecting yourself to eat healthy. Most of us can’t handle that kind of temptation, which is why success starts with keeping yourself out of less than desirable situations to begin with.

Last time we talked about Rewards Credit Cards. This time I am going to address Lines of Credit. Seven or so years ago, my husband and I went into our local bank with the intention of opening up a Line of Credit. The interest rate on a line of credit can be significantly more reasonable than a credit card. We thought if something comes up that we would like the option of paying for over a couple of months instead of all at once- such as a trip, Christmas, or a problem with the house- a line of credit makes more sense than a high interest credit card.

We went into the bank with a number in mind, $5000. This number was enough to pay for most of the things we had in mind, but was also not so big we couldn’t pay it off in a reasonable amount of time. Well, long story short, as firm as we thought we were going to be in our minds, we were quickly talked into at least doubling the amount. The bank gave us a whole bunch of reasons that seemed to make sense to us, and of course we had no intention of spending it, so what was the big deal?

Turns out it was a big deal! The big deal about having a line of credit was once again giving ourselves easy access to money we had not yet earned. Just like with the credit card, we got lazy about writing down our spending frequently to make sure we were sticking with our budgets. Not too long after we started to live in the negative.

Living in the negative is like taking all your power and throwing it out the window. It is stressful and doesn’t feel good to your whole being. Better to have 0 in your checking account than less than 0 and owe money!

Did I mention that the bank happily increases your line of credit limit every so often? No need to approve it. You just get the letter in the mail saying your limit has been increased. Having a line of credit for us was like standing on quick sand, and we were left wondering why would we do that to ourselves?

These less than stellar choices meant working twice as hard to Pay it Off and Get Rid of It! It requires making sacrifices, and missing out on things had we been more responsible we might have been able to do. I am here to tell you that the hard work is completely worth it! Loving yourself enough to put your financial health ahead of wants has incredible rewards.

Having been on both sides, my husband and I will both tell you with 100% conviction that it is much better to have financial freedom, even though it sometimes means having to say no to purchases you really want, or activities you would love to do. It isn’t always easy telling people no, both others and yourself, but you need to do what it takes to care for your financial health. When you do, when you feel the calm and peace of financial freedom, none of the other stuff is worth sacrificing that love!

If you have any questions ask away. I’ll do my best to answer them!

 

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