The Psychology of Credit

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There are individuals who, for many reasons, don’t want to face reality. I see it all the time — some are afraid to come to terms with something that they’ve done. Others are afraid that something bad might happen, even though there is almost no chance of it happening at all, and others just fear to face the reality that nothing is free.

We live in a word of credit, and it’s essential to understand that while that does mean receiving now and paying later, we must be responsible with our purchases and decisions. Accepting this reality will help you make smart decisions that will improve your finances. To get started, follow the credit advice below.

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1. Decide what is most important to you. Is it the short-term joy of the purchase or the long-term effect of having to pay for something? I have friends who are still paying off credit card bills from when we were in graduate school. That $12 T-shirt has doubled in price with interest, and then some. Was it worth it? Looking back, the answer is no, but at the time, it was no big deal.

2. Create a plan to get out. Creating a plan to get out of credit card debt can be scary for people because it forces them to face the reality that they’re financially in trouble. But acceptance — and financial budgeting — is a good start. Your plan can be quite simple: Stop using credit cards completely, pay the bill on time each month, and pay more than the minimum amount due if you can. Every six months, re-evaluate your spending habits to see if there are places you can cut back to put more toward your debt payments.

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3. Take responsibility, but let go of the guilt. This is a tough market, and there are many people who are barely making ends meet who have to rely on credit in order to survive. That happens, and I can understand that. The key is to remember that carelessly buying, spending and living outside of your means is no way to live at all. Not only will it cost you hundreds — or even thousands — of dollars in interest over time, but it can also hurt your credit score, which damages your chances of buying a home or even getting a job.

The lesson is this: Just because we live on credit does not mean that we will not have to pay the money back. Or, just because we might have gone overboard does not mean that we are not responsible for our actions. Even if you end up so far over your head and you go into bankruptcy, there are still many consequences that will have to be dealt with. So, don’t live in denial and take credit seriously. While it is convenient, it can swallow you up, as well, and that is not something that you want to have happen. Manage your money, be smart with it, and use Manilla to help you to keep an eye on your bills and balances.

Dr. Patrick McGrath is the director of the Alexian Brothers Center for Anxiety and Obsessive Compulsive Disorders and the co-director of the School Anxiety and School Refusal Program at Alexian Brothers Behavioral Health Hospital in Hoffman Estates, Ill.

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