January 14,2009
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Borrowing Your Way Out of Disaster, Pt.1
– Why trade one disaster for another?"Borrowing your way out of a disaster with credit cards":
Sure, the medical industry loves this logic. Put the uncollectible debt on your credit card and let them and eat well today. Borrowing your way out of trouble is the proverbial oxymoron. Yes, it's wise to have some reserve, just in case. But exposing one's self to astronomical credit card debt is a recipe for disaster in itself. Honest people hopelessly indebt feel trapped for life (and some are).Therefore, you must calculate your ability to pay of a credit card debt, complete with finance charges (which are usually significant with high debt). Try to not look beyond a few months to pay it completely off (a year can bury you). This would be as an emergency fund only and the card should be stored in a safe place. All normal activity should be confined to a different credit card with a low credit limit. Please note that this approach is still dangerous. There are almost always better alternatives to going in debt voluntarily except for buying a house or automobile.
One further note on disaster security...don't relegate it as unimportant. It's very important but, there are safe methods and there are panic methods. It serves little purpose to trade one disaster for another. By far, the most trusted and true methods are planned and provided for in advance. Insurance on your property, liability and, especially, health insurance are critical. Supplementing these with ‘acorns' is just as important. Having enough money set aside to survive job loss without living off credit cards is the theme of 2009.
Always remember, this is for ‘first aid' and not for ‘convenience'. With job loss, the first thing to do is put away the credit card and establish budget limits that will stretch your acorns to get you through the troubled times without going in debt.