These days, it seems that Americans put more value in their FICO score than their bank accounts. Companies such as Experian, Credit Karma, and others are influencing the masses into believing that a good credit score will always be there to provide the means for purchases, despite their inability to save money.
But as important as a good credit score may be, it’s not the same as having cash in the bank. In other words, credit is not wealth. It is only an illusion of having money to spend when, in reality, there is none. As mentioned in the article, Clarifying Misconceptions about Credit to Minimize Debt, credit is the privilege of using other people’s money, which must be repaid with confiscatory interests.
Also, having to rely on a high FICO score to conduct business will undoubtedly lead to financial complications in the future. Those who do will experience one or more of the following conditions:
- Debt to income ratio will steadily rise, reaching borrowing limits with no means for addition funds.
- Principal and interest payments will continue to drain financial resources, leaving the borrower in a state of credit-dependency.
- Although the borrower may have the desire to save money, the continual demand on his or her income will make it extremely difficult to do so.
- When debt balances get too high, some people may run into credit default. Others may file bankruptcy, joining the thousands of Americans who find themselves in this predicament each year.
- Those who continue this course are likely to stay broke, unless they end their dependency on credit.
By no means am I suggesting that you do away with credit entirely. It plays a vital role in our economic system, both in business and personal affairs. Furthermore, it’s important to maintain a good FICO score at all times. By doing so, you maintain access to funds and pay less interest on the borrowed money.
Even so, I would like to propose a change in perspective between CASH and CREDIT. From this point forward, begin to esteem cash higher than credit because it is essentially more valuable.
The definition of CASH
On a practical level, cash can be seen in two ways: physical money (dollars and coins), and current assets, meaning any wealth that can be turned into currency immediately or near-immediately (short-term investments, accounts receivable, inventory, etc.).
For reconciling purposes, however, dollars and cents (currency) have the greatest and most immediate impact on business and personal life. Since just about every asset must be converted into money for use, CASH is regarded as the prime commodity for economic transactions.
The power of CASH
Cash or near-cash-valued-assets will be the most important component in your financial portfolio. With it, you can pay your monthly bills, eliminate debt, send your children to college, put money down on a valuable purchase, build an emergency reserve, generate various income streams, and set yourself free, financially.
Additionally, cash is more than a commodity for trade. It has the capacity to represent who we are as individuals in the community. People with a lot of it command a higher level of respect, experience more security, exhibit a tremendous amount of control and power, and enjoy an extraordinary degree of personal freedom.
Because of its value, everybody wants the cash that you bring home each month. The government, the grocer, the landlord, the credit card companies, the banks, and many others want a portion of it. Therefore, if you’re not careful with your income, everyone will get to keep a portion of it, except YOU.
Managing your CASH wisely
Knowing the value of cash, the money you bring home each month is critical to your livelihood. With it, you can stay alive and start building your financial empire simultaneously.
But you must be smart about how you approach the situation. For instance, if you’re bringing home $3,000 a month, you must devote a portion of it for basic needs and another for wealth-building. The portion you use for wealth-building is yours to keep. With it, you can begin to shore up your economic base and make financial progress.
On the other hand, if you allow the entire amount to slip through your fingers each month without saving some of it as part of a wealth-building program, you won’t make financial headway. The situation is understandable if it occurs once or twice, but a consistent pattern of this behavior will undoubtedly keep you broke forever.
Ultimately, it’s your responsibility to manage the money you make wisely. The fundamental principle is NEVER, EVER allow all your CASH to slip away from you and into the hands of others each month. You must find a way to keep some of it from each paycheck if you want to get ahead financially.
More importantly, get in the habit of depending on CASH (not credit or the equity in your home) as your main asset in terms of financial growth. This means that you must start accumulating it as quickly as you can and keep building on your existing reserve for greater financial possibilities. Cash is King! Give it the admiration it deserves, and you will be rewarded with prosperity.
To learn more about how to take control of your cash and other financial management concepts, consider reading my new book: Pennies to Power: How to Use Your 20’s to Gain Financial Independence for Life.
Thanks for reading.
What are your thoughts?
Do you see CASH as an advantage over CREDIT? Why do most people continue to depend on credit, even when doing so may result in financial ruin? What prevents most people from saving money…CASH?