Tuesday, November 16, 2010
Advance Your Cash: Truth Creates Money, Lies Destroy It ~ Suzy Orman
While cruising around my home town searching for locations to possibly open a business, to my amazement I saw a cash advance & title pawn companies on every corner. There are even businesses that were previously restaurants now open for business serving up cash. If you are not aware these companies offer short term small cash loans at or below $500. The borrower writes a post dated check for the loan amount plus fees in exchange for the cash. Usually there is a 2-3 week maturity date by which the borrower comes in to pay the loan off with cash or allows their personal check to be deposited in the lender's account for repayment. Often borrowers actually come in as they become habitual users to the point of the clerk asking them "Do you want to re-write today?" Meaning post date another check! Now the lenders are also getting savy as to offer pre-approval via the click of the keyboard furthur luring you in and saving the embarassment of God forbid someone seeing you going in there.
I know how the story goes because I have been there. Right of of college, getting accustomed to what my young adult spending patterns should be, I was a customer of a company that offered these services. My $100 payday loan I would pay $15 in fees that didn't sound like much at the time. However if I borrowed every 2 weeks the APR would be 390% so I soon realized a few hundred dollars in fees a year doesn't make much sense. Then I got savy and thought what if I just get a credit card with a balance of like $250. The first $250 is like "free" money then when I get paid I can pay it off. Same concept but as long as I pay my balance within the 30 day grace period, they make no money off me. Wrong! Becasue the behavior of myself who was not financially savy at the time didn't follow that plan. Instead I found something to spend the money on creating a life style of spending that didn't match my income. Then paying the $15 monthly minimums to the credit card company started and there I was again held hostage to high APRs. After at least a year or more of this rat race, I finally realized that as long as I did not spend unless I had the cash I could clean up the mess. The light bulb truly went on when I heard a quote from Suzy Orman's late night financial show: " Most Bad Debt Occurs because Of a Lie." I found this to be so true as a lot of us spend while out socializing through our affiliations which causes us to try and please other people. We are all works in progress in the financial area but until we stop lying to our self and others we will continue to disallow the Truth to Create Money and will continue to allow Lies to Destroy It.