Today is Black Friday. Today is the day we spend money and push our credit cards to the limit so we can celebrate finding that great deal.
I shared a meme on Facebook the other day that said “If you can’t pay cash, you can’t afford it”. This particular truth is personal for me. I know from experience that living “all cash” is virtually impossible in today’s world.
We live in a debt culture. We call it a credit culture because that somehow sounds better. It is still a world of debt. Our financial viability is determined by our ability to manage debt. Trying to navigate the world of money is like Goldilocks; the porridge is too hot, then too cold, and finally just right. You can’t have too much debt and you can’t have too little debt. It is all about making sure that your debt is just right and giving the appearance of being able to handle more debt.
I have a friend whose business helps business owners establish and/or repair their business credit profile. For the last several weeks, we have been discussing one of his clients and how he can position himself to take advantage of a tremendous opportunity. This business is largely cash and carry with no real commercial presence. His business has been profitable for the last 3 years. He doesn’t really have assets or collateral, other than cash. He has cash. Cash!
With all of our combined expertise, my friend and I cannot seem to find him a financing home – traditional or alternative – short of utilizing the cash to secure financing. Ultimately that will probably be the route he takes – using cash to obtain a secured line of credit that will enable him to begin to establish a credit (debt) profile for his business.
This situation is representative of the problem of living in a debt culture. Here is someone who pays cash for everything, runs a relatively clean business, has an opportunity to expand and is trying to be responsible. Because he does not carry debt, no one wants to take him on.
When my ex-husband was buying my engagement ring, he was in his early 30’s and had never had a bank account. His family believed in “cash in the coffee can”. We decided that because I had destroyed my credit in college, we would build his credit and I would attach myself to him.
Flash forward and we were buying a house. My credit score was higher than his because my credit file had been open longer – even though the early years were bad. I was considered a better risk because I had entered the world of debt at a younger age. It did not matter that I had been utterly irresponsible or that he had been living within his means his whole life.
As I wrote in Money, our relationship with money defines many of our choices. We push boundaries and insist that scalding hot or freezing cold porridge is what we want. It is also how we learn what is “just right” for us. The key is understanding the difference between credit culture and debt culture. “Credit” is an emotionally charged term that screams “more is better”. “Debt” is an emotionally charged term that screams “less is better”. Scalding hot and freezing cold.
Goldilocks wasn’t wrong – she didn’t dwell on scalding hot or freezing cold. Her plan all along was to find “just right”.
When faced with scalding hot or freezing cold porridge, stay on course and always work toward “just right”.