This is a true story, and though maybe not the gentlest way to teach a personal finance lesson it touches on a few topics, so here we go:
I was a recent college grad still looking for my big girl job. I was working full time making roughly $38k per year. I had a pretty nice apartment that I lived in alone in a relatively safe suburb. I think at the time I drove a leased car – a Toyota Corolla. My parents co-signed the lease for me because it helped me build credit and the payment was pretty cheap. (Thanks Mom & Dad) Blog Post: How to Build Credit
I received a refund on my tax return that year of a couple grand, and I was feeling pretty good about myself. Look at me, a windfall! In casual conversation with my dad, I tell him about my refund and that I was using it to pay off my credit card balance. (Score!)
“What?! You have credit card debt?” he asked incredulously. Now, I worked in collections for Discover Card, so I knew what credit card debt was, and to me, my balance was not it.
My dad only had 3 questions and 1 comment.
- Do you have a savings account and what is the interest rate? (1%)
- What is the interest rate on your credit card? (18-23%)
- Then why do you have a savings account? (insert face-palm emoji)
Statement: “I thought you were the smart one.” #harsh #toughlove #parentinginthe80s
Like I said, not the gentlest delivery – but I learned the lesson. Ballers don’t pay 23% interest on credit card debt while earning 1% on money they could actually use to not have debt.
My dad wasn’t raising me to be broke, he was raising me to be a Baller.
Article: Pay of Credit Card or Save for Emergency
PS: Ballers also don’t give the government an interest free loan. More on that in another post.