Can You Live Debt-Free?

So I have something to admit.  I've been participating in this super cool online video thing with some really smart people, and I haven’t done nearly enough to let people know about it.  Unless you check out our social media channels you might not know what the Money Mastermind Show is or that yours truly has taken his unique brand of corny jokes and trivial personal finance knowledge to South Beach Google Hangout.  The basic idea is that every week five of us regulars plus one guest chat about the financial topic of the day.  So far we have looked at things like choosing a career path, if parents should pay for their child’s post-secondary costs, and last night’s topic: Can You Live Debt-Free?

Oh, and we’re giving away a free Kindle HD just for giving us a little feedback.  This isn’t a trick or some weird marketing ploy!  You  don’t have to type in a code or share us across 27 social networks (although that would be cool as well).  All you have to do is check out the show on Youtube or download the podcast through iTunes or Stitcher, and then let us know what’s up on iTunes or on our site.  A simply click in order to give us a star rating and a sentence or two about what you liked or how we would improve is all we ask.  Judging by the current amount of reviews, this will likely be the best odds you’ll ever get on getting a free Kindle HD!

Could You Break Up With Your Credit Card?

episode7-cover-1024x1024Last night we brought on a fellow by the Steve Stewart from the website Money Plan SOS.  He has some unique views when it comes to using credit in life – basically he philosophically doesn’t believe in it.

When asked, “What about credit scores Steve?” His reply was along the lines of, “Hopefully my credit score withers up completely and disappears,” meaning that he would no longer be borrowing money of any kind.  He then went on to describe the ways a person can get by without using credit cards or taking out debt.

“Credit Cards Don’t Kill Bank Accounts, People Kill Bank Accounts”

Now, I should be right up front in saying I love my credit card.  Every so often a credit card company comes along with an offer so good, I just can’t say no to them giving me free stuff.  I got a few chuckles out of the panel when I blatantly ripped a quote out of my own book (you know you’re a little egotistical when…) but I believe the point is a valid one.  For me, using credit cards or loans is simply using a tool in my tool belt.  Sure, if you don’t know what you’re doing with this particular tool it can really hurt you, but there is nothing inherently evil about it.

Food For Thought

The conversation about debt did raise some interesting broader-perspective thoughts for me though.  For example, the fact that I couldn't even consider going through life without my credit card shows just how large a role credit dependency plays in my life.  When we discussed credit scores Steve raised a great point when he pointed out that not having credit cards will sting your credit score a little bit (not the end of the world, but certainly something to be avoided if possible) and that logically this didn’t make any sense.  If someone has no debt and a history of not taking spending more than they have, why should they be penalized with a low credit score – something that could impact their ability to rent an apartment or even get a job.  This is yet another way credit companies have managed to weave themselves into the tapestry of our lives – likely without us even realizing it.

Credit DeTox

There is little doubt that we are addicted to debt/credit.  In doing some preparation for the discussion I found out that according to the most recent study I could find 91% of Canadians own at least 1 credit card, and only 70% of Canadians pay off the full balance every time.  I guess we know where all of those rewards points actually come from now…

Is that addiction a good thing?  Obviously not.  It gets a lot of people in hot water.  The interest rates on consumer credit and credit cards are through the roof and can really hurt people over the long term.  That being said, from a practical perspective I don’t know if it is worth the inconvenience to me at this time.  I made the point on the show that a no-credit approach might be a really useful tool for people that haven’t mastered personal finance basics – but those are exactly the people that likely wouldn’t consider it.  A useful comparison is the fact that whenever they do a survey asking people if they are an above average driver, almost everyone in the room puts up their hands.  Similarly, while almost everyone thinks they know enough to handle a high-interest credit card (yay, sign up rewards!) there are probably a fair number that are wrong even if they don’t know it.

Every personal finance expert/guru/writer/wannabe has talked about how vitally important it is not to carry high-interest debt for a reason – because it sucks and destroys budgets!  Make sure you use credit properly or it might be time to consider a credit detox like the one Steve proposes.

Check out the show and tell me what you think – even if it’s, “You have the perfect face to be a writer,” 😉

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Kyle is a high school humanities teacher by day, and freelance personal finance author by night. He has been published in academic journals, and has also co-authored the book "More Money for Beer and Textbooks". In his free time Kyle likes to limp up and down a basketball court and pretend to be a tough guy in a boxing ring.

11 Comments

  1. Phil on July 15, 2014 at 10:33 am

    Interesting Podcast, but somewhat irrelevant in my opinion. Debt is debt no matter what, so a mortgage serves the same function as a credit purchase, so I consider Steve a hypocrite in a sense. Glen’s closing statements really sum it up, good financial awareness is the key. As you point out, aCC is just a tool, and if you have good financial sense, there are more benefits to using credit (arms length protection, reward points, convenience, etc.. The bottom line is debt is debt and the comment regarding well a mortgage is so large of a gap to the next major purchase a car (re:Steve) well that is just BS it is ratio. If I have no money, any purchase will seem to have gap. If I have $500, the $1000 car repair will seem high. if I Have $100,000K, but making 6% on it and I need a car, and they are offering 0% down for 5yrs… well why would I not use it, if I understand my finances… So to summarize, Debt is debt, so have a plan should you be using certain tools out there that are available to attain them… – Cheers, and thanks for the interesting post.



  2. Kyle on July 15, 2014 at 1:47 pm

    Thanks for the comments Phil. Make sure and get in on that draw for the free Kindle. Did you check out any of the past entries?



  3. Phil on July 15, 2014 at 1:56 pm

    As much as free things interest me, there are others that would appreciate a Kindle much more than I, so I will leave it for someone else… As to past entries, I have not, but when I get some time I will. – Cheers.



  4. The Wallet Doctor on July 15, 2014 at 10:09 pm

    The lure of credit is strong. It can be a really great thing if you use it responsibly, but as you discovered with those stats, few manage to pay everything off. And that certainly isn’t unique to Canada!



  5. Kyle on July 15, 2014 at 10:13 pm

    Looking forward to hearing your thoughts Phil!



  6. Ron Olson on July 18, 2014 at 10:24 am

    An interesting read, thanks Kyle.

    I’m all for heavy credit card usage myself. 3% cashback, protection, etc etc. The key is that I use it like a debit/chequing card. If I have



  7. Kyle on July 18, 2014 at 7:37 pm

    Glad to hear it was worth your time Ron. Thanks for commenting. It’s tough to ignore those credit card rewards that are just sitting there. Then again, they wouldn’t be doing it if they didn’t make money on the program overall right?



  8. Agnieszka Obara on July 19, 2014 at 12:21 pm

    Saying we can live without credit is possible but let’s face it, credit cards can make your life easier if you know how to manage it and not letting it rule you. It is important that as a credit card holder, you set a rule for yourself and know your limitations. I know this is easier said than done, but it is not impossible if you put a little effort on it.



  9. Kyle on July 19, 2014 at 1:28 pm

    Agreed Agnieszka.



  10. SST on July 22, 2014 at 6:59 pm

    Wondering if the general public, especially those who extol the use of credit cards, know how credit card companies actually operate and the end result within the market place? Pretty sure everyone would cut up their CCs if the facts were advertised as much as “cash back” promotions.

    As far as ‘debt-free’ goes, would this include loans of all types?

    More over, economies have been fueled mostly by debt for the last 35 years, so even if you personally are living debt-free, when things go wrong (2008-09), or even when they go “right” (2010+) you will definitely be sharing in the pain of debt.

    Good luck.



  11. Kyle on July 23, 2014 at 12:38 am

    That was the question I asked on the show as well SST. People are passionate about some differently lifestyle ideas. Can’t say being allergic to debt is a completely crazy notion…



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