A young man came up to me at a book signing yesterday and asked me if I was the man who wrote Plastic Gods. I acknowledged to him that I was and he told what a great book it was and how much he'd enjoyed it. My signing had been a little slow, so it lifted my spirits to find out my book had meant a lot to this young man. As I stood waiting for the next person to stroll by I thought about my own high school days decades earlier. Being second in my class at Buena High School I was asked to address my fellow graduates. At the time I was lacking in experience and the wisdom experience brings. I didn't really know what to say, so it turned out mediocre at best. I sighed, wishing I'd of known then what I knew now. Then I started to formulate in my mind what I would have said to my fellow classmates had that been the case.
Fellow seniors, I stand before you today to warn you of a great peril that you will face the moment you step out into the world on your own. It's a danger that will threaten your health, your happiness, your marriage and even your very freedom. The reason this risk is so dangerous is that it is perfectly legal. There are no laws to protect you, no warnings from family and friends, and you won't know that you are a victim until its too late.
What I'm warning you about today is the credit trap—the lure to buy now and pay later, to live above your means, to accumulate possessions of every sort that you don't need. It's an unfortunate fact of life that our economy is driven by credit and you will be expected to do your patriotic duty and help drive the economy forward. This pressure will be manifested by a deluge of credit card applications, offers of financing for new fancy cars, a barrage of advertising trying to lure you into buying expensive home, clothes, cosmetics, travel packages, you name it.
You won't feel any pain the first few years after you fall into the credit trap. You'll be enjoying everything you've purchased on credit. Minimum payments on credit cards are low and you can draw on your credit cards or credit line if you come up short. It won't be long though until you'll find yourself in serious trouble. Lets say you have $50,000 of family income. If you did a budget you'd discover that you were probably spending $70,000. That means you're going in debt at the rate of $20,000 per year plus interest.
Interest at first may be reasonable, but the first time you miss a payment it will be jacked up to 28% and every time you go over your limit or make a payment late you'll be charged outrageous fees in above this high interest rate. Soon, in addition to your car and house payment you'll have minimum credit card payments due exceeding your car and house payment combined. You'll live with this as long as you can, borrowing from Peter to pay Paul, but eventually it will be too much and the only way out will be bankruptcy.
It's an established fact that financial stress is the leading cause of divorce. After a few years when creditors start to call, your credit goes in the dumpster, and it gets difficult to even pay basic bills, you'll start blaming your spouse, arguments will ensue, and love will turn to bare tolerance. It's very common for bankruptcy to be followed by divorce. Some law firms ofter a combination package, bankruptcy and divorce all for one low fee.
So, you've been warned. Don't fall into the credit trap. If you do, at best you'll lose your financial freedom and at worst you'll end up alone in the bankruptcy courts. Don't live above your means. The only credit you'll ever need is for a house, a car and perhaps your children's education. Pay cash for everything else.
Now here's my final piece of advice. If you follow it you'll never experience the tragedy I've just described. When you get your first job and go out on your own, prepare a budget and follow it no matter what. Change it whenever your income changes, and put in a budget item for savings. Ten percent is the amount you should save each month. Do this without fail and you'll preserve your financial freedom, greatly improve the chances of having a successful marriage and go a long way in insuring your future happiness and well being.
That's the message I wish I'd of given my fellow students back in 1969 or I wish someone would have given me. I fell into the credit trap just like millions of other American's have done over the years and suffered greatly on account of it. It's only been in the past few years that I've managed to escape and become debt free.
I wrote Plastic Gods as a way to communicate this message in a way that would be entertaining but still effective. The young man I met tonight wasn't the first person who's thanked me for Plastic Gods, but it felt good to know someone had benefited from my work.
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