Thursday, July 09, 2009
Credit Gets a Bad Rap
Credit is getting a bad rap in this recession. Credit is a tool that most of us need and use. And that's the key--to use it well. Like anything else in our lives, moderation is the key.
Credit smoothes out the mismatch between our needs and our incomes over our life spans. In your early adult years, you need a lot of things that your income can't pay for--yet--like your education. Where are you going to live? Virtually no one buys a house with cash. Then there's transportation. Are you an entrepreneur or do you aspire to be one? You guessed it--you're going to need credit, too.
The recession finds many people in a particularly bad spot because they've been using credit but not building savings. In effect, they use credit to substitute for savings. That's why consistently building your emergency cushion--equal to several months' expenses--is so important.
Building that cash cushion is a valuable personal finance goal to keep working on. Build your emergency fund by using direct deposit and automatic transfers from checking into savings and you will achieve your goal. The professionals at your credit union can help.