Never Bet The House On Getting Free Money
The news of a rise in bankruptcies is disappointing but hardly surprising given the current financial climate. It must be devastating for those involved but individuals and businesses are struggling for various reasons right now. In some cases that may be that we have two conflicting ideas about the value of money.
Most of us feel we work hard for our money and we don’t want to waste it. So, when we are spending real money using real notes and real coins we are reasonably careful with our cash. Somehow spending the same amount on a credit card is a very different experience and it is so much easier to be careless and carefree and not worry at all about the debt.
There is something about using a credit card that is almost unreal. We agree to a purchase, hand over the card and the deal is done. No stress, no worries and no doubts. No money changed hands and it almost feels like we are getting the goods or service for free.
This seems to be a similar sensation to the one experienced with money that comes more easily. Gambling is a good example whereby a person might play roulette and lose nearly all of their money and then their luck seems to change and they have a small winning streak. They may even be showing a small profit. Do they stop and walk away thinking they were fortunate to survive with their money intact? Do they heck. Apparently very few are able to do that and most will now start gambling in a reckless manner because they have just won all this ‘free’ money so it doesn’t have the same value as if they have had to work for it.
We all share this weakness when we get a windfall of extra cash. In most cases if we get a bonus, a lottery win or an inheritance we see the value of money differently than we would with our normal income and we might enjoy spending it. We may treat ourselves to a holiday, a new car or on home improvements.
What we should probably do might be to clear some debts or invest it for the future in some way but invariably we treat it as free money and feel we should enjoy it. There is certainly nothing wrong with enjoying life but it might well be that you would enjoy it a lot longer if you had less debt or the reassurance of savings to protect you in old age.
This is not entirely dissimilar to the position a lot of people found themselves in when they were encouraged to take out credit cards. They suddenly found themselves with easy access to credit and were able to buy things they previously considered unaffordable. There was no pain and it felt like they were using free money. At, least, it did until the bills started to become unmanageable.
They say there is no such thing as a free lunch and that is generally true. If there is one thing we can all gain from our experiences with the credit crunch it must surely be that there is a price to pay for borrowing money. If you take on too much debt, or if your circumstances change, the price of that money can be very high indeed.
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