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Living Without Credit

Living Without Credit
Living Without Credit

    Picture this: I’m 18, going to college, living 3,000 miles away from home. I stop in at a music store and fiddle around with one of the keyboards there. It’s nice. I strike up a conversation with one of the salespeople. He’s nice. He asks if I’d like to buy the keyboard I’m playing. I tell him I couldn’t possibly, since it’s a good $2000 out of my range. He introduces me to store credit. A couple hours later, I’m setting up this glorious keyboard in my dorm room.

    When I went home for winter break, I took the keyboard with me. And almost got the whipping of my life when my dad found out what I’d done: over $100 a month for 24 months — and me a college student without a job. He made me put an ad in the paper, and I was lucky enough to sell the keyboard for about what I still owed on it.

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    You’d think I’d have learned my lesson then, but you’d be wrong. A few years later, I was planning a year abroad, just out of college. For emergency use, I got a secured credit card, one of those deals where you put $200 in an account and get a $300 credit limit.

    That wasn’t a bad move, really — during my year in Europe, it gave me a great deal of security, and I had arranged with my mother to make the $10 minimum payments until I got back. And when I got back I paid it off.

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    Problem is, I didn’t cancel it once I’d paid it off, and pretty soon started getting more offers for “better” credit cards. $1000 limit. $2500 limit. Gold card. Platinum card. I was living in New York by then and traveling a lot and making pretty good money and before I knew it I had racked up $20,000 in credit card debt.

    Then I got laid off. And suddenly the $500 a month I was paying in minimum payments wasn’t feasible. I fell behind. Then I fell really behind. Accounts were canceled, and charged off, and sent to collection agencies. It was a mess.

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    I’ve spent years dealing with that mess, and to be honest I’m still working on it. I don’t have an advice to offer on debt recovery — it’s a slow, painful, messy process, and frankly I’m not that good at it. One thing I have become good at since my credit score plummeted is living without credit.

    It seems impossible, in this online era with cash becoming rarer and rarer, but it’s not impossible. In fact, there are a lot of good reasons to live without credit:

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    • It forces you to live within your means. When I had charge cards, I could always rationalize a big purchase. “$400? That’s only $12 a month!” Twelve dollars doesn’t seem like a lot of money, does it? Or else, I’d tell myself I’d pay it off next month — and next month, there was always some pressing cost that kept me from paying off my balance. Without credit, I simply can’t do that — there’s nothing to spend when my bank account balance reaches zero. There’s no way to push costs into the future — I can only spend what I have, when I have it.
    • Things cost what they cost. That $400 purchase I just mentioned? Taking into account interest and annual fees, it could easily cost $1000, $2000, or even more, making only minimum monthly payments. These costs get buried in the sum total of charges — you pay off a little and charge a little more, pay off a little and charge a little more, and pretty soon you have no idea what you’re paying for or how much you’re paying for it. Without credit, I walk in to the store, pay $400 cash, and that’s it: $400, period. Or, more often, I don’t pay $400, because I can’t afford it.
    • It forces you to discipline your spending. When you have $10,000 in available credit, it’s easy to get carried away. Living without credit means weighing every purchase, every expenditure, against your available cash. $400 seems like a lot more when it comes out of my monthly paycheck than when it comes out of a revolving line of credit with thousands of dollars to go before I max out. If there’s something I want, I have to work for it — either by finding a way to offset the expense or by saving up over time until I can afford it. Either way, impulse spending becomes impossible.
    • You can’t default on cash. Cash doesn’t call you at work, send threatening letters, or track you down through your references. You pay and that’s it.

    My biggest regret is that I didn’t realize all this at the time, and that I didn’t take steps to live without credit when it would have been a choice, rather than a forced exile. But I wouldn’t go back; if I somehow woke up with perfect credit tomorrow, I’d still keep to my credit-free lifestyle, for the reasons listed above.

    There are some inconveniences, of course. If you want to buy a house someday, you’ll probably want to have some credit history, although records of on-time utility payments and rent payments are often adequate (though who knows what the mortgage lending field will look like by the time the current meltdown works itself out?) Likewise, buying a car can be tricky.

    But that’s about it. Between my debit card and my PayPal account, I have no problems ordering online — PayPal even offers virtual credit cards for online ordering. Likewise, you can almost always use a debit card to make travel reservations or for rentals (sometimes they charge a deposit to your account which is then charged back when you pay the final bill, so you need to be able to cover both the deposit and the payment).

    It’s been six years since I made my last charge to a revolving account, and to this day I don’t miss it. I’ve found myself running short a couple of times, but to be honest, tightening my belt for a week or two doesn’t seem so bad next to the prospect of spending 20 years paying off the balance on a credit card. And while I’m still getting my house in order today, in ten years I’ll be in much better shape than I would be if I’d never screwed up and still held a pocket full of plastic.

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    Last Updated on July 17, 2019

    The Science of Setting Goals (And How It Affects Your Brain)

    The Science of Setting Goals (And How It Affects Your Brain)

    What happens in our heads when we set goals?

    Apparently a lot more than you’d think.

    Goal setting isn’t quite so simple as deciding on the things you’d like to accomplish and working towards them.

    According to the research of psychologists, neurologists, and other scientists, setting a goal invests ourselves into the target as if we’d already accomplished it. That is, by setting something as a goal, however small or large, however near or far in the future, a part of our brain believes that desired outcome is an essential part of who we are – setting up the conditions that drive us to work towards the goals to fulfill the brain’s self-image.

    Apparently, the brain cannot distinguish between things we want and things we have. Neurologically, then, our brains treat the failure to achieve our goal the same way as it treats the loss of a valued possession. And up until the moment, the goal is achieved, we have failed to achieve it, setting up a constant tension that the brain seeks to resolve.

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    Ideally, this tension is resolved by driving us towards accomplishment. In many cases, though, the brain simply responds to the loss, causing us to feel fear, anxiety, even anguish, depending on the value of the as-yet-unattained goal.

    Love, Loss, Dopamine, and Our Dreams

    The brains functions are carried out by a stew of chemicals called neurotransmitters. You’ve probably heard of serotonin, which plays a key role in our emotional life – most of the effective anti-depressant medications on the market are serotonin reuptake inhibitors, meaning they regulate serotonin levels in the brain leading to more stable moods.

    Somewhat less well-known is another neurotransmitter, dopamine. Among other things, dopamine acts as a motivator, creating a sensation of pleasure when the brain is stimulated by achievement. Dopamine is also involved in maintaining attention – some forms of ADHD are linked to irregular responses to dopamine.[1]

    So dopamine plays a key role in keeping us focused on our goals and motivating us to attain them, rewarding our attention and achievement by elevating our mood. That is, we feel good when we work towards our goals.

    Dopamine is related to wanting – to desire. The attainment of the object of our desire releases dopamine into our brains and we feel good. Conversely, the frustration of our desires starves us of dopamine, causing anxiety and fear.

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    One of the greatest desires is romantic love – the long-lasting, “till death do us part” kind. It’s no surprise, then, that romantic love is sustained, at least in part, through the constant flow of dopamine released in the presence – real or imagined – of our true love. Loss of romantic love cuts off that supply of dopamine, which is why it feels like you’re dying – your brain responds by triggering all sorts of anxiety-related responses.

    Herein lies obsession, as we go to ever-increasing lengths in search of that dopamine reward. Stalking specialists warn against any kind of contact with a stalker, positive or negative, because any response at all triggers that reward mechanism. If you let the phone ring 50 times and finally pick up on the 51st ring to tell your stalker off, your stalker gets his or her reward, and learns that all s/he has to do is wait for the phone to ring 51 times.

    Romantic love isn’t the only kind of desire that can create this kind of dopamine addiction, though – as Captain Ahab (from Moby Dick) knew well, any suitably important goal can become an obsession once the mind has established ownership.

    The Neurology of Ownership

    Ownership turns out to be about a lot more than just legal rights. When we own something, we invest a part of ourselves into it – it becomes an extension of ourselves.

    In a famous experiment at Cornell University, researchers gave students school logo coffee mugs, and then offered to trade them chocolate bars for the mugs. Very few were willing to make the trade, no matter how much they professed to like chocolate. Big deal, right? Maybe they just really liked those mugs![2]

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    But when they reversed the experiment, handing out chocolate and then offering to trade mugs for the candy, they found that now, few students were all that interested in the mugs. Apparently the key thing about the mugs or the chocolate wasn’t whether students valued whatever they had in their possession, but simply that they had it in their possession.

    This phenomenon is called the “endowment effect”. In a nutshell, the endowment effect occurs when we take ownership of an object (or idea, or person); in becoming “ours” it becomes integrated with our sense of identity, making us reluctant to part with it (losing it is seen as a loss, which triggers that dopamine shut-off I discussed above).

    Interestingly, researchers have found that the endowment effect doesn’t require actual ownership or even possession to come into play. In fact, it’s enough to have a reasonable expectation of future possession for us to start thinking of something as a part of us – as jilted lovers, gambling losers, and 7-year olds denied a toy at the store have all experienced.

    The Upshot for Goal-Setters

    So what does all this mean for would-be achievers?

    On one hand, it’s a warning against setting unreasonable goals. The bigger the potential for positive growth a goal has, the more anxiety and stress your brain is going to create around it’s non-achievement.

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    It also suggests that the common wisdom to limit your goals to a small number of reasonable, attainable objectives is good advice. The more goals you have, the more ends your brain thinks it “owns” and therefore the more grief and fear the absence of those ends is going to cause you.

    On a more positive note, the fact that the brain rewards our attentiveness by releasing dopamine means that our brain is working with us to direct us to achievement. Paying attention to your goals feels good, encouraging us to spend more time doing it. This may be why outcome visualization — a favorite technique of self-help gurus involving imagining yourself having completed your objectives — has such a poor track record in clinical studies. It effectively tricks our brain into rewarding us for achieving our goals even though we haven’t done it yet!

    But ultimately, our brain wants us to achieve our goals, so that it’s a sense of who we are that can be fulfilled. And that’s pretty good news!

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    Featured photo credit: Alexa Williams via unsplash.com

    Reference

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