Life on Credit, It’s not all bad…

This is a follow up, and somewhat contrasting, post to my most recent post, Life Before Credit. Thanks to Susan Tiner at Financial Organizing for sending me a link that described life in American throughout most of our 200 years of democracy, much of which has been created on borrowed money or credit. American Radio Works wrote a whole series on the American Dream and the fundamentals of what that stands for, mostly something different to everyone. But fundamentally it’s the idea of self improvement through hard work.

From the Pilgrims, to the New Deal,  to current American’s, in order for the majority of people to get ahead, credit is a necessity. As a country, there is this “can-do” attitude that with hard work and a willingness to better ourselves each individual can obtain their goal. However, for most of us that means having to borrow money to achieve it. Here are just a few examples of how credit can be beneficial, including some historical examples:

• The Pilgrims sail to the “New World” : They funded their trip through an installment plan (according to ARW). Merchants backed them by giving them loans and the Pilgrims made payments, simple enough. And this was almost 400 years ago!
• FDR’s New Deal: Government incentives gave WWII veteran’s free college tuition and affordable home mortgages to boost the economy. New homes meant new appliances that could easily be added to the monthly mortgage payment.
• Opening a business (timeless – meaning past, present, or future): Most people can’t start a business without a small loan. Of course there are always people who start businesses out of their homes on their own, but there are far more businesses that obtain loans in order to build or grow their business.
• Purchasing a house: According to ARW, prior to the New Deal, it was an uncommon practice to obtain a mortgage. Only wealthy people could afford homes by paying cash for them.

Credit in and of itself is not a bad thing. It can help people get ahead, start businesses, purchase homes. Building a good credit score is near impossible without some form of obtaining credit, whether it be a revolving or installment account. A good credit score can help people obtain those things that were once only possible for the top 1% of the population. Credit has basically created the American middle class.

Yet, the cycle of debt that once may have been manageable for most, seems to have spun out of control over the last few years. Gluttony seems to have set in. The American middle class is shrinking, or so it seems. With each decade, American’s redefine themselves. Perhaps that redefinition will be more clear in the coming years.

On a side note: A shout out and thanks to those sites driving traffic to mine-

• WiseBread
• Financial Organizing
• The Simple Dollar
• Get Rich Slowly
• Financial Samurai
• Cute as Pie Cottage
• Ultimate Money Blog
• One Income Dollar