It is quite common today to believe that in order to survive you have to use credit, but that is simply not true.
What do you think people did to survive prior to the invention of credit cards? Back in the early 1950’s the Diners Club card was the first credit card developed, and it was not until decades later that the use of credit cards became the pandemic that they are today.
The use of credit cards will keep you in the state of mind of being poor and will not make you wealthy. The problem people run into with credit cards and credit in general is that a lot of people really don’t know how they work: you borrow money with the intent of quickly paying back the debt, but instead fall into the trap of making payments for decades falling even further behind and paying triple even quadruple the original purchase price of stuff put on credit in the first place.
So how do you survive with no credit?
1.) Obtain a debit card. A credit history is not needed, and with one you cannot spend more than you have.
2.) Do you need a car? Pay cash. Unless you have a 7-figure stash of cash you should never buy a new car. A new car loses 60% of its value in the first 4 years. Since most people can’t afford that kind of a loss, you should be considering a used vehicle. By paying cash, and having no car payment you can take the money you would have put on a monthly payment into savings and build on for the next vehicle.
3.) As part of a budget, have a set weekly amount set aside for lunch, gas, entertainment etc. and don’t exceed it.
4.) Want to purchase a new home? You should not be buying a home without a down payment of at least 20%. If you can’t afford that, then you should be considering renting instead. Buying a new home while not being financially fit can be a curse rather than a blessing. You should strive to have a house payment no more than 25% of your take home pay. Many people today face foreclosure because they bought into the hype of the “no money down”, sub-prime mortgage mess and bought more home than they could afford. Don’t make that mistake.
5.) You may need a credit history in order to purchase a cell phone on a two-year contract plan. If your credit is bad, or you don’t have the cash you should opt for the pay-as-you-go option. There are many affordable plans to chose from these days, and in many cases these plans start in the $40-$50 a month range with unlimited minutes.