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Should You Depend More on CREDIT or CASH?

by | Oct 16, 2021

These days, most people are putting more value in their FICO score than their bank accounts. Companies such as Experian, Credit Karma, and others are making the masses believe that nothing is more important than their FICO score. 

The message is despite people’s inability to save money, having a good FICO score will always give them access to funds to buy what they want.

Credit is not Cash

A good credit score is a valuable achievement in our current, credit-dependency climate. But having access to cash through credit is only an illusion of having money when, in reality, there is none. 

Also, having to rely on a high FICO score to conduct business will undoubtedly lead to financial problems. Those who do it will experience one or more of these conditions:   

  1. Debt to income ratio will rise steadily as they continue to use more credit to buy what is needed.   
  2. Principal and interest payments will gradually drain cash supplies, leaving borrowers in a state of credit dependency. 
  3. Although some borrowers may have the desire to save money, the continuous demand for debt repayment will make it difficult to find the cash to save.      
  4. When debt balances get too high, some people will run into credit delinquency issues. Others may file bankruptcy, joining the thousands of Americans who find themselves in this predicament each year.
  5. Worse, people who continue to use consumer credit as a way of life are likely to stay broke, unless they end the credit-dependency cycle. 

By no means am I suggesting that you do away with credit. It plays a vital role in our economic system, both in business and personal life. Also, it’s important to maintain a good FICO score. By doing so, you maintain access to funds and pay less interest on the borrowed money.   

But I would like to propose a change in perspective between CASH and CREDIT. From this point forward, esteem cash higher than credit because it is essentially more valuable.

The Definition of CASH

On a practical level, cash can be seen in two ways: physical money (dollars and cents), and assets, meaning any wealth that can be turned into currency immediately or near-immediately (short-term investments, accounts receivable, inventory, etc.). 

For reconciling purposes, however, dollars and cents (currency) have the greatest and most immediate impact on business and personal life. Since just about every asset must be converted into currency for circulation, CASH is regarded as the prime commodity for economic transactions.  

The Power of CASH

Cash or near-cash valued assets will be the most important component in your financial portfolio. With it, you can pay your monthly bills, eliminate debt, send your children to college, put money down on a valuable purchase, build an emergency reserve, generate various income streams, and set yourself free, financially. 

Also, cash is more than a commodity for trade. It can show who you are as an individual in the community. People with a lot of it command a higher level of respect, experience more security, exhibit tremendous control and power, and enjoy an extraordinary degree of personal freedom.

Because of its value, everybody wants the cash you bring home each month. The government, the grocer, the landlord, the credit card companies, the banks, and many others want a portion of it. So, if you’re not careful with your monthly income, everyone will get to keep a part of it, except YOU.

Managing Your CASH Wisely

Knowing the value of cash, the money you bring home each month is critical to your livelihood. With it, you can stay alive and build your financial empire simultaneously. 

But you must be smart about how you approach the situation. For instance, if you’re bringing home $3,000 a month, you must devote a portion for basic needs and another for wealth-building. The portion you use for wealth-building is yours to keep. With it, you can shore up your economic base and make financial progress.

But if you allow all your income ($3,000) to slip through your fingers each month without saving some of it for wealth-building, you won’t make financial headway. 

This situation is understandable if it occurs once or twice, but a consistent pattern of this behavior will undoubtedly keep you broke forever.  

Ultimately, it’s your responsibility to manage your money wisely. To make financial headway, the rule of thumb is NEVER, EVER allow all your CASH to slip through your fingers each month. You must hold onto some of it for financial progress.   

More important, get in the habit of depending on CASH (not on credit) as your main asset. This means you must accumulate it as quickly as you can and keep building on your existing reserve for greater financial leverage. 

“Cash is King” is not an exaggerated statement. Years and years of financial analysis have led most people to believe that nothing is more valuable in the world of economics than CASH. Therefore you, as an individual, must give it the respect and admiration it deserves. When you do, your financial position will improve for the better.  

Thanks for reading.  

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