How Money and Credit is Used by an Average Middle Class Family

Here is an example of an average middle class life would be like:

John Smith graduates High School at 18 with his basic knowledge of money, and heads off to college. His family lives from check to check just like most people today, so John needs a student loan to make his way through college. While attending college he is either seduced into applying for credit cards, or basically just handed credit cards from some creditors.

So what does an 18 year old kid do with a credit card? Basically the same thing most 18 year olds do. They compete with their friends and use it to buy hi tech toys, impress his dates by buying nice gifts and taking them to dinners, etc. etc. This is all done on credit. John does have a part time job so he is able to pay his bills but he fails to pay down the balance and only pays only pays the minimum payment, which is what most creditors want you to do. Why did John only pay the minimum payment? Either he only had enough money to pay the minimum payment, or he felt by only giving a small portion of his income towards his debt he would leave spending money in his pockets for other things. He might have not wanted to let go of what he had in his pocket. Either way, for what ever reason, he failed to pay off his balance in full. John is already living above his means and he does not even realize it. What John also fails to realize is that the longer he holds a balance the more money he will pay for what ever he had purchased. Because of the interest charged on every dollar he spends, that hi tech stereo system which had cost him $ 1,500.00 might cost him $ 2,000.00, possibly even upwards to $ 3,000.00 when it is finally paid off.

A few years later, being the responsible person he is, John still manages to keep paying his minimum payments, so the creditors keep increasing his credit limits and other creditors keep sending him cards. He has finished school and he has a decent job making $ 40,000.00 per year, carries a $ 10,000.00 balance on his credit cards, and is slowly paying off his student loans. Life seems to be going well, but he is slowly being groomed into a lifestyle that will eventually hurt him financially in the future.

John meets the love of his life, Jill, and decides she will be the one to marry. John has a little money in savings and he uses it to buy his love a ring. She says “yes” and the two of them dream of having a happy and prosperous life together, it all feels so right. The wedding plans begin, and they quickly find out how expensive a wedding can be. Although the both of them managed to save money for a good portion of what was needed they fell short of cash. Instead of down grading their elaborate wedding, they decide to use their credit cards to pay for a few of the needed things, including their 3 week honeymoon.

After the beautiful wedding and their romantic hi end honeymoon, its back to reality and they both have returned to their every day life. Some time has passed again, and they have managed to pay down some of the balances on the credit cards. With both John and Jill having such great credit they have no problem getting a mortgage to buy their dream home. Now John and Jill both have taken on one of the biggest financial burdens they will ever have in their life, they now have a mortgage to pay, but they are so proud, they own their own home. Most of their savings has been used to pay for the down payment on the house and they need to do a few repairs and also furnish this home. With the credit cards in hand they do the necessary repairs and they furnish this beautiful home. Because of all the credit they were given, they actually were able to move faster into the future with their dreams, not realizing that they were now caught on the treadmill to destruction. They owe 30 years of their life just to pay for the house, let alone all the other bills and most of their income would be used for paying down the debt they have accumulated over the last few years. Neither John nor Jill has any extra money for basic spending let alone anything left for savings or investing. As they continue to use the cards for their purchases, it gets to the point that they are now using their credit cards to pay for their basic needs, food shopping, clothing, etc. There isn’t enough money coming in to put towards savings, they are now way beyond their means having already spent their future income. John begins to realize he cannot keep this pace anymore. A commercial on the radio tells him how he can lower his monthly payments and even put more cash in his pocket by consolidating his bills. By doing so John has cut basically a third off his monthly payments, arming him with 33% extra money at the end of the month. This eases his mind for sometime, but instead of taking advantage of this comfort zone, the spending begins again. Why? Because they have some extra cash coming in monthly, but instead of saving it, Jill feels she needs a new car. Why not? They have the extra money. So they head off to the car dealer, to buy that nice new car. Not only have they lost money by purchasing a new car, which will lose value the minute they drive it off the lot, but they purchased this car on credit. Not only are they paying more for the car by having to pay interest on the loan, they are also paying the interest on a loan which is a greater value then the car is worth.

Few years later they have managed to keep their credit in good standings, and they decide to start having children. Not only have the children come but also they need “kid things”. A new minivan is needed to get the mom and kids around so John trades that new car in for a new mini van, the loan from the first car transfers over to the new car and of course increases the balance. They are now living the life they dreamed of, but most of what they own is on credit. They owe somebody something for it. They seem to be happy, although they are now working to keep what they own.
The Kids grow up and the whole cycle starts again, eventually John reaches the age of 65, has re-mortgaged his home many times through the years, still owes money on the home, still owes balances on his credit cards and like most people of that age, they cannot survive on social security alone. John has to continue to work. They have failed to set up a large enough retirement fund to allow himself to retire. John has worked his entire life, earned well over a million dollars and has nothing to show for it.

So where did all of John’s money go? It went to all his creditors. Most of John’s earning and money was used to pay interest. Between all the credit cards, the mortgages, loans, etc. etc. John built himself a life of financial slavery. John basically did what he was taught to do with his money. He followed the lead of everybody else around him, which led him into becoming a slave to debt.



Does this sound familiar? I bet it does. This is the life of the majority of people today. Believe it or not it was planned to be this way. We as the working class are actually used to constantly keep the flow of credit revolvong only to make the banks and large corporations wealthier.



There is a way out of this rat race. You need to educate yourself with what they know. The power of leveraging your money. Plant a seed today for your tree tommorrow.



With the correct knowledge and strategies, you could actually buy anything you want without using your credit, or even touching your primary income. The techniques are absolutly simple and easy to implement; you just have to know how.



Educate Yourself Today!