In the last four years, people from all walks of life have all of a sudden become overnight financial experts. When the 2008 housing bubble in the US created a worldwide market crash, it became front page news. People became interested in the way money worked and for better or for worse, it got people talking. The centre of most conversations I’ve been a part of has been personal credit, since a number of my peers had either lost jobs or had businesses that have suffered from the crash.

And so, I want to give a new and fresh perspective on this subject which I hope will be of value for many people.

Why Get Credit?

Most of the major purchases that people make in their lives are out of reach when we look at the money we make at work and our typical saving habits. So, we take on credit to be able to afford things quicker than we would have on our own at the risk of paying a premium on the convenience in the form of interest.

Take a home, for example. When was the last time you heard of anyone buying a house in cash? No one saves like that these days and thus no one ever has the cash readily available to make these types of purchases.

What’s the Problem?

Paying interest payments becomes quite bothersome. The price you pay for borrowing money is the pain of paying consistent monthly payments far above the value of the actual purchase. If you bought a car for $30k, when it’s all said and done, you’ll have paid way more than that after the interest.

If you find yourself in a financially weak position, for example if you became diagnosed with a critical illness and had to seek treatment or you lost your job, or you broke your leg and you couldn’t work, you can’t put those payments on hold. If you had bought it outright with cash you wouldn’t have that problem since you made a one time payment. A lot of times this isn’t even the issue. Most of the problems come from bad management of people’s finances and spending beyond their means.

There Isn’t Hope, But There’s A Solution

Let’s consider what the problem is. People are absolutely terrified of the word… Bankruptcy. People want to avoid this for the reason that once declared, your assets are repossessed and your credit is stalled for 7 years. In other words, you won’t be able to get any credit for that time.

The intuitively good approach to this is to pay the debt back and the intuitively bad approach is to file for bankruptcy. If you don’t have any assets and you have no plans to make any major purchases, do you really need to care if you file for bankruptcy? The major plus of this is that the money you make is now going straight to you instead of paying back this debt. Now don’t go running to a bankruptcy firm. There’s a number of reasons you might not want to go with this. People with families that depend on the assets they have in place to maintain their lifestyle might want to give this some extra thought.

Don’t Let The Banks Bully You

The point I’m trying to get across is to not be afraid of the idea of bankruptcy. The media does a great job of painting a grim picture making it sound like the worst thing in the world. If the bank decides to give you thousands of dollars in a line of credit, that’s their problem. And as long as you don’t care about the consequences of not having assets or making major purchases, it’s not yours.

Aaron Koo is a passionate networker and entrepreneur who gets people out of that “someday” mentality about understanding their finances.