So what is credit discipline you might ask? Well, let me define the two (2) terms first: credit and discipline. Credit is defined (depends actually from what point are you looking, the creditor or the debtor) as (1) trust or confidence (from the Latin word credere); or (2) promise to "buy now and pay later" under designated "terms" for goods or services (from the dictionary). Discipline on the other hand is defined as strict and regular mental or moral training. So from this perspective, we can define credit discipline as "strict and regular control on promise/s to pay, within designated/ agreed terms to maintain our trustworthiness."
In one of the articles I read (from the Internet), the following are some of the "most common causes of debt problems": (1) Unrealistic expectations (2)
Easy access to credit (3)
Too many credit cards or store cards
(4) Not having the income to support wants
(5) Moving loans from one company to another
(6) Not paying off loans before getting more things
(7) Feeling a need to have what others have
(8) Children's wants and giving in to them
(9) Loss of job
(10) Loss of income
(11) Changes in family, e.g., new child
(12) Separation
(13) Not having money set aside for an emergency, (14) lack of credit discipline. In essence, the two (2) most important causes for debt problems with today's ordinary people are first, too much availability of credit and second, compulsive and irresponsible spending. In short, lack of credit discipline. Unfortunately, most spenders/ consumers have little idea of how much their purchases really cost because they use credit cards. In his book, Debt-Free Living: How to Get Out of Debt by Larry Burkett, he offers three personal traits that lead to debt: First its because of ignorance.
The ignorance here refers to a lack of understanding about the true nature of his/her financial situation, and sometimes a kind of "living in a dream world" approach to financial matters. False perceptions of what can be handled can get us in trouble, especially during big spending times such as Christmas. Second is indulgence. Indulgence must obviously be one of the worse downfalls of a "fast food" society that believes they should always "have it your way" and "get it in thirty minutes or less." We have trained ourselves not to wait if we don't have to, and we often and easily give in to the need for immediate gratification. And third, poor planning. Poor financial planning can lead to overspending and deeper debt. People should take responsibility for their own financial affairs. People fail to plan because they may feel they do not have enough income or financial assets to consider planning".
In the same article I read, it stated four factors why do we find it so hard to live within our means. (1) .... impulsive buying; (2), comparison with others; (3) wrong priorities and (4) misplaced values.
(Mr. Ed Limtingco can be reached at 0917-7220521 or at elimtingco@cibi.net.ph)