Years ago we were applying for a mortgage and the one credit card we (I) had counted against us as it was deemed that I had the ability to rack up a big debt on a cc. From that I learnt NEVER accept an increase in your cc limit offered by the bank. For the record, I had never maxed out that card at any time.

I no longer have the cc, which could make it interesting if I ever have to hire a car as the Australian hire car companies only take cc. This is so they can charge you extra for things such as the insurance if you damage the car or you don’t refill the petrol tank before you return it.

As for emergency fund amounts, I’d recommend the equivalent of at least 3 months worth of expenses. Of course, you may want to aim for more or less depending on in what industry you work and the condition of your local economy. The idea is that you aim for an amount that, in the event of an unexpected job loss, will allow you to still pay your expenses until you can find another job.

Maybe I should re-word that – It would be far better than starting your adult life by defaulting on a loan because you can’t find a job that will enable you to pay it off.

Not kidding at all – We paid $4000.00 cash for a good, reliable older car (a 1999 Toyota Corolla) a couple of years ago for my husband, and it’s still running great, with no problems.

Insurance is cheaper too, because we don’t have to carry full coverage, and it’s good on gas. I have a 2001 Toyoto Echo that’s also paid for and very good on gas.

I think the problem is that with all of these leases, people have been led to think that they need a new car with all the bells and whistles every three years. We drive our cars until they die.

I agree with everybody that recommended Dave Ramsey’s “The Total Money Makeover” – it’s not the message that we’re used to hearing about handling your personal finances (it’s not even a message that many people WANT to hear, based on some of the comments here), but it’s a message that can give you a lot of peace of mind if you’re willing to embrace and implement it.

As I said in the very first comment, my husband’s been laid off most of the time since April of 2006, and if we had been in debt, it would have made things very difficult indeed. As it is, adjusting to living on an income that was cut by about 2/3′s hasn’t been as bad as you would think.

We live simply, pay cash for everything, I cook at home, buy at thrift stores and don’t think we need to have “the latest and greatest” of everything. In the end, it’s a CHOICE – you CAN live, and live well, without consumer debt.

@ Becca – “Suggesting student loans are bad is impractical and quite frankly, classist. Without loans, a lot of smart kids are relegated to state schools and community colleges. Sure, in certain careers, that may be fine and the kids can overcome the difference in education, but that’s not true in all careers.”

Frankly, I think your comment is pretty classist.

To imply that state schools or community colleges are “bottom of the barrel choices” for smart kids (meaning the only kids who willingly go there are “less than smart”??), or that you can’t get a good education at these schools, is just wrong-headed and somewhat offensive.

Especially in this economy, IMO it’s just not a good idea for a young person to saddle themselves with 10′s of thousands of dollars in debt when they aren’t guaranteed a job when they graduate that would enable them to pay it off.

Get whatever jobs you can (bag groceries, flip burgers…) pay-as-you-go at the local community college if you have to, take longer to get your degree, and be willing to live on less. It will be far better than starting your adult life by having to declare bankruptcy because you don’t have a job to pay off that loan.

Or consider a line of work that doesn’t require a degree. Now THERE’s a thought, huh?

@Christie, I have an auto-debit setup for 36 months (for $50/month) that gets deducted every month from my account. This is actually very interesting. I did lose my job last year. I had around 10 grand in my savings account of which we used almost 6Gs until I found a job. Had I bought the appliances by paying the full amount, I would have gone belly up sooner or would have ended up selling some of my stocks (which doubled since then).

It’s all good under you know what you’re getting into and you don’t go overboard.

@Praveen… zero percent is nice, until you loose your job, deplete those savings, and have to pay back interest on the loans because you didn’t pay it off within the time period. If you have the money, just pay for it. Think of the time you will save not having to think about paying it off by December 31st 2012!

I recommend reading Dave Ramsey’s “The Total Money Makeover” or listening to his talk radio show. He gives great advice that makes a difference in your future, as well as your family’s future!

Because it is going to take us a long time to build savings on a pretty meager income that varies so much, we have found having a credit card to be freeing to our minds during several job changes (thank you, economy), coming out of school transitions, and seasonal challenges (I make the least income during the winter months when our bills are always highest – e.g., electric heat, missed days due to illness for part-time worker with no sick leave, doctor bills). We can always pay them off in the summer when income increases and the few dollars in interest I pay for 6 months is more than worth the peace of mind.

Hopefully some day we’ll have bigger savings to serve this purpose, but we’re in the budding stages of our careers with a young family and we want to enjoy this precious time with our little ones rather than work it all away.

- A credit card is the same as a charge card if you pay the bill in full each month.

- In an emergency, a credit card (with the credit feature) may be invaluable. During the recent DC snows, a tree fell in our street, and our power went out. We (my wife, 6 year old, 2 year old, and I) had no heat and had to go to a hotel. Our car got stuck in the snow, and the trip to the hotel 3 miles away took 3 hours. Since the county delayed plowing our street, we were unable to drive back into the neighborhood for a week. We paid for the hotel with a credit card.

Whilst I agree in principle with buying things with ‘owned income’ rather than by credit card, there is one major advantage – at least in the UK – of paying by credit card for some things. Under UK law the credit card provider is ‘jointly and severally liable’ for any purchases between about $150 and $45,000. This means that if your supplier goes bust or what you buy doesn’t work, or breaks down unreasonably, your card provider must pay up even if the supplier can’t or won’t. The same does NOT apply to debit cards.

As I say, if this isn’t the case in the US then my apologies – please ignore. But if the same protection is available in the US then it is a very valuable benefit of a credit card. Just make sure you pay the balance off every month. Automatic Direct Debit works just fine!

I have to say that it’s kind of irritating me that people are telling me I could have done differently and better without knowing the first thing about my situation. I had already settled on colleges from the ones I wanted to go to. I got scholarships. I worked. No, I still couldn’t have done it without loans.

And yes, if I put 50% of my paycheck in savings, I would not be able to eat.