Now that the interview has aired and Lance Armstrong is the poster boy for the dangers of running (or bicycling) from the truth, you knew it was only a matter of time before I figured out a way to turn it into a teachable moment for improving your credit portfolio.
Hounded for years by former teammates and others close to his cycling team who alleged that he used banned drugs to win the Tour de France, Armstrong built a second career out of vehemently denying those rumors and constructing a parallel universe of self-delusion. Even after the U.S Anti-Doping Agency gathered enough evidence of Armstrong's rule-breaking to strip him of all his medals and ban him from professional racing forever, he still maintained his silence on the matter.
In what may be the worst kept secret since it was revealed that soft drinks make you fat, Armstrong confessed to Oprah that he used illegal drugs.
No doubt, it would have been better for Armstrong's legacy -- and the sales of his Livestrong brand of fitness products -- had he come clean years ago. But his example of much-belated truth-telling shows that no matter how horrible things are, no matter how badly we've screwed things up, accepting reality and dealing with the truth is always the best way to make things right.
As it goes in professional sports, so it goes in our financial lives. Armstrong was able to string along fans and drug testers for years with a combination of evasion and lies in much the same way consumers ignore that niggling voice that whispers "Whoa, buddy. Are you sure you can afford this?"
Recent events in Washington make the present moment one to reckon. With the federal budget deficit predicted to be just under $1 trillion next year, even deductions long held sacred and considered third-rails of politics, including mortgage interest and charitable deductions , are on "on the table." The payroll tax holiday has already gone the way of the $5 movie ticket. So, whether it's capital gains taxes, the Affordable Healthcare Act tithe or increased payroll taxes, higher taxes are as inevitable as the ramifications of global warming this year. Add to this the discretionary (though some feel emotionally obligatory) expenditures to come on Valentine's Day and the inevitable spate of birthdays, weddings, anniversaries and other celebrations sprinkled throughout the year, April 15th (clearly not a discretionary expenditure day) and Christmas looming but 340 days away -- then consider the combination of holiday hangover, rising taxes and continued spending... It starts to feel like a hamster wheel.
Armstrong unwittingly is our guide off the wheel. It starts with a cozier relationship with the truth. Our crimes are not so great, and our fame not so extensive, as to require a cable television confessional with Oprah. We just need to create a more realistic ration between our financial situation and our expenditures. Credit is neither a reward nor a punishment. It is a tool. When used in combination with sensible saving, wise investing and a dash of frugality, it can help us build and maintain financial security in our lives.
Now before my steemed colleague Dave Ramsey shouts me down with calls to live a "debt-free life," hear me out. For the majority of Americans, credit is a primary means of acquiring the stuff of a middle-class life. It's how most of us buy our houses and cars, pay for our children's education, rent all kinds of things and obtain deposit-free cell phones and utilities. By being honest with ourselves, we can reduce the cost of those transactions by working hard to create a true resume of our credit profile. The better our credit, the less money we have to pay for access to money, and the more dollars we have available to buy our significant other something more meaningful than a box of chocolates for Valentine's Day, or acquire the things we want out of life and have something left over to invest in our futures.
That said, credit is about much more than dollars and cents these days. Increasingly, it is used by companies to determine if we are eligible to get life and fire insurance, whether a first date will progress into a relationship, whether we can obtain a security clearance required for certain jobs, and/or sometimes whether we will get hired at all.
Even if you avoid looking at your credit (only one in five people actually take advantage of their right to receive a free copy of their credit report each year), even if you attempt to avoid credit altogether, the reality of credit never goes away. Ignore it at your peril, because others rely on it to make judgments about you, judgments that have much more impact on your day-to-day life than anything Armstrong faces in the days and years to come.
If I've persuaded you to discover the truth about your credit reality, here are some important things to think about. (Don't worry. This is going to be a lot easier than winning a Tour de France time trial.)
- Check your credit reports at least once annually at annualcreditreport.com. It's free!
- Use websites like Credit.com, where you can see your free Credit Report Card, which enables you to better understand where you stand, what you're doing right or wrong, and how you can improve your chances to be approved for products and services that you want - that will enhance the quality of your life.
- Enroll in credit- and fraud-monitoring programs, commit yourself to regularly reviewing your online bank and credit accounts, or take advantage of free alerts issued by banks, credit unions and credit card companies. Make sure that every transaction was made by you, and not an identity thief.
- Always pay your bills on time.
- Never use too much of your available credit, lest you be seen as a spendthrift (and hurt your credit score).
- Never seek too much credit at one time, lest you be viewed as a credit junkie (and hurt your credit score).
You don't need to win seven consecutive Tour de France competitions in order to get where you need to be. And you don't need to confess your credit sins to Oprah. By being truthful with yourself about the need for a strong credit report, how you're using credit and what you can do better, you can create a stable financial life and "live strong."