Debt is a prison that holds many North Americans bondage. Debts are strong chains — they bind us and feel overwhelming.
Statistics show that the “Average American holds about $38,000 in personal debt (not counting your mortgage!)” (https://www.cnbc.com/2018/08/20/how-much-debt-americans-have-at-every-age.html )
Canadians are also drowning in debt, with most households owing about $1.78 for every $1 they make! Think about that for a minute.
The consequences of debt are many:
- Worry, stress and anxiety.
The number one thing baby-boomers worry about is that they will run out of money when they retire. Death is number two.
Baby-boomers would rather die than run out of money.
Despite this, baby boomers have still failed to save enough for retirement. This worry consumes them.
Worrying about money reduces your ability to think about other issues going on in your life. Your cognitive abilities decrease and other areas of your life can suffer.
Worrying about money causes relationship stress and even breakdown. How many divorces can cite money issues as a cause for the breakup?
2. Debt causes you to pay more for an item than it is worth.
By putting an item on credit and only paying the minimum on your card, you can effectively pay double for the item. And possibly still be paying for it long after the item is gone or no longer useful.
Americans love to buy cars — have you ever calculated the cost of vehicles?
The real cost?
Most people only calculate the interest spent — how about also calculating the potential interest lost from not having money to invest?
It is vital that you learn about how credit cards — and their exorbitant interest rates — increase the cost of goods purchased. And how paying for any asset that depreciates (decreases in value) with credit is an extremely poor financial decision.
Start calculating how much interest you are paying and how that adds up.
Debt Calculator – By making just the minimum payments on your debt, it will take you years to pay off your debt and you will pay…
Play with the numbers here and see how much interest these companies are making (they are on the right side of the interest calculator) and how much you are spending.
Ignorance is NOT bliss here. Ignorance is willfully delaying your pain.
3. Your debt is borrowing from your future.
Your future self is paying for the “stuff” you accumulate on credit today.
The money you are spending paying off “stuff” you have purchased in the past is preventing you from investing in your future.
Because your future self does not have this money to invest (taking advantage of compound interest) you lose future earnings. Most people fail to take this huge point into consideration.
4. Debt is preventing you from achieving financial security.
Those monthly payments add up. Interest can be a dutiful slave or a harsh taskmaster.
I challenge each of you to take a close look at your debts. Find a plan to pay them back asap!
Learn as much as possible about managing your money, how to retire and how to get out of debt. There are good ways and bad ways of doing that. I will write more about that soon.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
― Albert Einstein
Getting out of debt and avoiding future debt will bring peace of mind that is a beautiful thing.
So much is written about increasing one’s happiness and satisfaction in life — one sure-fire way to do this is to avoid debt.
If you have it (and remember the majority does!), then start TODAY to pay it off.
I promise you will feel much lighter and happier without those chains around you.