It never ceases to amaze me how easy it is to get into debt.
I haven’t been a child since the last millennium, but I do still remember that people had to apply for credit by filing out a paper form. Today, offers for credit come directly to my email address. The financial institutions pushing credit no longer need a signature. Somehow, tapping a screen has become an acceptable way for people to start the journey into debt. They don’t even need to verify that I’m the one tapping the screen on my phone! Anyone can tap that screen and – poof! – I’m the one who’s responsible for repaying a new credit card. ***
Just this week, a financial institution offered me a credit card with a $25,000 limit!!! Are they crazy? Exactly what algorithm are they using to think that my income could pay off that kind of limit every month? To be clear, I don’t earn enough money to pay off that kind of limit in one month. And since I always pay my credit card bill in full each month, I make sure that I don’t charge more than I can repay.
Debt is a cancer to wealth.
You build less wealth while you have debt payments.
Let’s get one thing straight. Personally, I’ve come to believe to that people should be investing while they’re paying off their debt. I don’t care if it’s $10 per week or $50 per month. A little something needs to be invested for the future until the debts are paid. It may take years to repay your debt. During that time, people should still be building their wealth through investing. Small amounts invested over long periods of time do have a way of growing into very large sums. Time is too precious to waste, so invest while paying off debt.
Try not to think about how much further ahead you’d be if you were able to send your debt payments to your investment account. Obviously, investing more sooner is better. At the same time, investing something is better than investing nothing.
Once the debts are gone, atleast 70% of those former debt payments ought to be re-directed towards investing. The other 30% should be spent on whatever frivolities a person wants.
Don’t go back into debt!
Do what you want with your own money. I’m just here to tell you that going into debt over and over again will prevent you from building any kind of wealth for yourself. Debt is not getting cheaper. When was the last time the interest rate on your credit card came down?
Secondly, if you’re forever going into debt for one thing or another, when are you going to have the monthly 3-figure or 4-figure amount to invest for your future? Do you really want to spend your entire life working just so you can send most of your paycheque to someone else?
I’ve had debt before, but I got out of it.
I used a loan to buy my second vehicle. It was a 5-year loan, and I don’t remember the interest rate. The payment was $325 per month, so a little more than $10/day. I was tickled to death when that car loan was finally done. I’d hated making those payments!
So imagine my shock and horror when the financing company offered me another loan to buy a new car.
WTF?!?!!
At the time, a friend of mine explained that I was the exception. She said that most people would go and buy another vehicle. My mind was blown! I simply couldn’t fathom the idea of going into debt for another vehicle simply because I had repaid my loan. The vehicle I had just paid for was only 5 years old. There was nothing wrong with it, mechanically or cosmetically. Best of all, that car no longer siphoned $325 out of my wallet every month. Why on Earth would I want to go back into debt for another car?
Debt is easy to acquire, yet hard to eradicate.
Read that heading again. The truth is that I’ve never had an easy time getting out of debt, when I’ve had it. It took me years to pay off my mortgage, and I did it rather quickly. As I’ve noted, it took me 5 years to pay off a vehicle loan. I seem to recall that it took me several years to repay my student loans too, and those were relatively small at an amount of $15,000. Thankfully, I’ve never had credit card debt.
Yet, if I could remember how long it took me to acquire the debt, I would have to say that each loan application required less than 30 minutes of my time. My mortgage might have taken a bit longer but it was still less than an hour to be approved.
Mere minutes to acquire over $100,000 of debt… sigh… it’s almost breathtaking, isn’t it?
In very sharp contrast, it took me years and years to pay it all back. And I managed to repay those loans early! There were tax refunds and retro-cheques to help me do so. Most of the early repayments came from delayed gratification and extra payments. According to my memory, I accelerated my mortgage payment every year on the anniversary so I could pay off my principle residence’s mortgage super-early. I started at $304 bi-weekly and had bumped it up to $750 bi-weekly by the time it was done.
I have to wonder why the length of payback is never, ever advertised when creditors are extending debt to customers. Never ever forget this truth – it takes a long time to repay debt.
Debt is an impediment to the life you want.
Sending most of your paycheque to creditors sucks. You work hard, and someone else benefits from your efforts. I’m not at all convinced that most of us want the results of our life’s energy and precious time going to our creditors. We should be in a position to determine where our money goes. After all, we’re the ones who used our blood, sweat, and tears to earn it.
Get rid of your debt. There are many websites offering good suggestions about how to do so. I don’t claim to be an expert. My path to debt freedom included living well below my means and practicing delayed gratification for years. It worked for me because I earned a decent income and was able to keep my expenses low as a Single Person. I didn’t take on many subscription services. I went to the grocery store and cooked my own meals. As I rid myself of debt (student loans, car loans, and a mortgage), a significant chunk of those former payments went into my retirement and investment accounts.
Today, I’m very content with my financial situation and Past Me’s choices about money. Eliminating debt from my life, sooner rather than later, means that I have better options and that I’ve secured a spot in the Double-Comma Club. Creditors are not part of my life and I think that’s great.
*** I minimize the risk of this ever happening by deleting these email offers immediately. Then I go into my trash folder and delete the email permanently. I also never let anyone else touch my phone outside of my presence. If there’s another way to stop unsolicited credit card offers coming to my email, please let me know.