Debt

Debt

The Debt Leash

Debt can feel like a leash that just won’t quit.  The terms debt free or  ‘get out of debt’ could seem to you like just some fairytale that comes out of the mouths of  pollyanna poodles.  The constant choke on your finances can prevent you from saving and investing for critical purposes such as education or retirement.  The cash that could have been saved, invested and used to grow and give you security for the future has now vanished into the black hole of irretrievable money called interest payments.

Credit Cards

Did you know that if you just make the minimum payment on your credit cards that it could take an incredibly long time to pay off the card?  Did you know that you could end up paying more in interest than the cost of the item you purchased?  Use this calculator to determine exactly how long you will pay and the total amount of interest (wasted money).

Only Smart Debt

Is it worth it?  Always review your return on investment potential.  A home or student loan can be excellent investments with proper strategies to borrow the minimum amount that makes sense, depending on the value of the real estate or career income possibility.   Otherwise, take a look at what you’re going into debt for.  A vacation? The latest smartphone even though you’re  still not smart enough to understand the old one?    A brand new car over an excellent used car? Fancy clothes that could have been purchased for much cheaper at TJ Maxx?

Many people feel social pressure from the ol’ Keeping up with the Jones’ dogma which can hurl one into loser mode if they get behind on the latest cool stuff.  Parents have embraced this trend and new generations are redefining ‘basic needs’ from food, shelter, a basic wardrobe and transportation into the latest smartphones, computers, brand new cars & fancy clothes.

What if?  What if smart living and being financially secure blows away all of the superficial satisfaction from getting cool stuff and being financially careless?  If you can embrace this concept of reality, you may be able to get a grip on your spending and actually get out of debt.  Many people have done it, are thrilled that they have done it, and have never looked back.

Budget

It all starts with the budget.  How much do you have to spend per month?  What exactly are you spending it on?  Get the list going.  What can you cut out?  Look at your income.  Is there any way you can make more money?  Now list your debts in order from the highest to the lowest interest rate.   It’s time to apply more moolah to kill the debts one at a time.  If you need a psychological victory, then start by paying off the lowest amount first.  Celebrate.  Now apply the money you are no longer paying on your conquered debt to the debt with the highest interest.  Eradicate it.  Celebrate.  And so on.  Your payoff order may vary based on your own circumstances and criticality of the actual debt.  The main point is to commit to wipe out your debt, make it happen and then celebrate.

Get Out of Debt

Make it your ultimate goal to completely get out of debt, including your house and your student loan.  Some may say that it depends on the interest rate, but there’s a tremendous amount to be said for being completely debt free and the associated financial freedom.

Ideally,  the only debt you will be associated with is a bond investment that is making you money.   Wouldn’t it be cool to stop making interest payments to someone else… and instead invest that money as part of your portfolio to receive interest payments on someone else’s debt like a corporation or the government?  Woof.

%d bloggers like this: