Recognize Your Debt Problem

I am going to show you that your debt problem is bigger than you think.

So far you have bought into the idea that debt is a way of life. Debt will give you a better standard of living. Well if you haven’t realized it yet, debt will not increase your standard of living….it is a lie!

Your debt problem was created by buying into that lie. It is so prevalent that it almost seems to be true.

I was taught it by my parents, by the media, and by friends, that debt was good. I could get what I needed now, with a minimal charge. My formal education was no help.

No one explained to me that debt was not a solution! No one told me that my debt problem would cost me more that I ever imagined.

Let me give you a standard scenario. My husband and I wanted a new car. Our older one was fine, but did not project the image we wanted. The desired image of course was prosperity, affluence, etc. We decided we needed an additional car, which at the time we really didn’t.

So we went to the dealership and begged them to lend us money. Which after some deliberation they did. We even got the no payments, no interest for one year plan. We thought we were so smart! Then a year went by and our ridiculously high payments came due.

Still we were grateful to even have the car the dealership so generously bestowed upon us. But we had received more loans than we could afford. We lost the car, and were drowning in debt. Our image was costing us more than we had bargained for.

And often our first thought to fix our debt problem was to get another credit card.

Because what happens when you get another card in the mail? Wow, Visa’s so great they just gave me $5,000 more. Whew, what a relief, now we can make our monthly payments.

Do you see what’s wrong with that? No one actually gave me or you anything. In fact their whole goal is to take from you the interest that will compound on that $5,000.

A debt load weighing a man down

Let’s say you racked up that whole card.

If you have $5000 outstanding balance, at 18% interest your monthly payment will be about $125/mo. Not too bad, most people can handle $125/mo. Right? Wrong! That’s where the companies suck you in.

If you were to only pay the minimum payment it would take you 131 months to pay that off, so a little over 26 years. And you would have paid a total of $39,125.

So that $5000 worth of stuff that is now stuck in the attic because you didn’t really need 2 blenders, or the clothes are now outdated cost you an extra $34,125.

Let me repeat that the $5000 cost you an extra $34,125!! Using debt does not increase your lifestyle is decreases it because you now have less money. You may get things right now, but you pay for it forever!

Also you can take this one step further. What if instead of paying $125 to the credit companies each month you invested it?

Lets say you didn’t really need that $125/mo right now. You were saving it for 26 years down the road. So you put $125/mo for 26 years into some higher risk mutual funds and averaged 10% over the 26 years. You would have made $181,639.68.

So now that $5000 in debt really cost you $220,764.

My goal in this is to get you to begin to think a different way. If your goal is to impress your neighbor right now than debt is pretty alluring. If your financial thought process, which has been ingrained in us, is that you can afford an extra monthly debt payment. You will end up broke, just like that neighbor you are trying to impress.

But, if you worry less about what others think and plan for the future your debt problems can be resolved. Plus you will have retirement income, and other dreams to look forward too.

The credit companies are not in business to help you. They are in business to get your money. That’s all! The large glamorous buildings the credit companies are housed in are not a nice by-product from being kind and helpful to mankind.

No. The credit companies get their money by creating a debt problem for you. They use advertising and manipulation to convince you that you “need” something you don’t. Then when you can’t afford it they will give you credit to pay for it.

YOU end up with something you didn’t really need, and as an added bonus you also get to pay compounded interest on that stuff you didn’t need. But the CREDIT COMPANIES get all the cash.

All of a sudden the generosity of the creditors doesn’t seem so wonderful.

Start this program by rethinking your spending habits. Is the way you are living right now going to allow you to reach your goals?

If you continue on this track will you ever retire?

Go To Debt Step 2

"A man in debt is so far a slave,"
Ralph Waldo Emerson.

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Suggested Reading

  • Millionaire Mind
  • Millionaire Next Door
  • Total Money Makeover
  • First Things First
  • Think and Grow Rich
  • Rich Dad Poor Dad
  • Cash Flow Quadrant
  • Maigc of Thinking Big
  • The Richest Man in Babylon
  • 6 Thinking Hats
  • How to Win friends and Influence People

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