Last week we talked about the ramifications of how
keeping up with the Joneses is costing people a
whole host of problems down the road.
This week, I will discuss the mistakes people are
making with debt and point out some of the danger
signs that show up when you have too much.
Mistake # 3: Taking on Too Much Debt
I found this week’s e-Newsletter a bit of a challenge
to write because society has enrolled everyone in
taking on their share of debt. We are basically
conditioned to take out a mortgage, car loan,
use a credit card, and now every student wanting
to attend college feels left out if they don’t have
a student loan, some to the tune of $100,000 and up.
I find myself thinking about borrowing money
every time I want to make a large purchase. Why?
Because that is the way you are supposed to do it.
It is automatic. I keep tell myself that I need to let
go of this way of thinking if I want to continue to be
debt-free.
Just think if there was no credit available. Do you
think things would cost what they cost today?
During the real estate boom of 2002-2007, housing
was escalating at such a fast pace affordability of the
monthly payment was becoming nonexistent. Mortgage
companies started peddling interest only and negative
amortization loans because homebuyers just had to
own a home at any price. What a disaster that was!
Recent Lending Trends:
– Auto financing just added a 96 month car loan to make the
monthly payment more affordable. If the customer is not
interested in that, they have all kinds of terms available to
get someone in a car.
– Today, we are seeing college tuition cost skyrocketing.
The Huffington Post just the other day reported that a public
policy research organization released a study showing:
A household with $53,000 in outstanding student debt — which is
the average college loan balance for a family headed by two
people with 4-year degrees — will be about $208,000 poorer
over a lifetime than a similar household with no debt.
– Credit card debt is increasing at alarming rates since consumers
are making more purchases on-line, the explosion of smartphone
credit-card apps, and card companies easing credit limits.
I have worked in both the mortgage and car industry. I’ve pretty much
seen it all on how people want to take on a mountain of debt.
Lenders have basically got us addicted to borrowing…
A side note: Their practice reminds me of the recent movie,
“Sharknado.” The disaster film where man-eating sharks are
scooped up in water spouts and flood Los Angeles with
shark-infested seawater.
Because the lending industry has maneuvered us along this path,
people tend to get trapped by taking on too much debt.
With this type of behavior you are chained to the creditors for
a very long, long, long, long time. You are living for your creditors
instead of living for yourself. You are on someone else’s terms.
Here are the warning signs if you have too much debt:
-Your credit cards are maxed out.
-You’re paying the minimum payment on your credit cards.
-You are borrowing more money to cover your monthly expenses.
-You’re getting calls from creditors hounding you.
-Your bank account is regularly floating around $0.
-You have no Emergency Fund (aka Smart Fund) in place.
-Your taking cash advances from credit cards to pay for stuff.
-You are borrowing from Family or Friends.
-You’re constantly stressed and worried about your debt load.
If you are currently experiencing any of these warning signs then
take IMMEDIATE action to change your circumstances.
Here is some advice… Become the Debt Destroyer.
No matter how much debt you have right now, set up a plan
to pay down all your outstanding debt other then your home mortgage.
Once you have that conquered, then work toward paying down
your mortgage until it is completely gone.
One of the goals of living with Money on Your Terms is
having zero debt. The money that is going toward your
outstanding debt could be used for investment and
retirement savings.
Have your money work for you, instead of you working
for your creditors. Be the Debt Destroyer and you will
feel a sense of freedom.
Give yourself the ultimate gift by becoming debt-free.