We live in a day and time where most will get suctioned into the debt trap. The temptation being to borrow money to get the things we want today. Some macro necessities are unavoidable for most, such as the house and car, becoming chained to debt that way.
It becomes an easy lure. Most know they’re in debt but have no idea how deep. They have no idea how much is too much, while not knowing how to reduce it. So if one has money issues, they need to get on top of it, this by realizing they have a debt problem.
Continuously owing and going on credit can fester like an addiction, as many find that attempting to keep control of their finances spirals out of control.
This especially in an environment where the media encourages us to spend, and that it’s okay to go into debt, that it’s inevitable.
The Seduction Of Debt
There are blaring messages by advertisers, all in the glory of making prisoners out of consumers, this by shackling them to paying interest to the loaners.
They bombard us with temptation such as Pre-approved loans, Easy Credit!, A FREE gift when you apply, get a year of interest free credit.
For many, their eyes light up as they surrender to the decoy of “live for today,” falling for the “life is short” attitude. Many cave in as they spend on luxuries they don’t need, which doesn’t leave them enough money to pay the basic necessities.
Although certain types of debt are appropriate and expected, such as the mortgage or a student loan, many will however spend to excess by buying more than they can afford, and become employees to the debt, and this is what banks are hoping and counting on.
The Lure Of Easy Credit
Credit cards are the gateway debt vehicle which can be too easy to obtain, but becomes difficult to maintain, this especially once someone find themselves spending, juggling, borrowing from one card to another.
The biggest hook of credit is that at times it’s advertised as “Free,” but we all know it’s our financial lives that’s at risk at the end. The trap that is debt drastically reduces our standard of living.
Families begin to live paycheck to paycheck, while saving nothing for emergencies. Personal bankruptcies then become persistent. The biggest advantage of getting out of debt is to escape the evil interest payments.
To Dig Out Of Debt
If you currently owe $1000 on your credit card with an interest rate of 19% percent per year, and you pay just the minimum of 3% per month, it’ll take over 12 years to pay it off, while paying close to $900 in interest.
If you decide to double your payments to 6% percent per month, then the debt will be gone in around 6 years, while the interest that’s paid would be around $300.
Savings can be realized by switching mortgages, this by fixing your interest rate to 2 or 3 years, while knowing exactly what the repayments during that time will be, so you can budget around it.
Also make sure that the mortgage is flexible, so you can pay it off sooner, this if more funds suddenly become available.
Certain bank loans can have obstacles, such as some may have penalties for early repayment. So just comply to the repayment schedule while not getting tempted to get further into debt.
Don’t fall victim to the hook that is getting sucked into debt by more borrowing. The reason being, that most will find themselves in debt because of luxury items they want but not need.
To Avoid Financial Difficulties
There are certain “red flags,” warning signals which indicates that you may be heading towards that slippery slope of financial difficulty. Certain indications that you might be getting trapped.
Take a closer look at your current spending habits and your budget. If a few of the following applies to you, then you could already be in the mercy of debt.
• Taking out loans to pay off other debts
• Using credit cards for purchases that you would normally pay with cash
• Receiving “overdue” bill notices
• Paying just the minimum due on credit cards
• Using your savings to pay the bills
• Working overtime or 2 jobs just to make ends meet
• Borrowing from your life insurance policy
• Borrowing from the bank of mom
• Avoiding certain debts, just paying the most persistent collectors
• Getting credit card cash advances to pay for daily living expenses
To Control Debt
Once you wrestle and control the burden that is debt, and it becomes under control, is when you can think about saving money. A disciplined monthly amount that goes directly into your savings account is a good start.
If you allocate a certain amount from your paycheck, and it’s directly withdrawn every month, then it becomes like paying another bill. Never get into debt over things that won’t have a long-term impact on your life.
Do you really need that faster more sleek car, that new fashion fad, or an upgrade on your computer. Develop the discipline to go minimal. Ask yourself if it’s essential or an expensive convenience.
Also look into the expenses in your current life, the daily spends. Is it really necessary to get that designer coffee from the vendor every morning, or can you brew your own.
Can you really afford to go out for lunch everyday, or can you pack a nutritious sandwich instead, where the savings can be placed into your rainy day savings account.
The key is being mindful of your spending. This so you don’t need to hold your breath every time you see the credit card statement, or when looking at your bank account. Financial responsibility starts now.