Is Having Debt Bad?

When statistics like 80% of Americans are in debt float around the internet, it’s hard to believe that there is a way to live life without debt. That’s 8 in 10 people that are in debt. If you were to walk into a room, more than half of the people in there will be in debt. Again, thinking of debt in those statistical ways, it’s hard to think that there is an option to not have debt.

If you want to go to college, you have to have student loans, right? Almost every big corporate store offers some type of store credit card. If you watch TV for longer than five minutes you’ll most likely find yourself watching a commercial for a credit card that offers perks like double miles for purchases or 5% cash back.

Not only is the idea that debt is a part of life but there’s the idea that if you have debt, you’ll get perks like double miles and cash back! Every cloud has a silver lining, right?

Wrong. Debt is bad, friends and while it may seem like everybody has it (because they do), this isn’t a club you want to be a part of. Now let’s talk about why.

Debt is stressful.

2020 has gotten all of us to think about our financial situation because for a lot of us, it has changed. Americans are losing jobs, taking pay cuts, being furloughed, getting downsized because of the pandemic that has raged the world. There are Americans out there they can’t afford their rent or mortgage and that’s just the tip of the iceberg. If you can’t pay to keep the roof over their head, how do you keep the lights on? How do you keep the gas going? Water? Oh, and then there is probably the car payment, credit card payment, and the payment plan for something you bought six months ago.

When the storm hits, we focus on the four walls and the necessities. Debt doesn’t allow for that kind of focus. Those credit card companies want their money and you owe it to them, you already spent it. Now you owe what you spent plus some interest because the credit card company was nice enough to front the cash for you. All debt does is add stress to an already stressful situation. Depending on how much debt you have, it can be overwhelming and feel like you’re never going to see the day where you are out of debt. Thoughts like that just adds to your stress.

Debt is spending money you don’t have.

If you’re taking out student loans it is because you cannot afford the cost of tuition. If you’re taking out a car loan, it is because you can’t buy the car outright. If you are reaching for the credit card, you’re most likely going to be spending money you don’t have in your checking account. Accruing debt is a way to get the “buyer’s high” from getting something new but delaying the problem of paying for that item later. The buyer’s high will fade away and then you’re stuck with the bill and the monthly payments you will be committed to.

Debt is an unnecessary commitment.

Show of hands— how many of us have made plans or committed ourselves to something that a day later we wish we didn’t? Most of us have found ourselves in that boat. We went back and realized we overestimated our time or we found a scheduling conflict. Usually, when conflicts arise, we can reschedule something or move things around to allow for the commitment. Or, we can back out of the commitment. It might not be our favorite choice, but sometimes when we overcommit our time, we can usually figure out a way to get out of something to cut back.

Debt doesn’t work that way. If you lose your job or take an unexpected pay cut, you can’t call up the credit card company and explain that you don’t have the funds anymore. You’ll still owe that money. Not only will you owe what you spent but you will also be charged interest which makes the overall cost go up.

Debt costs more money.

Say you’re looking at a used car that is $7,000 dollars. The average interest rate on a car loan is 5.29%. At minimum, you will be paying $7,370 for that loan. You’re paying more than the car costs just because you are taking out a loan. However, considering that most interest rates are annual, you’re paying 5.29% per year you have the loan which adds up over the course of your loan. The average car loan is about 5 ½ years.

But! The payment is what I could afford, the payment was $250 a month. Okay, fair point. Not many people have $7,000 lying around waiting to buy a car. However, if you were to take that $250 you could afford and saved it instead to pay for the car in cash, you would have had the $7,000 saved up in 28 months. You would have paid for the car in less time than the loan. Plus, if you lost your job or a financial storm hit, you wouldn’t have the added stress of making sure you could afford a car payment.

Debt takes away from your income.

Ever heard of the phrase, “don’t count your chickens before they hatch” ? We can expect and anticipate a lot of things in life but as most adults know, we can’t control everything. Debt is a way of counting your financial chickens before they hatch. You’re agreeing to payments for money you think you will have later. What if you don’t though? What if your company goes under? What if you get into an accident? What if a client doesn’t pay you? What if the chickens don’t hatch? We can’t see the future and everytime we take on debt, we try to play fortune teller to see the future and the money we will have in then instead of making a choice to only spend the money we have now.

Debt makes it harder to save money.

Do you want to build a retirement fund? Do you want to take a vacation in the summer? Do you want to have some money for a rainy day?

Debt makes it harder to do that. You work for your paycheck and when that paycheck comes, your bills are already rounding the corner, ready to claim their funds. So you pay the light bill and the gas bill and the water bill, awesome. Now we can look at what to save. But wait! There’s the credit card bill, the car payment, the student loan payment, the store credit card bill. Even if you are only making the small minimum monthly payments for those cards, all that adds up really quickly. Next thing you know, your entire paycheck is gone to bills and debt payments and there’s maybe seven dollars left to save, if you’re lucky.

Basically, debt sucks.

It may seem weird to think about debt as bad. It may seem like you’re speaking a different language than those around you when you decide to say no to debt. It will suck when you have to say no to drinks with your friends because you don’t have the extra money. Deciding to get out of debt requires a season of sacrifice, a season where you will miss out on some things. However, once you are out of debt, you’ll be free to have drinks with your friends because you’ll have the money to pay for your drinks in cash and not have to worry about the credit card bill that will come at the end of the month.

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