Why You Need To Get Out Of Debt

We tend to focus on saving money around here, but today we’re going to talk a bit about debt, why you need to get out of debt, and how you can start.

Statistics vary, but in the U.S., the average person has a credit card balance of between $8,000 and $15,000. In Canada, a recent survey found that while 75% of Canadians believe debt has a “positive impact” on their lives, 58% feel uncomfortable with their debt and a third say they lose sleep over it.

What does this mean that people tell themselves that something they lose sleep over and that they’re uncomfortable with is still somehow a positive force in their lives?

Believing The Myth

People didn’t always have credit cards. Once companies realized just how much money they could make with them, marketing went into overdrive convincing you that not being able to pay for something was just a technicality. In a few years, we became so accustomed to buying whatever we wanted, that the notion of not being able to afford something rarely even registered.

When I resisted incurring debt to afford the latest things, some of my friends thought I was actually crazy. The idea that I wasn’t buying things because I had other priorities for my money was literally incomprehensible to them. After all, if you just put it on your credit card, you can do whatever you want!

The Cost Of Debt

One way to look at your debt is to calculate how much you’re actually paying for all this stuff you buy. A $500 purchase in cash will cost you just that, $500. Putting it on a credit card with a 20% interest rate and not paying it off for a year means the same thing will cost $600. If that balance is a part of a larger revolving debt on your card, and it takes you, say, 3 years to pay off the whole thing, that purchase will end up costing over $850.  Wouldn’t it be awful to still be paying for things long after you were finished using them?

On a larger scale debt is slavery because a large portion of your money will go towards your debt and interest payments.  How will  you afford a comfortable retirement when you can’t save anything for it.  You will work longer than you planned to and then you’ll live in poverty during your “golden” years.

Take Control

Think long and hard about the choices you’ve made and ask yourself if you’re really happy with them.  If you decide you want to be in control and not in debt to anyone, there are plenty of options. Make a list of all your debts, including minimum payments for each.   Cut expenses, sell stuff you don’t need, and negotiate more favorable payback terms where possible.  Make debt repayment a priority and attack it with everything you can.

If you still feel it’s hopeless, learn about debt reduction program options at www.debt.ca.  Professionals will have more options and will help you find what’s best for your situation.

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2 comments

  1. Jane Savers @ The Money Puzzle says:

    I feel the weight of my debt every day. It affects every decision, good and bad, that I make and is the thought that is in my mind more than anything else. I forged the links of the debt chain and it will take years to break them. Every day working, saving, cutting, doing without.

  2. Elizabeth @ Simple Finance says:

    My husband and I are lucky enough to only have our home loan in terms of debt – yet, I do think about it a LOT. Not the debt so much (the payments are manageable), but how much we spent on the house in a bad market in the first place. It drives me BATTY, and yet, it’s not my fault; it was a “good value” at the time. Just not anymore.

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