Why is Debt Bad for You?
In these days of technology and where gadgets available for almost everything, we have started buying things all of the time. Getting the new iPhone, or checking out the new Amazon product have become essential requirements for us. When you have so many attractive offers around you, we are blinded by the shiny objects that we actually don’t care about the amount of money we are spending. We want that thing so bad that we are ready to pay even if we don’t have that much money in reality. People who are vigilant about where their money is going and are literate about personal finance management are relatively in a better place, although many people are not aware how their money is so easily parting away from them.
For me, I was so happy when I got my first full-time job after a long struggle, I let all my inhibitions go. When I saw all deals on Black Friday with all things that I was craving to buy, including an iPhone and XBox 360, I went berserk and ordered everything on my new credit cards. I finally deserved all these things because I had struggled all my life so far. These were supposed to be my rewards.
But the happiness from them was short-term. After a year or so, I accumulated an enormous credit card debt, as I was buying things on my credit card as I was paying most of the income that I got on rent money and paying off my student loan.
Two years back when I again got into reading books and studying personal development, I decided to learn about money management and how I could strategically pay off my accrued debt.
I wanted to understand how I could manage my money in a better way and keep it growing, and at the same time understand the psychology behind spending and saving.
I read a lot of books and watched countless videos on personal finance management. All of this material did help me a lot in understanding finances, but I realized that I am to be on top of my finances almost on a daily basis and be consistent with learning personal finance management.
If you are someone who has accrued credit card debt, like me and are desperate to pay off this debt, I would highly recommend reading Dave Ramsey’s book “Total Money Makeover” and follow the baby steps he has mentioned in it. A step-by-step approach is key and it is very important that you cultivate patience. In these days of instant gratification where you can easily get anything by a card swipe, it will take some WHYpower (better than willpower!) to cultivate the habit of being patient and making delayed gratification a priority. Also, it will be needed to resist the temptations of buying new things. It may seem painful in the short term, but staying disciplined will immensely pay off in the long run.
Reasons why debt is bad for your and your life in general:
- When you’ve accrued a debt, all your extra money goes into paying off the balances. In this way, it stops the ability to experience things you’d really like to do.
- It is costly. Although it may seem like a good quick fix for present, but in the long run, you’ll end up paying way more than you had expected
- Debt takes a long time to get paid off and is not easy to get rid of.
- You’re not in control of your own money and you feel helpless.
- For me personally, debt has really impeded my ability to travel around and explore new places and cultures. This really hurts me!
- It can be a big contributor towards stress and depression, hence negatively affecting your mental and emotional well-being
- It strains your relationships with your friends and family members
- You cannot gather new experiences and memorable moments because you always wonder if you should pay for it or not.
There is no angel or a knight in shining armor who is going out to come and make all these problems disappear. We have to seek solutions ourselves, and it all starts with changing ourselves first. Some things that have helped me in paying off my debt are:
- Reading books and educating myself on personal finance management. My recommendation would be to read at least one book on finances a month
- Track expenses EVERY DAY! Whenever you spend your money, use an app such as Money Lover, or even a plain small notebook is fine. Again, I’d like to emphasize: Make this a daily habit!
- Make a budget – this is a game changer!
- Have an emergency fund, which will be a safety net for unexpected expenses
- Embrace minimalism
- Collect moments not things
- Buy things that will make you and others feel good in the long run
- Cut your credit cards, but do note down their details in an Excel sheet. Never use them, but very sparingly so that they remain active as you pay off the balances.
- Pay by your debit card and/or cash
- Always have a $20 or if possible $100 bill in your wallet/purse (will change depending on what currency your country has!), and never spend that amount, NO MATTER WHAT! This will be a reminder that you have money all the time, and you will never feel a lack.
- Switch to the mindset of abundance, and think that all the money is on its way for you. Even if you don’t have evidence of material things around you, do not worry, eventually, all things will work out fine for you. Have faith!