Instant gratification is destroying lives around the world, but specifically here in America. Because of this society that encourages debt. It is normal for people to want to live well today and receive that instant gratification. And it is usually this attitude that causes someone to swipe a credit card for a trip across Europe or purchase many small items that end up in the trash before the cost has actually been paid for.
It's become the American way. The cost of living has outpaced income growth for more than a decade, so it's no wonder people are resorting to financing their life. I don't think people graduate high school assuming they will fall into the same financial pit, but for most people, it just creeps up on them.
I was purchasing a $125 piece of furniture for my son's bedroom the other day and the salesperson offered me financing to purchase this small item that was the cost of many peoples’ cable bills.I rejected the offer and paid for it cash. I asked the salesperson how often he gets a yes answer and he said in his own personal experience, one in three people are buying furniture on credit.
We are conditioned to think we are supposed to buy things with debt, such as vacations, furniture, home remodels, etc. It's hard to blame people for taking on debt for buying a home, or even cars, for that matter, because these items have gotten so out-of-control expensive it's almost impossible for the average person to live and save up enough money to afford these two essentials for life.But take out the 30-year mortgage for houses and the 5-year loan for cars and all of a sudden, prices would collapse and people would be able to more easily afford these items without going into as much debt.
The same discipline it takes to not go back for seconds and thirds at dinner is the same discipline it takes to stay out of bad debt.
Debt is bad for so many reasons:
- Debt encourages you to spend more than you can afford.
- Debt is expensive. Even in a low-interest-rate environment, when you take on debt, you are borrowing income from the future that you hope to be earning.
- Overwhelming debt leads to stress and health problems. Debt is hard on not only you, but hard on the family as well.
- Debt hurts your credit score. Essentially, if you have existing debt, the debt you have will hurt your credit score and make it harder for you to go into more debt. Maybe that is partially a good thing, except in instances where credit scores are not being used for incurring more debt, such as the rate you will receive on your car insurance.
In a world where houses and cars cost a lot of money, it's almost unrealistic to expect to save up the entire price of the asset before you start to live your life, so I wouldn't be opposed to some calculated debt where you aren't in over your head. Ways you can offset the impacts of this debt are to look for deep discounts and make larger payments to pay down the debt as soon as possible.
The best debt is debt that services itself. I've used debt successfully to finance business deals and real estate transactions. In business, there is a great deal of money to be made, and when you successfully use other peoples’ money, the results are multiplied– but so are the losses. Keep in mind that one of the biggest reasons people go into debt is because they are doubling down at the casino and walking out a loser. There is a fine line between investing and gambling, and you have to be the gatekeeper of your money.
Learn to want things you can afford, and allow your hate for debt to consume your desires to overindulge in temporary highs. The average person is getting consumed… don't be average.
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