But what exactly is debt and why does it have so much power in our lives? Investopedia defines consumer debt as the description of what you owe because you purchased goods that are usually consumable and thus not appreciating. The definition goes on to say that having a high amount of debt is not beneficial to the consumer because it puts a strain in the limited income coming in every month.
In most cases, that is what makes debt really bad – we got it to finance something that does not help our personal financial growth at all. Before you continue putting yourself in debt, maybe you should take a good look at the devastating effects that it has for your future.
Reasons why debt will make your present difficult
There are several reasons why your debt can make your present life very difficult. This is especially true if you have a lot of credit card debt. When you look over the life that you will lead because of your debt, you will realize just how much you want to be free from your debt situation.
Change of lifestyle. A change in lifestyle may not be so bad unless it means lowering your current way of living. If you are in debt, this is exactly what you will experience. The change will depend on how much you owe your creditors. That could mean selling your home and moving to a smaller rental apartment. It can also mean letting go of your luxury cars and settling for a second hand sedan. These are the sacrifices that you have to make to help conserve the limited income that you have – all with the purpose of having enough money to pay your debts.
Postpone or permanently let go of things you want to get now. If you want to pay off your dues, you need to understand that you need to let go of certain expenses that only satisfy your wants. From hereon and until you pay off the debt, you have to stick only to needs. That could mean you have to sacrifice some of your entertainment activities – especially the expensive ones. Even if you see a good product on TV, you know that you cannot buy that because you simply cannot afford it.
Wasting money on interest. To add insult to injury , you will be wasting money on interest. You have to deal with the painful truth that your income is being used to satisfy the interest amount that is making your creditors rich. If you have a lot of high interest credit card debt, this will be the story of your life until your balance is completely paid off.
Ruins your relationships. Another negative effect of debt is the strain that it will put on your relationships. A lot of marriages were broken because of financial problems and you can expect that debt is in the midst of it. If only one of you is responsible for that debt and the other have to make the same sacrifices to get out of it, that can take a toll on the relationship.
Makes you vulnerable to emergency situations. Since most of your finances are on your debt payments, the natural response is to sacrifice your emergency fund. This is never a good idea because it puts you in danger of incurring more debt when an unexpected expense crops up.
Before you swipe that credit card or make an unnecessary purchase, think about the effects that debt has in your life. That way, you can keep yourself from the miserable life that debt usually puts you through.
How your current credit is robbing from your future
Not only is your present life made miserable, your debt situation robs you of so many benefits that you should have been enjoying if you only had a debt free lifestyle. Here are some of the future effects that your debt will have in your life.
You have to forego early retirement. Most baby boomers are forced to work past their retirement age because they have so much debt to their name. Not only that they usually have very little retirement money. This is why some of them are forced to work longer and some of them even consider working until they drop. If you don’t do something about your debt, this may be the retirement that you will have.
Lower standard of living. Since you will be putting a portion of your money on your debt payments, that means you will be sacrificing a good lifestyle for you and your family. That can earn the ire of the people around you – especially if the debt was all your fault.
Graduate schools. In case you were planning to go back to school so you can demand a higher pay, that may not be possible with so much debt. You cannot work part time because you need the income and you need most of your extra money for your debt. That does not even include the money that you need to pay for your school fees.
Freedom to choose a career. Some people find the demanding corporate world quite tiring but instead of having the freedom to choose a less stressful workplace, they are forced to stay with their current job. Instead of basing your career choice on your personal fulfillment, you have to base it on the money that you will earn – even if it makes you unhappy.
Here is a video that follows the life of consumer who charged so much on her credit card back in college. When she graduated and started working, she explains how life had become restricting and difficult because of the reckless spending she made before.