If you have a huge debt problem, you might want to focus on getting rid of it as soon as you can. This is not something that you should postpone. If anything, it has to be prioritized because it can seriously compromise your financial future.
According to reports, consumer borrowing increased by 8.8%. It is believed that this is fueled by their growing confidence in the economy. Their belief that the economy is strong and that gives them the confidence that they will But if Americans are not careful, this can become a problem for them. It can quickly get out of hand and cause another financial crisis. Especially since the report mentions how credit card debt has crossed the $1 trillion mark. Since credit cards are notorious for their high-interest rates, it is important for you to use this type of debt wisely.
While we cannot completely eliminate debt from our lives, you need to make sure that you do not give it enough power to influence your financial future. If you have a huge debt problem, you will most likely end up feeling restricted by your credit obligations. The need to pay off your debts will keep you from enjoying your income or investing it. This can also stop you from pursuing a lot of things that will make you happy. You have to aim for a particular income so you can afford to pay them back. That can be quite stressful.
4 life milestones delayed by your debt problem
Apart from controlling your life and making it more stressful, there are also other things that debt can do. According to a recent survey, debt can delay 4 major life events: homeownership, retirement savings, parenthood, and marriage.
The survey revealed that 34% of their respondents admitted to delaying their intent to buy a home because of debt. This is not surprising since buying a house can be very expensive. If you have a huge debt problem, it is harder for you to get an approval for a home loan. Chances are, your high balance is affecting your credit utilization. This can negatively affect your credit score. When you have a bad credit score, the chances of being disapproved of a mortgage loan is likely to happen. And even if you get approval, there is a high chance that you will be given a high-interest rate on the loan – which means you have to pay more for it.
If you really want to buy your own house, you have to make sure that you pay your current ones first. You need to show the creditors that you are responsible for paying off your debts properly.
Another thing that will be affected by your huge debt problem is your retirement savings. The survey revealed that 31% delayed contributing towards their retirement funds. Most people would focus on paying off their debt instead of saving for their future. While most of them do not expect to avoid this forever, the fact remains that it is being delayed. We all know that the earlier you start saving for your retirement, the better it will be. Your money will grow more because of the compound interest. If you delay your contributions, you will not be able to maximize that.
The need to save up for retirement is important because it will give you financial security when you get older. With reports that a million dollars are no longer enough to finance a comfortable retirement, you know that you have a lot of saving to do. So cut back on your spending so you have more extra money to pay your debts while saving for retirement.
The survey also tells us that 16% had to put off their dreams of parenthood. This is understandable because having a child will entail costs. And it is an expensive cost at that. You will spend a lot of money to ensure that your child will have a great life ahead. While there are still young, you have to provide for their every need. You have to give them the basic necessities like shelter, food, clothing, etc. Of course, the most important expense is their education. This is what you can give them in order to help them survive once they leave home to pursue their own lives. Despite the expense, it is a worthy investment because it will ensure that your kids will have what they need to be successful in life.
The necessity of the expenses does not diminish the fact that it is expensive. And when your kids are already there, you cannot risk not having enough money to give them what they need. This is why your debt should be dealt with before you have kids. Prioritize your debts so you can finally start having kids – or you can start earning more.
Finally, the 4th milestone that is usually delayed is marriage. 14% of the survey respondents admitted that they postpone marriage because of their debts. The truth is, marriage and personal finance is an important discussion that you have to seriously tackle before you tie the knot. While the main reason to get married is emotional in nature, your finances should also be taken into consideration. Your love for each other might crumble and fade once you start fighting about money.
While a high net worth is not necessary, you have to be honest with your debts. You need to be open with your significant other about the amount of debt that you owe. After all, when you get married, you want to be able to support each other. Make sure they know about this financial responsibility that you have. They might be able to help you get rid of it and support you as you try to improve your financial position. Your honesty will help the two of you build a strong relationship early in your married life.
These are the important life milestones that people have opted to delay because of their debts. If any of these milestones are very important to you, then these only some of the costs that you have to deal with if you have a huge debt problem.
Keep your debt problems from ruining your future
One of the reasons why it is dangerous to ignore your debt is the fact that the interest will make your unpaid debt grow. The higher the interest rate, the faster the debt will grow. The Federal Reserve revealed that they will push through with the three interest hikes scheduled to happen this year. That means there is a chance that the creditors and lenders will increase your interest rate. If you have debts that have variable rates, all these hikes will affect your payments and make them bigger. This is a big enough reason for you to be seriously aggressive in tackling your huge debt problem.
Fortunately for you, having a debt situation is not the end of the world – unless you decide to ignore it. This is one of the problems that will only get worse if you choose not to do anything about it. So you have to make sure that you do something about your credit situation.
Here are some tips that you can use to help pay your debts.
Have a good reason to borrow money
We are never going to encourage that you never use credit again. What you should be doing is to learn how to use credit to your advantage. There are debts that can help you improve your financial position. But before you define that, you have to make sure you have a good reason to take on debt. If the debt will help you earn more money, that is a good enough reason to borrow money. If it can increase your net worth – like buying a house can, then go ahead and get a home loan. But if your reason to use credit is so you can buy things you do not need in order to impress other people, then you should not use debt at all.
Use credit according to plan
When you decide to borrow money, make sure that you use it as intended. This is more for those who plan to borrow a personal loan or use their credit card. When you borrow a student loan, mortgage, or car loan, you cannot use it on something else. But that restriction is not true with a credit card or personal loan. You are free to use it as you wish. Discipline yourself so that the funds will only be used as planned. That means using credit wisely. If you borrowed a loan to consolidate your debts, you have to do it as you planned. If you have to use your credit card or purchases, make sure you can afford to pay it back.
Make sure you have a debt payment plan
Finally, if you want to avoid a huge debt problem in the future, you have to be ready with a debt payment plan. If you do not know to pay off your debt then do not borrow money. Some people cling to debt immediately because it is the easy way out of their debt situation. But this is the wrong mentality. Make sure you understand your debt relief options. Check your budget plan so you can see if you can afford to pay back the debt. If not, then you need to cut back on your expenses. Do not let your debt go unpaid because that can seriously compromise your future.