Although there’s plenty of discussion in the media this morning of possible assistance for some strapped home-buyers, debt will always suck your money away. Here are my favorite three reasons why.
1. Debt makes everything you buy cost more.
Ah, the joy of paying interest on previous purchases. You’ve grown to hate that particularly fun night out. Why? Because you’re still paying it off. And it was five years ago! Too bad we only learn later how those rounds of drinks “on me” will actually cost far more (and for far longer) than you ever expected.
2. Debt enables you to buy things you can’t afford.
Note that it doesn’t say debt “makes” you buy things you can’t afford. If you’ve borrowed more than you can immediately pay back, you’re the one who made the decision. The debt (most likely a credit card) was your tool to do so. That’s why you’re the one who has to make sure that you can afford whatever it is that you are buying. Don’t trust the sales clerk, credit card company, or car salesman to figure out the long-term implications to your financial well-being of the purchase. That’s on you. Always has been.
3. Debt creates a race to the bottom – not to the top.
Many people proudly display their new tech. gadget, fancy new car, and huge McMansion. But they don’t brag about their credit card debt, auto loan, or mortgage balances, do they? That’s why we often think of people with “more stuff than we have” as richer than we are.
It’s just an appearance. Keeping up with the Jones’ has always been hard and, practically speaking, foolish. Today, it’s even more difficult because the Jones’ are in trouble. You just don’t know it. In fact, the Jones’ aren’t even real. But the debt– your’s and their’s–is.
There definitely is such a thing as good debt. But debt you can’t pay back on things that go down in value (a major problem for most people, especially those going to the max during the holidays) is not good debt. It’s not good debt even if it makes you feel good when you buy it.
Come January, you’ll see how bad such debt is and how it’s still sucking your money away from you. Remember, you decide how much debt you’ll have. Not the salesperson or the credit card.