Unfortunately debt has become the accepted standard in today’s society. If you don’t have half a dozen revolving credit accounts, a jumbo mortgage, and a couple of new cars, you aren’t living. Debt is so accepted that I’ve known people, self included, who graduated from school and couldn’t wait to start applying for credit so we could fill our lives with the things that everyone tells us we need. Thirteen years later, I have a different view. After years of interest payments, balance transfers, chasing 0% offers, and trying to track when payments were due, I’m done with debt payments. Debt has become a four letter word in our house.
Is There A Such Thing as Good Debt?
You’ve likely heard the argument that a “good” debt is one that allows you to potentially better yourself in some way. Student loans are good because they allow you to earn more money with a college degree. Mortgage debt is good because you are able to have equity in the place where you live.
I agree to some extent. If I hadn’t been able to borrow money to attend optometry school, I likely would not have anywhere near the earning potential that I currently possess. If we had waited to buy a home in cash, we might never have gotten there. I also think most people take on so called “good” debts and look at making the payment instead of the entire amount you will be paying back over many years. I know we all get the amoritization schedule, but it seems so overwhelming that we quickly glance it over and whip our mindset back to making the payment.
My husband and I still have student loans and a mortgage for a primary and rental residence, but I can’t wait until the day when those are gone. If we’d been smarter with our money, we could have been done with student loans already. I’ve been in the minimum payment mind set for a long time. Now I’m ready to start making some serious over payments until the balances are all gone. When the student loans are done, we’ll go to work on the mortgages.
Temptations of Debt Abound
When you sign up for and are able to make those payments on the “good debts”, you are rewarded with a high credit score which allows you to get approved for any credit card or financing offer out there. This is where the whole payment mentality kicks in again.
I have bought so many things that I didn’t need right away on 0% credit offers. You’ve seen them. There is usually period of so many months interest free or “same as cash” where no interest accrues if you pay off the balance in full.
Learn from my mistakes. 0% is not the same as cash! Best case is that you are making these payments monthly, and you are able to pay the item off before the promotional period ends. The downside of this is that money you are paying to have new furniture, new skis, electronics, or shiny rims for your new car is money you could be using to pay off your other “good” debts. If you do slip up and aren’t able to pay it off, the interest balloons and is applied to the original balance. If you only have $20 left on a $2000 loan and don’t pay it off on time, you get charged interest for the whole $2000. Why take the chance? Save up until you can afford it. Odds are, most things offered at 0% are not necessities. If they were, the company wouldn’t need to entice you with no interest offers.
I’m In Debt, What Can I Do?
The first step is to sit down, figure out what you owe, and make a plan. You can join the Debt Movement started by Jeff Rose in partnership with Ready for Zero to pay of $10,000,000, yes ten million dollars of debt, in 90 days. No you don’t have to owe $10 million, but sign up. There are some great tools to help with your pay off, and joining a like minded community helps more than you can imagine. There are so many ways to pay off debt, and I will be writing and featuring guest posts on that topic for the next couple of months to celebrate the Debt Movement.
What’s holding you back? How are you going to pay off debt this year?