Why You Should Work to be Debt-Free

I have been doing a lot of study regarding debt, investing, and finances. I enjoy this stuff. It makes me feel in control of my environment when I know how to handle my monetary resources. I have heard some conflicting information about debt. Some say that there is good debt and bad debt. Good debt usually means school loans or home mortgages or car payments. Bad debt usually means credit card debt. In my opinion, if your debt isn’t paying you back, then its bad debt.

School loans? I was told they were good debt and that it would be okay to go into debt for school because I would come out on the other end with a secure job. My realizations: There is no such thing as a secure job. Knowledge is important. If I had worked harder I wouldn’t have any school debt.

Aaaw, hindsight.

Any debt just sucks. You are a slave to this debt. Dave Ramsey says this and I rather like it : “What used to be a huge, life-altering event will become a mere inconvenience (when you are debt free)”. Think about this- If you are paying $600.00 a month for a house, $230.00 a month for a car, $100.00 a month on credit card minimums and you are bringing in around $1200.00 and a water heater breaks in your house….well there goes $570.00. Your total expenses for that month (just on debt, not including living expenses like food and energy costs) just bumped up to $1500.00. If you were debt free, this wouldn’t be a huge deal. (The higher amount you bring in, the higher your debt most likely is as well).

I am not against buying a house. I am just against locking into a mortgage too early. A lot of young people today buy houses too early without having their debts paid off and a substantial emergency fund.

How many of you have been here: Newly married, have a little bit of debt in a lot of places (multiple credit cards, school loans, car payments) and no emergency fund, yet you decide to buy that new TV or laptop, game system, four wheeler, bike, Gucci bag….whatever you are interested in….? This is called instant gratification.

I have school debt, yet I was told this was good debt and didn’t feel compelled to pay off large chunks when I had the opportunity. Until I got a statement recently (that I actually read) that said in 19 years we will have only Cody’s debt paid off and will have paid double due to the interest. My jaw dropped. In 19 years I will be 43. There’s no way I will still have school debt when I am in my 40’s. So I decided to step into gear and pay this off with a 6 year plan. In 6 years I will be 30. That seems a lot better to me. I have the means to pay off larger portions of my debt and so I should, instead of spending all of my money on things that I am not entitled to yet. Not until I am debt free.

I am fortunate enough to have learned my credit card mistakes at a young age and get them taken care of before it progressed too badly. No more credit card debt for me. I will never have a car payment because I want to pay cash for that. Here’s a fascinating fact for you:

“Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth. The car payment is most folks largest payment except for their home mortgage, so it steals more money from the income than virtually anything else. USA Today notes that the average car payment is $464 over sixty-four months. Most people get a car payment and keep it throughout their lives. As soon as a car is paid off, they get another payment because they “need”a new car. If you keep a $464 car payment throughout your life, which is “normal” you miss the opportunity to save that money. If you invested $464 per month from age 25 to 65, a normal working lifetime, in the average mutual fund averaging 12 percent (the seventy-year stock market average), you would have $5,458,854.45 at age sixty-five. Hope you like the car!!!!!!!” ~Dave Ramsey

I would much rather be a millionaire than have had nice looking cars. But that’s just me.

My point is this…being in debt sucks. Get out of it. If you want, I can help you with budgets and managing money if that is what is confusing to you or scary or just plain hard. Let me know…it’s free. :)