Everyone owes at least some money so being in a little debt isn’t really a problem is it? Well, the problem with a little debt is that it quickly becomes a little more, then a little more, and then before you know it you have a lot of debt. You end up with so much debt that it seems as if there is no way out. One of the most financially damaging parts about being in debt is that it encourages you to just keep adding to the problem. You start to develop a mindset that says that it’s okay to go ahead and buy something else or spend more on a credit card, after all, what’s a little more debt on top of all that you already owe?
When you use credit to buy something you get the great emotional high of getting something you want, and you don’t have to deal with the financial implications until later. That’s what makes debt so dangerous, that it just keeps pushing you into a situation where you will never be able to reach your financial goals and be financially stable.
- Being In Debt Is Expensive
- Debt Impacts Your Future Income
- How Interest Adds Up Over Time
- Debt Keeps You From Reaching Your Financial Goals
- Being In Debt Can Prevent Your From Owning A Home
- Debt Has Major Negative Impacts On Your Health
- Being In Debt Can Hurt Your Marriage
- Being In Debt Hurts Your Credit Score
Being In Debt Is Expensive
When you are at the store buying something you want with a credit card you don’t feel the financial sting that will be coming later. All you know is you just got that new sweater or television you wanted, and you didn’t have to put a dent in your bank account to do it. But that dent is coming later, and then you will feel it and suddenly that flashy purchase won’t feel so good anymore. What a lot of people don’t realize is that when you buy something with credit or financing you are paying more. You are paying more for the same item because you are paying interest in addition to the cost of the item you are buying. On top of that many people make the mistake of making the minimum payment, which means it will take you longer to pay off your debt, and the interest just keeps adding up over time. The only exception to this rule is if you get a 0 percent APR or interest-free period, but these periods don’t last forever.
Debt Impacts Your Future Income
When you take out a loan or make a credit card charge you are basically putting off paying for something until the future. So what happens when the future gets here? Well, you are making payments on something you already have, so whenever you finance anything today you are taking money out of your future paychecks. Does that really sound like the right way to plan for solid financial future?
How Interest Adds Up Over Time
Let’s say for example that you buy a new living room set fro $2,000, you finance it on a credit card that has an 11% APR. If you only make the minimum payment each month then by the time you finish paying off that new living room set you will have paid a staggering $3,400. The really scary thing here is that a lot of people pay far higher interest rates which can easily cause the cost of a purchase to double or more over time. Instead of using credit or financing to pay for an item try saving money each month instead and then making the purchase.
Debt Keeps You From Reaching Your Financial Goals
Each time you make a credit card payment or another type of financing payment you are taking money out of your budget. That’s money you can use to add to your savings account, retirement fund, or to use for some other venture that could be earning you money. Those monthly payments can also keep you from being able to go on vacation or to buy the Christmas gifts you know your family would love. Of course, this often leads people to feed back into the cycle and give in by using credit cards, which has the ultimate result of making your financial problems even worse.
Being In Debt Can Prevent Your From Owning A Home
When the time comes for you to buy a home you are going to need a mortgage to do so. So you apply for one and your bank or other financial institution makes a decision based on many factors, and debt is a big one of those factors. If you owe a lot of money on credit cards, car loans, and even student loans then a bank may refuse to give you a mortgage. If they do give you a mortgage you will end up with a higher interest rate because you are a higher risk, which means you will pay more each month for your home.
Debt Has Major Negative Impacts On Your Health
Do you know what is one of the worst things you can deal with in regards to impacting your health in a bad way? Stress is. When you are in heavy debt your stress levels are going to be higher, which can lead to both minor and major health problems. You could end up with headaches, ulcers, mental health problems, and even end up having a heart attack.
Being In Debt Can Hurt Your Marriage
When you and your partner are suffering under the burden of heavy debt it can place a huge strain on your relationship. Your lack of money will keep you from being financially secure, and it will have a major impact on your quality of life. You will probably start to argue over who is more responsible for your problems, which will lead to bigger fights. In time these fights can cause irreparable harm to your marriage causing it to fail.
Being In Debt Hurts Your Credit Score
Your credit score is one of the most important things that will factor into your financial health, and the amount of debt you have accounts for 30% of that score. The more debt you have the lower your score will be, which means that whenever you do need to finance anything else your interest rates will be higher.