Debt Is Not Cool

Author E.E. Cummings, when talking about his debts, is reported to have said, “I am living so far beyond my income that we may be said to be living apart.” Humorous as it may sound, being in debt is never cool.

Many of us are guilty of self-comforting ourselves with messages like, “A little debt won’t hurt, will it?” But it’s this kind of thinking that can lead to a debt nightmare, particularly if you’re not sure how to manage debt. While you may think it’s cool to have the latest fashions or gadgets or vehicles, remember: it is not cool to be in debt.

Credit and debt keep us fixated on the past and the future. Part of our attraction to debt is the illusion of success and emotional high from buying new things without having to part with our money. Others see our buying power and assume we’re successful individuals.

Debt may appear to be free, even feel like it is free, but the reality is that in the end, you pay a price for the debt you take on. Debt basically enables people to live a lie. An excessive reliance on credit can lead you into temptation. To put it another way, debt is borrowing from your future income to pay in the present time. Each time you borrow money, you are robbing your future self. Debt keeps you from accomplishing your financial goals and can potentially lead to financial stress, strained relationships, health problems and a lowered credit score.

On the other hand, credit’s elusive promise is that it will change your life, make you look more successful and accomplished and satisfy all your heart’s desires. The reality is far from it. To truly be successful, we need to exercise fiscal prudence; spending wisely and only when absolutely necessary, keeping a balanced budget and making strong efforts to reduce debt.

People may find themselves in one of two types of debt:

• Unavoidable debts; arising from an unexpected job loss, reduced income or disability
• Avoidable debts; including credit cards, bank loans, store cards and impulsive purchases

If your debts come from the second category, it’s important to understand ‘how’ or ‘why’ you’re going into debt and plan for it accordingly. Below are several reasons why you may be accumulating debt.

Spending more than what you earn: When you spend more than you earn, your debt can accumulate to a level that you will no longer be able to service it. While there are occasions where credit can help you make an essential or much-desired purchase, you must budget to pay off that purchase before taking on more debt.

Lack of planning: If you don’t understand how to manage your cash flow and credit obligations properly, you may make poor financial decisions that could end up costing you. There are many tips right here on the MNP Ltd. blog that can help you understand how to effectively budget.

Self-denial: Sometimes it’s hard to face how much debt you have and how much interest you’ve racked up. The idea of cutting back after enjoying a lavish, credit-sponsored lifestyle may be impossible to imagine. But your debt will not go away just by ignoring it. Instead, it will only get worse. Face up to your debt levels now or risk losing more in the future.

Understanding how to manage money can change your life. Success is an important value in our society, one associated with hard work and the ability to buy cool things. But success alone and material goods cannot bring total happiness to our lives. This can only be achieved with a positive mindset.

The urge to buy cool things is what often necessitates us to borrow. But going into debts to do so tends to make us miserable over the long haul, especially when the realization sinks in that you may not be able to pay back the debt.

Debt in a sense then, is bondage. The question is, how do you get out of it? The truth is, there are few things in life we all need. But our wants can be as numerous as our imaginations. Try applying these strategies to help you not only get out of debt, but stay there:

• Avoid the tendency to call something a need when it is really a want. It’s essential to distinguish between these two categories.
• Stop spending money you do not have. Try and force yourself to feel the pain today to have a better tomorrow. Try buying on ‘available cash’ instead of purchasing items on credit, if your budget has room for such purchases.
• Know what you owe and create a debt repayment plan. Ensure timely payments by setting up an automatic withdrawal for a scheduled payment before the due date.
• Learn to prioritize your debts. Address your highest interest rate debts first and try to eliminate your Christmas purchases as early as possible in the New Year. Use a ‘balance transfer option’ where possible. Use your tax refund, if you have one coming, to reduce your debts.
• Develop a habit of paying off all previous debts before acquiring any new debt. Practice using credit cards wisely. Try to limit yourself to a single card instead of multiple cards.

Debts cause more headache and stress than they are worth. Getting out of debt requires positive determination and a change in perspective; but it is worth it. To learn how to be ‘cool’ and successful without debt, know that help is here. Contact us at MNP Ltd. to get out of debt for good.