Let’s face it, we are a society that is buried in debt. The average US household has $15,191 in credit card debt and also owes $33,607 on outstanding student loans. Add in auto loans and other types of financing and it is easy to see the typical American family is burdened by over $70,000 of debt! And, of course, that figure is ignoring any mortgage debt.
We have become a debtor nation. That is probably not going to change anytime soon. Our culture, society, and even economy are driven by consumption. When consumption is a priority, people will continue to incur debt by spending more than they have.
Of course, incurring some types of debt can be beneficial or be used to leverage yourself into a better position. For example, taking out a reasonable amount of student loans to further your education can obviously pay off in a large way.
Here is the deal – no matter how or why you incurred the debt, in the end it is still debt! You have still got to make payments. You are still going to be charged interest and at possibly very high rates depending on the type of debt.
Digging your way out of debt can seem like an overwhelming task especially if you owe massive amounts. It is easy to keep putting the problem off or to simply ignore it by pretending it is not there. Continuing to accumulate debt will eventually catch up to you. If you are borrowing money, you are also living on borrowed time. How do I know? Well, my wife and I once had debt of over $140k and we paid it off in less than 3 years!
The Secret to Getting Out of Debt
I’m going to share with you the secret to how we did it – the secret to getting out of debt. The secret is:
Hate your debt with a passion. Despise it. Realize how it can and will destroy your life and your future. Dwell on how insidious the debt is. Internalize how it will be robbing you of ever reaching financial security or independence. Make the debt your prime enemy.
Now, that may seem cheesy or ridiculous. I guarantee you it is not. If you absolutely, vehemently loathe your debt you will find yourself willing to do what it takes – the sacrifices and the hard work – to eradicate it.
Reasons Why You Need to Hate Your Debt
If you currently find yourself merely feeling lackadaisical about your debt, let me give you a few reasons that should both scare and incite you:
- Your Future is Screwed – You are destroying your future if you continue to carry your debt load going forward. Every day you fail to take action is wasted. The quality of your life will be severely compromised by the debt. Debt is a disease. It eats away at your financial health. Are you going to fight this disease or let it handcuff your future into a miserable existence?
- Limited Financial Flexibility -
- Credit: High debt balances will not, in and of itself, necessarily lower your credit score as long as you remain current on your payments. However, lots of debt spread out across numerous accounts increases your exposure to missed payments whether it be by absent minded mistakes or sudden inability to pay. If that happens, your credit score will suffer.
- Debt-to-income ratio: The more debt you have, the worse your debt-to-income ratio will be. This ratio simply measures how much you earn compared to how much debt you have. In addition to your credit score, this ratio is used to evaluate your financial health. A skewed ratio indicates poor financial health which could cause repercussions.
- Ability to deal with unexpected hardships: Life throws curve balls to everyone. If you are drowning in loans and extreme debt, you lose your ability to handle these unplanned for challenges. That is a rough way to go about life – not being able to quickly adapt as needed.
- Spending Way More than Originally Thought – Getting a good deal or taking advantage of a sale is useless if you charge it and then let the interest build up. In the end, you’ll pay way more than the original price. Likewise, your education ends up being more costly the longer the loans are outstanding. You could literally end up paying thousands upon thousands of additional dollars over the long run. That is your money. Money being thrown away.
- Time Value of Money – If you are making minimum payments or have loans in deferral, the power of compound interest is working against you. That is a colossal mistake. Capitalized interest means the interest accrued but not paid gets added to the principal portion of your loan. Thus, in essence, you end up paying interest on the interest! You are destined to be a pauper the rest of your life if you keep letting that happen.
- Ruins Your Ability to Invest – Saving and investing sure is a difficult task when large portions of your funds are allotted for debt repayment. Most likely, you won’t be able to save or invest for the future until after you have conquered your ugly debt. You need to get that compound interest working in your favor – to have your money make more money.
- Psychological Health - Having a debt burden hanging over your head is stressful. It’s depressing. It can wreak havoc on your mental and emotional well-being. The feeling of liberation you get when finally paying off the last of your debt is amazing. Trust me.
- It is Embarrassing! – Yes, lots of others have significant debt too. It is still embarrassing though. The longer you carry that debt, the more it looks like you are incompetent at managing your finances. Either that or you come off as lazy and unmotivated to improve your lot.
So there you have it. What are you waiting for? Are you going to keep being a slave to debt? Because that is what you are right now. Get angry. Get mad. Froth at the mouth. Hate your debt with all your might and fight to unshackle yourself from the constraints.
Once you free yourself from the bonds of debt, then you can focus on how to get rich.
How do you feel about your debt? Is it something that just bothers you and nothing more? Do you think by developing a pure hatred for that debt you’d find yourself compelled to more urgent action to take charge of the situation? What makes you the angriest about your debt? Can you think of any more reasons to hate debt?
*Average Household debt figures are sourced from nerdwallet.
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