In my opinion based on first hand experience the majority of people who have large debts have sleep walked into them. I'm not saying it's their fault but what I am saying is society is set up in such a way that it's hard not to incur large debts. Some people might argue that it is the individual's responsibility to look after their own finances and I would agree but from a young age in the society we now live in we are all primed and conditioned to take on unnecessary consumer debt. Now don't think I'm saying all this to be controversial but the simple fact of the matter is that most debt is by stealth. Debt by stealth. Let me explain.
As we make our way through life there are certain expenses we need to incur to help us on our way and there are other smaller discretionary expenses that we don't need to but feel obliged to incur. Let's first take a look at the bigger debts we face in our lives.
Student Loans:
To get you through college you probably had to take out student loans. The loans needed repaying and as soon as you left college the pressure was on to find a nice stable job so that the banks could stake their rightful claim on your income. I suppose at the time it made sense - a trade off between getting a good education and good job versus taking out a small student loan. If only it was that simple - yeah sure you needed the money at the time and college is very expensive but the problem is it sets the tone for the rest of your life. The banks hope to get you into the borrowing habit at a young age so they have you as customers for life. Pretty smart eh?
Mortgage Debt:
Mortgage debt can be justified by the need for somewhere to live right? I mean that's a no brainer. Ok but think about it for a minute - the global property market has rocketed for the last 5 years. You bought because everyone else was buying right? You had a family to support and the banks were literally throwing money at you. Everyone else was doing it right? You were secure in the knowledge that 'we were all in it together'. You took the plunge and things went your way..for a while. The value of your house grew in double digits for a couple of years and you thought that you were on easy street. What the heck? You thought, lets just drawn down some equity and go on a nice holiday.
Consumer Debt:
So now you have the house - well wooden crates for tables just won't cut it. So off we go to the furniture store to rack up some more debt. The guy in the store seem to be offering a great deal with his low monthly repayment options on that sofa. The 28 inch screen TV that you had looks a bit dated so you got one of the new 40 inch plasma screens. On a lease plan of course. More debt! So far the debts look fairly easy to spot. They don't seem to have much stealth but let's continue.
The debt bite:
The house, the TV, the furniture - all funded with debt. Nothing new here you say. Now we are in a situation that most people with this lifestyle find themselves. The monthly payments start to take a big bite out of your monthly take home pay. This added to the college loans you are still paying off leaves you with very little to spend on the 'necessities'. Here are some of the so called necessities of life - that new outfit, the morning decaffe latte, the nice gourmet sandwiches for lunch, the expensive two week holiday, the latest ipod, the trendy trainers and the list goes on. If you sat down and analysed the outgoings on these 'necessities' it would not be hard to see how they all add up to a whole pile of debt because the chances are that most of the items on the list (and a whole lot of other items) were paid for using your credit cards.
Credit cards can be very useful if used properly but that's the focus of another article.
Looking at your expenditure on a single day basis the expenses don't seem to add up to much. True, on a daily basis these expenses look small and manageable but taken over the period of say a month then they don't look so small and manageable. What is even more telling is that these expenses are not taking into consideration the loan repayments. So if you like you have the long term debt - i.e. debt that has a repayment schedule that is greater than one year for example mortgage, car loans, college loans etc. then these little 'necessities' that add to your short term debt situation. By being a drain on your daily finances these little things all add up to take a big chunk out of your monthly take home pay.
If you compound this spending behaviour over a year then the real impact starts to show. You end up either hitting your overdraft every month or adding any excess expenses on to your credit cards. Take this behaviour over a number of years and you have a problem situation. The problem is that unless there is a shift in behaviour then there is serious trouble ahead.
As you are probably beginning to see Debt by stealth is an ever present threat. You turn on your 40 inch plasma screen TV and you see the adverts bombarding you with information and trying to seduce you into buying. On your way to work listening to the radio or checking out the billboard advertisements, same thing again they all want a piece of you or more accurately they all want a piece of your money. Everything and everywhere there are debt threats. Western society is built on consumer spending, it's the keystone of capitalism. Spend or die. But wait a minute, who says that you have to overspend? Where is it written that we have to keep up with the Jonses?
Keeping up with the Jones.
Oh no not that tired and hackneyed phrase. I'm sick of hearing that - you say. Well sure it is a tired phrase that people seem to throw about but it does hold a lot of truth. Instead of the Jones if we used the word peers or friends then I think you would appreciate the sentiment in the phrase. Too often we find ourselves forced into a race to keep up in monetary terms with our friends, neighbours and relatives. It gets to the stage that we are running just to stand still. The neighbours have the latest car - we feel obliged to match them. Our friends go away on a two week vacation to the Far East. We have to go one better. Ultimately we end up in a competition that we just cannot win. We get stressed from the constant need to keep up, the need to maintain our social standing by spending.
Sure its nice to have nice things but where is the glory in having nice things yet being kept awake half the night worrying about how your going to make next months car payments? So what to do?
Wake up
As I said at the start of this article, it is my opinion that the majority of people sleep walk into debt. Then one day they realise that the money they are making is no longer enough to cover the bills. What usually happens then is denial. It can't be that bad. If I ignore it, it will go away. And so the spiral continues, downwards, until they are faced with foreclosure and bankruptcy.
There is another way. It doesn't matter how bad your situation may seem, no matter how little income you currently have, no matter how many creditors are calling. There is another way out.
You want to solve your debt problems? Then WAKE UP! I'm serious its time that you WAKE UP and took a long hard look at your debt situation. No one else is going to help you but YOU! Since this is the case then you need to take control of your finances and reign in your spending, look to pay off your loans early and maybe even consolidate your debt. There are numerous strategies to eliminating debt but you have to first realise the hard cold facts about your current debt situation. Its up to you - you are your only hope. All that the likes of this website can do is to provide you with information, tools and guidance but it is up to you as you go about your daily business to make the small and eventually the big changes to your spending and saving habits.
So saddle up for the ride. No its not going to be easy and yes it will take time but if you are will to change and are committed to the fight and are willing to learn and work hard then there is no reason why you will not be successful!! Go on I dare you.
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