Continuing a series I wrote in Nov. of 2014. Again, why didn’t I listen?
“Wealth consists not in having great possessions, but in having few wants.”Epictetus
Debt will destroy you and your financial well-being. Debt is a behavior, debt is a choice. I want to emphasis that debt is a behavior and a choice because most people will rationalize their financial potential away: I need a place to live, so I need a home; I need an education, so I need a student loan; I need to get to work, so I need a car; I need an emergency back up, so I need a credit card. What you are really saying is I want something now and I am willing to sacrifice my future in order to get it.
There are solutions to every debt problem mentioned above. Need a place to live? Rent. Need an education? Apply for grants and scholarships, work to pay for it. Need a vehicle? Take transit or save money to buy a running vehicle with cash. Need an emergency fund? Save to have one so that you do not need to worry about a credit card.
The worst type of debt you can get into is consumer debt. I really want that TV, but can’t afford it. The stores have the solution for you. Pay for it on credit so you can have it now and all you have to do is pay a little bit of interest. Sounds great. And then you need a sofa and a table and on and on. All the while you are not only paying more for the products by financing them, you are not saving the money and earning interest for yourself.
We have become a society of consumers and not producers. A house built on such a foundation will surely fall and most of our houses are falling. We work and spend and work and spend and work and spend, all the while hoping something changes, but it never does. If you do not save and live within your means you will always work and spend.
Why do we do this? Because we do not like how it feels to see everyone else with stuff and we have nothing. We want to live in comfort and ease, but we forget that we have to earn it. We choose to in-debt ourselves to feel good now and push the pain until later. This behavior has to change in us if we are to become wealthy.
Lesson #1 pay yourself 10-15% of your income every time you earn money
Lesson #2 Avoid debt like the plague.
Next Lesson: What to do if you are already in debt.