The thing about debt is that our financial systems are setup to make it as easy as possible to spend money you don’t have. Your mailbox is littered with credit applications, and if you sign up at a store they give 15% and you are approved in about 3 minutes. At a car dealership all you have to do is sign a few papers. Even a mortgage is easy, although you have to sign a lot more papers. Thousands of dollars can transfer hands in a few minutes, and you are usually left with a depreciating asset and the obligation to pay back the money they gave plus whatever fees and interest they decide to charge you.
The ironic thing is that we often think we are buying stuff that we think will make our lives easier and more free, when in reality we just gave control of a portion of our earnings to someone else.The fact that you gave someone else control of some of your money means that they have a say in what job you work, how much you will save, and how much you will spend.
Now you can’t quit your higher paying dead end job that you hate to take a lower paying job doing exactly what you dreamed about all your life. Can you save $500 a month for some goal that you have always dreamed off? There is a good chance that Wells Fargo, Chase, Amex, or Honda will let you know that there are a lot of things that you can’t do now.
For those that trying to get out of debt or those that think I am overlooking the benefits of debt, do this calculation. Total up your monthly debt payments: mortgage, student loans, car payments, credit cards, everything. Now divide that total by the amount you take home after taxes and you will see what percentage off your own money you aren’t in control of.
Scary, depressing? It was to me. After getting rid of $70,000 of debt, we just have a small mortgage left. It represents about 10% of our take home pay, which means I am in total control of 90% my money. The encouraging part is that you can do something about it! It might take a while, but it is worth it.