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Debt is bad because with debt comes risk. Debt is risky for businesses and people. Debt, if used correctly, can be powerful tool. However, in too many cases, debt is used improperly and the consequences are unhappiness, stress, bankruptcy and divorce.

Attitudes About Debt Have Changed

I’ve already talked about how our attitudes about debt and borrowing have changed in this country (and probably the world). The parents of the baby boomers didn’t have credit cards. They didn’t have jumbo mortgages and they didn’t finance consumer electronics. In fact they tended to avoid consumer debt altogether.

Debt wasn’t something to be proud of or even discussed in polite company. Attitudes have changed and debt no longer has a stigma associated with it. Debt is considered a normal aspect of modern life. We are supposed to have a mortgage, two car payments, a few credit cards, some financed furniture and appliances and a big screen plasma/LCD TV on credit from Best Buy.

Times have definitely changed.

Risks

Because debt has become such an ingrained part of our culture, few of us realize just how risky it can be. Some of the risks are obvious, some are more subtle.

Losing Your Job

It looks like we’re going through another cycle in the economy. Large and small companies are laying off workers. Are you prepared to survive losing your job? It’s a lot harder if you have a mountain of debt. Your savings won’t last long if your mortgage, car payment and other debt are out of control.

You Can’t Save for the Future

How can you save for tomorrow if you’re spending for today? Your payments are going to eat up all your income. What’s left over is much harder to save. If it’s a choice between food and clothing versus savings, guess which one loses. You need to eat. It’s hard to save when you don’t have any money left over at the end of the month.

People tend to put of savings for another day. I’ll save for retirement when I have more money. Guess what, you’ll never have more money if you keep spending it all. It’s simple math.

You Can’t Follow Your Dreams

Starting a business is the American dream. So many want to start a business but most don’t. Why not? Fear, uncertainty and momentum are common causes. However, there are practical considerations also. How are you going to pay the mortgage? How are you going to make the payment on that new minivan? What about that credit card bill?

Debt is going to hold you back. Let’s do some simple math. Add up all your debt payments. These are all your payments that go towards the mortgage, automobiles, furniture, appliances, credit cards, etc. These are your fixed payments. You can’t cut back on these. Whereas you can cut back on eating out, new clothing, entertainment and other expenses, you can’t do that with debt.

Now imagine those fixed payments were gone. Would it change your life? What would you do with that extra money every month? Could/would you start a business?

This is a question I’m considering right now. I’m debt free. I have several ideas for a business and I’m a partner in a semi-profitable business right now. In the past, when I talked about starting a business, my wife asked me how we’re going to pay the bills. That’s when I had student loan payments and a house payment. Now I don’t have any of that. I often tell my wife I could work at a fast food restaurant and still bay the bills (I think I'm pretty funny, my wife does not).

Being debt free is very liberating.

Your Creditors Own Your Stuff

While your bank holds a mortgage on your house, they control it. If you stop making payments they can foreclose, no matter if you owe $500,000 or $5,000 dollars. They can foreclose and force a sale of your home. Stop making your car payments and see how long your car stays in your driveway. The repo man will be by to see you rather quickly.

I don’t know about you, but I like being in charge of my destiny. I’m sure you’ve read or watched the stories of people who “never thought it could happen to them.” The ones that lost everything because they got sick or lost their job.

I personally know several people who’ve have either lost their jobs or are close to it because of the latest “economic slowdown.” No job is safe. You could get fired tomorrow. Your company could get bought. Your job could go oversees. No job is 100% secure.

Mental Health

I sleep pretty well at night. Without debt, I’ve seriously reduced the number of things I have to think about or worry about.

Money problems can strain a marriage. This is especially true when there just isn’t enough of it to go around. Think about couples you know well. What do they fight about? Is money one of the main topics. Directly or indirectly money can be a source of marital difficulty.

Why stress about money? I personally don’t want my processions to cause me stress. You know the old saying, do you own your processions or do they own you?

What Do You Think?

Am I making too big a deal about debt? Is the new attitude about debt just fine or are we in trouble. Leave a comment below and let us know.

Tags    Credit Cards    Debt    Mortgage    mortgages    Pay Of Your Mortgage

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