I have spent this week talking about different kinds of debt, how they affect your credit score, and how to build credit while avoiding debt.
But why am I harping on debt so much?
Most people are fine with having a car loan to have a nice, reliable car. And even I took on a mortgage to escape a negligent/abusive landlord.
The Best Way to See Debt
Debt is a black hole for money. Seriously.
First, itâs a way for a company to drain every single cent they can from you, especially if the debt accrues interest. You are paying much more for something than its worth.
And there are several ways they can trick you. Some places will charge interest AND a finance fee, money they charge for extending the credit line.
Then you need to think about how often your interest is compounded. Some may compound interest monthly like a credit card. Sometimes, it is compounded DAILY. This means that you owe more money EVERY DAY.
Second, itâs making you an indentured servant. Companies are taking advantage of your desire to have it right now to ultimately control you. If you have much debt, you are locked into your job. Changing jobs or losing your job ultimately means losing your entire way of life.
Debt racks up so fast, and people often end up in so much debt that even the wealthy are living paycheck to paycheck!
Why? I bet itâs because of the Denomination Effect. We donât realize how quickly small expenditures add up to big amounts. When deciding to take on each debt, we think about it like this: â$250 a month? Thatâs so cheap! I can afford that!â
But if you end up having a boat, 2 cars, a house payment, a computer, etc all for $250 each and your actually paying out $1000 each month for debt.
Your Sell Your Life for Money
Employment is trading your time and effort for money.
When you work, you are literally trading your life for money. You canât do anything else with that time, and if you are underperforming, then you get fired.
If you get federal minimum wage, $7.25 an hour, then it takes you Â½ an hour to buy one gallon of milk at $2.99 (my local price).
Do you want to trade 30 minutes for a gallon of milk?
Doesnât sound like a fair trade to me! Iâd much rather drive an older car, save up to pay for a new phone or computer when I need them than to toil away for someone else for a starvation wage.
As our family has grown, we have realized that we are much happier with fewer things than with less time.
Our kids donât care how many gigs their tablets have (yet), and they are satisfied with the cheapest Amazon Kindle that I scored for $50. And they all share one, too.
Why? Because they would rather have me at home with them watching baby robins hatch or playing in the mud.
Things havenât made us happier as a family. Time together has.
Not only do I get to spend my time where I want to be, but I get the opportunity to teach my kids by example important character traits like saving money, discerning the difference between wants and needs, a hard work ethic, and to value relationships over things.
Debt is not a speed bump on the road of a happy life; it is a brick wall. It holds you back. If you want money for what matters, you canât waste it on debt.
Hi! I am Ali, a homeschool mom who is passionate about science, managing my money and time well. Unfortunately, with an army of tiny faces, I am always still kind of a mess.
I was tired of not having a judgement free place to talk about money troubles with other moms. So I created one!
Click on the picture above to join my Facebook Group, Money Savvy Mommas.