It often starts with a single purchase that puts your credit card balance out of reach. Then begins the rationalization that a little debt won’t hurt – potentially, the first step down a slippery slope that ends up in a big pile of debt. The emotional
lift that comes from buying stuff, even when you can’t afford the payment, may feel like getting something for nothing. But the more debt
that you create and the more interest that accumulates, the better chance you have of ending up in serious debt trouble. The financial implications are obvious, but debt can hurt more than just your wallet or checkbook.
Borrowing from the Future
All forms of credit, including mortgages, credit cards and auto loans, allow you to borrow from the future. But
by the time most of these things are paid off, they’ve depreciated in value or have lost their appeal. Add in interest and these items end up costing way more than the purchase price. By keeping debt to a minimum, you’ll be able to put money away for retirement, college or investments that will payoff for the rest of your life.
Goals Put on Hold
Debt can keep you from accomplishing your goals for the future. The more debt that you accumulate, the higher your monthly payments and the less you’ll have to spend on everything else. For example, rack up $2,000 in credit card debt and pay just the minimum, and it’ll end up costing a whopping $3,400 at 11%. The $1,400 that went torwards credit card interest could have been invested or used to accomplish other objectives.
One of the dreams of most Americans is to buy a home, but that hope can easily be foiled by too much debt. To qualify for a mortgage a clean credit history is vital. Credit card, auto, and student loan debt are considered when a mortgage application is reviewed. If there’s a concern over how debt is handled – too much, late payments, etc. – the chance of being approved for a home mortgage is less likely.
Money Woes Create Stress
American life is fraught with issues that bring on stress and overwhelming debt is one that is hard to escape. Struggling to make ends meet, knowing that you’re not making a dent in the debt you owe, can lead to sleepless nights and even worse, serious health problems. Things that you bought months ago (and are still paying for now) are no consolation when you need money for an emergency and you have no cash or available credit. In addition, debt can lead to pressures about the household budget and be a burden on your relationships.
Bottom Line Defense
Debt hurts all facets of your personal life and may affect your long-term goals. While credit is a necessary component of a healthy credit history, it’s not the amount but responsible management that is important.
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