Just as coins have two sides, there are opposing situations in finance – something is either considered a “liability “or an “asset.” Your finances should never be balanced; on the contrary, they should tip to a great degree to the asset side. For example, if you have a limited budget, it would be better to pay in cash for an older car rather than sign a lease on a brand new one. While there may be room to debate whether a particular financial decision is a good or a bad one, most debt can easily be categorized on one side or the other.
A Culture Of Instant Gratification
The problem with the culture today is that too many people try to leverage their debt – a balancing act that only takes one small misstep to cause financial ruin and chaos. They try to rationalize their spending often to offset an emotional need like boredom. Young people with no experience in living on their own are the most vulnerable to living this way. Student loans are treated as free money until five or ten years later when the bill comes due. They make the mistake of using every cent to fulfill dreams that should have been put on hold until sufficient income could be secured.
Limited income and the necessity to live on a shoestring budget is no one’s idea of the American dream, but nearly everyone started there. Most people want what they want NOW. The concept of instant gratification is a threat to their future and cases where entitlement is the attitude, debt is a four-letter word that should be avoided.
Time To Change Your Attitude
Attitude is the major reason that debt becomes a liability rather than an asset in many people’s lives. If you accept the premise that the only way to achieve your goals is by borrowing, you’re setting the stage for troublesome debt. A college education can be earned without student loans, with hard work and a pay-as-you-go plan. Buying a car may require that you focus on saving so that you can pay in cash, rather than taking out a loan. Home cooked meals are fun to create and save money that can be used for items many people put on a credit card.
The most vulnerable to debt problems are those who:
- Have no detailed plan for the future
- Feel entitled to what ‘everyone’ else has
- Get bored and turn to the latest fad for relief
- Need to be constantly entertained
Debt doesn’t have to be all bad. Few people inherit enough money to go through life without having to deal with debt of one kind or another – mortgage, car loan, student loans, etc. For most of us it’s simply the way of the American dream. While the term good debt may seem like an oxymoron – like being ‘alone together’ or in the midst of a ‘deafening silence’ – there are benefits to successful debt management.
When the return on investment of a particular debt is considered, the cost of borrowing may be worth it. A mortgage on a home or rental property that will increase in value, funds to create a business venture or student loans that result in a career that will land a good paying job are examples of positive reasons to borrow and will be assets down the road. Of course, terms and conditions need to be seriously considered so that the lowest rates and least penalties will apply during the time you are repaying the debt.
Don’t Let Debt Become a Liability
Avoid tipping the scale in the direction of debt as a liability by choosing to wait and working toward a goal to pay for your dreams with cash. Resale shops are sprouting up across the country and lay-away plans are being offered by major retailers – both concepts that provide what you need or want without the added burden of credit card debt. Getting back on track once you cross over the imaginary line where you’ve become a slave to your lenders is a hard, but not an impossible road to travel. In fact, it’s absolutely essential for your future no matter how difficult it may be.