On Debt…

Are you in what seems to be an endless cycle of debt that you cannot crawl out of?

Does it feel like the bills keep coming and the salary never rises to match?

The first question you should be asking yourself is: “What kind of debt is it, and how is it serving me?”

If your debt is not serving you strategically, you have fallen into the consumer trap. I’m talking about credit card debt that you’ve collected over the years for purposes that you can’t even recall. I’m talking about home renovation debts or car debts that are out of your means. I’m talking about that student loan that, despite serving its purpose a long time ago, you never got around to paying. I’m talking about your habit to purchase the newest model of that gadget you love annually. If you are seeking to cultivate good luck in your life, these debts need to be snuffed out.

If your debts are strategic and allow you to invest in an asset that is within your means, or an investment portfolio that returns more to you than the interest you owe, hats off to you.

Modern society is not only comfortable with, but is rather arguably addicted to debt. We are fished by the banks as early as we walk into the school bookstore to buy our books for the term, and many of us never get out. Couple this with the phenomenon of “have not” or “lack” mentality, and you’re headed for financial doom.

I’ve been discussing this with people around me and observing their habits and subsequent complaints for a very long time. Let’s look at some examples:

Person A, let’s call her Angela, grew into the habit of spending 500 dollars on her credit card, the equivalent of her bi-weekly salary, before she received her paycheck. She would then transfer her whole salary to her credit card as soon as she recieved it. She would complain incessantly about never having any money, all while spending the next 500. Soon, the 500 became 600, 700, 800, 1000; she was spending double her salary. Before long, she had racked up 10,000 in credit card debt, did not own any assets, and had to move out of her parents house. She believes she has bad luck…

We don’t want to be Angela.

Person B, let’s call him Bill, was mindful about not collecting credit card debt. Instead, he put everything he purchased on a payment plan with 0 interest for the first year. Bill had to run to pay at least 15 stores a month for everything from his car to his fridge… to his sofa. By the end of the year, all his purchases started collecting interest. His 400 dollar couch ended up costing him 800 bucks, and this is the least of his problems. Bill believes he has bad luck…

We don’t want to be Bill.

Finally, person C, let’s call her Carol, made the move to purchase a property during a low interest period. Her property was within her means given the low interest, so Carol decided to take a secondary loan to upgrade it with some renovations. She paid her minimum payments on this total debt and was comfortable knowing it would be paid off in 30 years. 5 years into her mortgage, the interest rate skyrocketed and Carol defaulted on her payments. She is now facing repossession. Due to the phenomenon of compound interest, Carol has not put a dent in the principal amount owed, so she will lose on her investment. Carol believes she has bad luck…

We don’t want to be Carol.

Now, what’s done is done, and today we each stand with X amount of debt. If the debt is no longer strategically serving you, it’s time to get rid of it.

Line up your excuses and nullify them.

  1. “I don’t make enough money to live comfortably and pay off my debts.”
  2. “I work really hard. I deserve to have everything I want.”
  3. “Everyone else has more money than me. I just have bad luck.”
  4. “All my friends are rich. You can’t possibly expect me to reject my social duties. I’m too proud to let them know what’s really going on.”
  5. “I’m not going to tell my kids they can’t take extracurricular activities.”
  6. “Nowadays, it’s normal for a home loan to take 30 years to pay off.”
  7. “I don’t have time to cook. I have to buy precooked meals.”
  8. “I don’t have time to clean. I have to hire someone to help me.”

I think you get the picture. All of these excuses have 500 holes in them. Excuses like these will make you, and keep you poor. The banks are banking on it!

Pay your debts down as quickly as is impossible to you.

Consider the costs of inaction. Believe me, they are far worse than not having an almond milk mocha latte ever again.

To get started, my favourite resource that has helped me bust my debts and avoid incurring new ones is Dave Ramsey; you can find his show on Youtube. Watch, learn, and implement.

And remember… we design our own luck!

M.

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