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Debt = Financial Cancer, Part One

 

Debt can be deadly to your finances!  It’s so dangerous to your financial health, that I believe it’s not being too dramatic to say debt is like financial cancer.  However, the banking industry has done such a fantastic job marketing their product – debt – to the American people that we can scarcely imagine not having a car without a car payment, a house without a house payment, or a wallet without a credit card.  Let’s look at the ways that debt can eat away at your income and nest egg and cause ruin to your financial health.

·        Types of Debt – From Bad to Worse.  The least dangerous type of debt is mortgage debt.  Notice that I did not say it was safe debt!  With the recent housing market crash, it’s obvious that buying more house than we can afford with little or no down payment is a recipe for disaster.  Your best bet is to rent while saving up to buy a house with cash.  However, most Americans are not patient enough to do this.  The next best way is to put a sizable down payment on a house and get a 15-year mortgage.  Not only will you get out of debt sooner, but you’ll pay WAY less interest over the life of your loan.

            Many of us have fallen prey to the myth that “you’ll always have a car payment.”  The average car payment in the US is about $475 per month.  That is $5,700 per year!  The sad part of it is that many people owe more on their cars than what they are worth.  The vehicle that I currently drive, I paid for with cash over seven years ago.  I continued to drive my previous car for 2 years after it was paid for and saved the money I would have paid in car payments.  Then I took my cash to the car dealership and negotiated a great deal – with no payments!  I currently have enough money in my savings to purchase a newer car, so again I am holding out for a great deal. 

            The most dangerous type of debt is credit card debt.  Credit card debt is unsecured, meaning there is no tangible asset to back it up unlike a mortgage or car payment.  Why is credit card debt so destructive to your financial health?  It is SO easy to charge up purchases that you really can’t afford.  You can get trapped in the cycle of using your income to pay your credit card, then not having enough cash to pay for groceries and gas so you charge the card right back up again.  Did you know that on average people spend 12-18% more when using credit cards than cash?

·        Debt payments eat away at your income.  Your income is your most valuable wealth-building tool.  But if you have a house payment, a car payment, and a handful of credit cards, those payments are going to take a big bite out of your income.  Most of your paycheck is spoken for every month before it even hits the bank.  This leaves very little money left over for saving, giving, or family fun.  Just imagine what you could do with your money if you didn’t have any payments! 

·        Being in debt causes marital stress, which can lead to divorce.  Debt puts a financial strain on any marriage.  In fact, the leading cause of divorce is money problems.  Staying in denial about the state of your finances only makes it worse.  However, couples that get on the same page about getting out of debt and living within their means can beat the odds of financial ruin and divorce. 

Stay tuned for “Debt = Financial Cancer, Part Two” coming tomorrow! 

Article by Christine Luken Originally Appeared in  Healthy Times Magazine, January 2013

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Christine Luken
 

Click Here to Leave a Comment Below 26 comments
Robin (Masshole Mommy) - February 11, 2014

My husband and I paid off our credit cards last year and closed the accounts – and never looked back. Credit cards are a dangerous thing.

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Wendy @ ABCs and Garden Peas - February 11, 2014

Ugh. Debt. I was in a relationship once where my partner lied about his debt, and yes…it sure can be a relationship killer!

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Allyson - February 11, 2014

This is definitely a helpful list. Since I opened a credit card at age 18 I have never held a balance. I am terrified of having credit cards debt, so I simply don’t spend what I can’t pay off. I use my credit card for everything because I get cash back, and I know I am always paying it back.

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brett - February 11, 2014

debt is horrible. i had a LOT of debt when i met my husband. it took years of hard work and lots of extra side jobs but it’s gone. now our only debt is our mortgage.

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Milena - February 11, 2014

We finally have paid off all of debt. Yes, it is stressful to be under that pressure. Great list.

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Debbie Denny - February 11, 2014

Great advice, You are so right about credit cards!

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Carlee C - February 11, 2014

My grandfather was so adamant about my parents and their grandchildren staying out of debt. He actually took me to the bank when I was 18 and helped me learn about loans and taking care of credit.

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Jennifer B - February 11, 2014

We don’t have any credit cards, and while sometimes I wish we had just one to have around for emergencies, I am actually glad that we don’t! It forces us to save for what we want and save up for emergencies too.

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Helene Cohen Bludman - February 11, 2014

Credit card debt is the worst. I have encouraged my kids to stay away from them.

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Danielle @ We Have It All - February 11, 2014

Debt is not good. I was in debt about 10 years ago and when I paid that last card off – I never looked back. I’ll never have credit cards again. EVER.

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Sandra - February 11, 2014

I feel like we are much happier not having any debt. And it is so tempting but it is also rewarding when you get something and it is all yours!!!

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Pam - February 11, 2014

Debt is definitely dangerous. I have been trying to teach my daughter and her fiance financial lessons before they get married and I have emphasized how bad debt is.

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Debbie L. - February 11, 2014

I believe being debt free is so important. Living within your means and paying as you go.

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lisa jones - February 11, 2014

I Use Credit Cards All Year Long Then I Get My Taxes & Pay Them Off Then I Start All Over Again!! LOL!

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Aly Mashrah - February 11, 2014

My dad has a large sum of debt and the condition of his health has definitely suffered.

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Chrishelle - February 11, 2014

Debt sucks. We do not have credit cards or a car payment, but it stinks having a mortgage. We are working really hard to get rid of that too. We do not live elaborate, but my kids do not go without and we are all happy.

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Janeane Davis - February 11, 2014

It was interesting to read your perspective on debt and how to handle it.

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Lisa - February 11, 2014

We financed our cars but paid them off and still drive them even though they are 8 and 5 years old. We also pay off our credit card every single month.

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Liz @ A Nut in a Nutshell - February 12, 2014

We racked up big debt and it took four years of hard work but we paid it off. Seven years debt-free and counting. I’m going to buy a car with cash as well.

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Danielle - February 12, 2014

Phew! I feel so blessed to have cleared myself of any debt over a decade ago! No credit cards for this lady 😉

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Elizabeth - February 12, 2014

We just got out credit card debt under control and paid off– woo hoo!!

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Amanda Love - February 12, 2014

Great post! I had my share of credit card debt when I was in college. Finally got it paid off and now I have just one card. My AMEX that I use only in emergencies and pay off the full balance right away or as soon as I can. I like using cash/debit.

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Mama to 5 Blessings - February 12, 2014

great tips, I am so glad my husband and I are frugal. Great pointers. Thank you!

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