There is a lot of talk nowadays about frugality and paying off debt, but why is living with debt so bad?  What harm is there in using a credit card to get what we want?  After all, we work hard.  Don’t we deserve some luxuries?  Why wait to get things when interest rates are so low?

Well, I lived with debt for several years and now I’ve been debt-free except for my mortgage for a little over a year.  So, I know the differences firsthand and I can say that living with debt BITES!

The top ten reasons living with debt should not be an option

Personally, I’ve ruled out using debt as an option.  I’ll pay cash or do without!  Why do I feel so strongly about this?  Well, here are my top ten reasons.

10.  You might lose everything

When you borrow money as a way of life, you run the risk of losing it all.  As we’ve recently seen, people sometimes lose their jobs unexpectedly and they don’t always find another one for months.  Falling behind on your payments often leads to foreclosures, repossessions and lawsuits.  It can even snowball into bankruptcy.  Why take the chance?  Why not just be happy with what you can afford?

9.  The worry will keep you up at night

People that are living beyond their means often suffer from sleepless nights worrying about how they are going to pay for all they’ve bought.  Is it worth it?!?  What in the world is worth dealing with insomnia, ulcers and overwhelming stress?  Getting behind will result in your debts being turned over to collectors which means things will only get worse.  People often become consumed with worry about how they’ll make ends meet.  Not me!  I sleep like a baby.  Being debt-free is a lot less worrisome.

8.  Debt leads to a lower standard of living

Being in debt robs you of your quality of life.  It is draining managing all the debt and working yourself to death trying to pay for it all.  Yes, you may appear on the outside to be living the good life, but not on the inside where it really counts.  How can you even enjoy what you have when you are juggling all those bills?  The freedom I feel from being almost completely debt-free is to me a much better way to live!

7.  It is a continual drain on your finances

Debt robs you of your financial strength.  It leaves you a monetary weakling.  Why?  For a number of reasons.  You pay way more for everything you buy because on top of the purchase price, you are also paying interest, late fees and service charges.  It is like having a leak in your checking account that you can’t get fixed.  Dribble, dribble, dribble!  That’s the sound of your money going down the drain.  I’ve fixed my leaky pipes and it is nice to have my money working for me again!

6.  Debt steals your sense of security and peace of mind

I don’t know exactly what it is about being in debt that is so unsettling, but it is.  I think this is especially true for women.  Many just don’t seem to feel as safe when debt is on the books.  Maybe it is because those living beyond their means don’t have any leverage financially.  They’re broke and broke people can’t buy their way out of a wet paper bag!  Having money in the bank makes everyone in the family feel a little more secure at night and I like that!

5.  Causes one to compromise their moral beliefs

People juggling debt often find themselves in tight places where they wind up compromising their values.  They have to lie to a lender to buy a few days.  They are tempted to do things that are unethical or just dumb to get the money they need to pay the bills.  Of course, for many, this erodes their self-confidence and makes them feel like crap.  Why put yourself in this position?

4.  Robs your children’s future

When you are living in debt, you typically aren’t saving for college or accumulating any wealth to pass on to your kids.  In addition, you are teaching them very poor money habits.  Is this what you really want?  Every time we make another purchase on a credit card, it is like stealing from your child’s future!  That is way too high of a price for me to pay.

3.  Holds you back from a life of meaning

When you are buried in debt, you can’t help others.  Most significance in life comes from being generous.  Generosity flows from abundance.  Living with debt produces a sense of scarcity.  It makes us want to hold on to everything we have with an iron fist.  Paying off debt has helped my family create margin in our finances and gives us the freedom to live a life of meaning!

2.  Prevents your money from working for you

When you borrow, your money is earning interest for others.  It is working for them.  In fact, you are no longer working for yourself at all.  You are working for those you owe because the majority of what you earn goes directly to them.  Imagine someone out there is prospering from all your hard work.  I don’t like that vision!  I want me and my family to be the ones that benefit from my earnings. 

1.  Makes you a slave

Freedom is about having options.  It is about choosing where to live and work and play.  When you have debt, your options are very limited.  You can’t change jobs because you need the pay even though the work is crappy.  You can’t buy a better house in a better area with better schools because you don’t have the money.  You can’t do the things you’d really like to do because if you did you might not be able to make ends meet.  See the rub?  This is the number one reason that I like being debt-FREE!

My top ten reasons to avoid living with debt

It truly has been a relief to pay off a bunch of our debt!  I’d choose being debt-free any day.  My wife and I have struggled with all of the above at one point or another in our lives and we’ve witnessed it in the lives of our neighbors and friends.  Living in debt is just not worth it!  If you are convinced and want to get out of debt, you will find several articles on this site that will help.

Can you relate to any of these reasons?  Leave a comment and let me know how living in debt has affected your life.

Photo by spaceodissey

Most of us have some bad money habits that continued could leave us eating ALPO for dinner!  If not literally, then certainly figuratively. 

Dogs might love ALPO and we might survive eating it, but it won’t be pleasant.  Shape up or you could wind up broke and desperate!

Check out this list to see if you have any bad money habits that you need to break!

1.  Struggling to keep up with the Joneses

Comparing yourself to your neighbor is a very common bad habit and trying to keep up with their lifestyle is a trap that will suck your finances dry.  Be your own person and decide for yourself what makes you happy!

2.  Shopping for groceries on an empty stomach

A big chunk of our income goes toward groceries.  When you are hungry, everything in the store looks appetizing.  Be sure to eat something just before you go grocery shopping this will help cut back on the food bill and possibly your waistline more than you can imagine.

3.  Leaving the lights on 24×7

Dads across the country ask, “Are we paying the electric company’s Christmas bonus this year?!?”  Turn off the lights when they aren’t in use.  It will reduce your power bill and it is good for the environment!

4.  Buying every book you read

I check out most of the books I read from the library.  This not only saves me money, but it also eliminates the need to store all those books.  After all, how many do you actually read more than once?

5.  Failing to consider TCO when making a purchase

TCO stands for “Total Cost of Ownership”.  Many items require us to pay upkeep, storage and usage fees.  Pools, boats, RVs, hot tubs and other luxuries often fall into this category.

6.  Saving too little

Planning for the future is important.  However, many of us catch the “I gotta have it now” attitude.  We then come up short when buying a home, paying for college or retiring.  Saving too little is a bad habit for many people!

7.  Renting or leasing everything long-term

When you rent or lease everything, you don’t build any equity.  Your money just disappears, never to be seen again.  Instead, use your money wisely to buy assets that retain value.  A home is a good example and now is a great time to buy!

8.  Following the crowd when investing in the stock market

Many people tend to get caught up in the hype about the stock market.  When market news is good, they buy.  When market news is bad, they sell.  Generally, this leads to buying high and selling low.  Not a good strategy!

9.  Buying stock in a single company on a hot tip

How many of you have lost money on this one?  I know I have.  Doing this habitually will cost you a lot of money.  A long-term, diversified portfolio is a much better strategy!

10.  Making a daily weekly visit to the mall

You may not buy something every time you visit the mall, but occasional purchases still add up.  Stay away from the places that lead you to spend more than you should.  Stop the catalogs and mall visits and you will save money!

11.  Owning more shoes than you could wear in a month

Comfortable footwear is a must, but how many pairs do you really need?  Many of us have a different pair of shoes for every possible occasion.

12.  Eating out too often

This has got to be my Achilles heel when it comes to finances.  I love eating out!  Of course, restaurants are expensive and if you go out all the time especially to fancy places, then you are throwing money down the drain.

13.  Buying a new car every couple of years

New cars depreciate 20-30% the first two years of ownership!  Why take this kind of a financial hit?  Buy a good vehicle that is two years old and keep it until it wears out.  Trading cars all the time is definitely a bad money habit.

14.  Using payday loans to make ends meet

Payday loans are notoriously bad.  The interest rate can easily be 200-400% APR!  You can quickly get yourself in a payday loan sinkhole that is practically impossible to escape.  Don’t start this habit if you haven’t already!

15.  Smoking

In 2009, the average cost of a pack of cigarettes rose to nearly $9.00!  An ex-pack-a-day-smoker could invest this money at 8% interest and have about $50,000 in 10 years or $160,000 in 20 years.

16.  Drinking a latte every morning

It is easy to get down on smokers, but what about you?  Do you stop and have a latte every morning on your way to work?  Saving just $4 per day could net you over $20,000 in 10 years!  Habits can cost you more than you think!

17.  Thinking 90 days really is the same as cash

Retailers wouldn’t offer this so often if they didn’t make money doing it.  If you are late even one day paying off this charge, then you will likely owe back interest on the full amount!  The perils of 90-days same as cash plans aren’t worth it!

18.  Charging everything to your credit card

Some find it more convenient to use a credit card for all their purchases.  Well, with interest and late fees you generally wind up paying more by using plastic over cash.  In addition, it is psychologically easier to whip out a card to buy things than it is to use hard-earned cash!

19.  Borrowing against your 401k

There are a number of reasons that borrowing from your 401k is a bad idea.  Mainly, you are robbing your future to pay for your present circumstances.  This will leave you poor!  Doing this repeatedly is a terrible habit that will come back to haunt you.

20.  Cranking the heat and air at your residence

We all like being comfortable, but it is more economical to be very conservative when setting the thermostat.  You can do all kinds of things to stay cool this summer besides just sitting in the A/C.  Be creative and save yourself some dough!

21.  Playing the lottery

In my humble opinion, the lottery is just a voluntary tax on the poor, but I won’t go there.  The odds of winning are so low that this is like throwing money in the trash.  Invest this money wisely and you might truly have a fortune some day!

22.  Paying too much

There are all kinds of ways and reasons that we pay too much for stuff.  Sometimes it’s because we want the latest and greatest or because we “need” a designer label.  Never pay retail and always look for a bargain.  This habit will save you tons over a lifetime!

23.  Being late with payments

Some of us are just never on time for anything.  However, paying your bills late is not a luxury you can afford.  Late fees add up fast!  Try online bill pay or some other technique, but be sure you pay what you owe when you owe it.

24.  Investing in things you don’t understand

Never, never, never put your money in something you don’t fully understand.  When you do, you are like a lamb being led to the slaughter.  Sorry to be so graphic, but it is time to wake up!  Get-rich-quick doesn’t work.  Don’t fall for it!  Take the safe route and you’ll be ahead.

25.  Visiting your local casino every week

Casinos are in business to make money, not give it away.  So, no matter how hard they try to convince you otherwise keep your money in your pocket.  Going to a casino regularly means that you are going to lose your money.  It is that plain and simple.

26.  Pawning or hawking items at a pawn shop

You can either sell items to pawn shops which is called hawking or you can borrow money using your item as collateral which is called pawning.  Either way, you are losing money.  Doing this regularly will cost you a bundle.  Avoid pawn shops unless you are buying!

27.  Making impulse buys

Do you go out shopping without knowing what you are going to buy before you leave the house?  If so, then you are looking for an impulse buy.  Most people live in denial about this and trick themselves into thinking  they got a “good deal”.  Buying things you don’t need is not frugal.  Staying home will truly save you money.

28.  Failing to try before you buy

I’m a big fan of trying something before you buy it.  This has helped me numerous times to avoid buyer’s remorse.  Yes, it may cost you a little to try something first, but this can save you hundreds down the road.

29.  Signing up for debt consolidation

People usually want to consolidate their debt when they have too much to afford the monthly payments.  Debt consolidation usually offers a lower monthly payment, but without a change in behavior most folks wind up deeper in debt than when they started.

30.  Relying on one income stream

What if your one source of income dries up?  What will you do then to stay afloat?  This is when many start developing some of the other bad habits on this list like using credit cards, payday loans and pawning items.  Develop multiple streams of income!

31.  Letting the government hold your money

Many of us are so afraid of owing some taxes on April 15th that we let the government take too much out of our checks.  If you get a big tax refund every year, then you need to adjust your withholdings.  You are just letting Uncle Sam use your money for free.

32.  Bouncing checks

Overdrawing your checking account will cost you big time in overdraft fees and service charges.  There is really no excuse for this with the widespread availability of online checking and budgeting systems.

33.  Buying extended warranties

You can always find someone that was glad they bought the extended warranty, but for each of these there are a thousand people that gained no benefit from the extra cost.  This is exactly what the warranty provider banks on.  Skip the extended warranty and save the difference!

34.  Overbuying gifts

I’m a generous guy.  I really am, but some people just go way overboard especially at Christmas.  Are you really doing the right thing for your family if every year you bury yourself deeper in debt?  Sensible gift-giving is the loving thing to do.

35.  Using your emergency fund unwisely

An emergency fund is for when the truly unexpected happens.  It is not for new tires, Christmas gifts or car repairs.  These are all things you should be including in your budget.  Your emergency fund is there for when you lose your job or get sick.  Using it unwisely will leave it depleted for when a true emergency pops up.

36.  Neglecting preventive maintenance tasks

Most assets need some form of preventive maintenance to keep them in top shape.  This is true of your home, car and appliances for example.  Neglecting to do this properly will cost you more in the long run.

37.  Refusing to negotiate

You can often stretch your dollars further by negotiating a better deal.  However, some people are afraid to ask.  I recently got 5% knocked off a large car repair just by asking.  It wasn’t much, but every little bit helps.

38.  Spending a dime to save a penny

Sometimes, if we aren’t careful, we can waste money trying to save money.  I’ve done this more than once with home-improvement projects.  I try to do it cheap and wind up having to redo the whole thing over the right way.  This jacks my cost up even more than expected.

39.  Buying things you don’t use

Be honest.  How many of you have a gym membership or piece of exercise equipment that you don’t use?  Why waste the money?  Stop the bleeding by refusing to continue buying things that you won’t use!

40.  Buying too soon

Technology gadgets are notoriously expensive when they are first introduced.  You can often save a bundle if you wait awhile before making such a purchase.  If you are in the habit of buying things when they are hot, then learn to chill a bit.

41.  Buying too late

Procrastination can force you into paying more for items you need.  When you notice something you’ve been saving to buy is on sale, make your move.  Waiting may lead you to miss the deal.  Be prepared and take decisive action!

42.  Acquiring too much of what depreciates

Things like cars, boats, furniture and decorations lose value fast.  These are usually things we want to impress the neighbors.  However, they have little to do with true wealth.  Buying too much of this stuff will leave you poor and disillusioned.

43.  Being too generous

Loaning or giving money to every person with a sad story will usually make you one of them.  I’m a big fan of donating to worthy causes, but be smart about how you give your money.  There is nothing wrong with checking out a story before giving to it.

44.  Being too selfish

Greedy people often find themselves in a financial ditch.  Making money the most important thing in your life is not a good strategy for living life to the fullest.  Yes, money opens many doors, but selfishness closes far more.

45.  Allowing yourself to be pressured

Don’t buy things because a salesman is pushing you to do so.  In fact, pressure should be a red flag to you that something isn’t right.  Walk out of any deal where you feel pressure to rush into something.  Legitimate deals can almost always wait overnight.

46.  Failing to ask for a raise

Ask for more money at work and they might surprise you by giving it to you.  You won’t know for sure until you ask.  Every employer wants to keep salary expense to a minimum, but they also want to keep good help.  If you haven’t had a raise in awhile, ask for one!

47.  Ignoring your credit history

In today’s world, you must monitor your credit history to avoid identity theft.  Checking your credit report a few times a year will help ensure nothing fishy is happening.  It may also help you catch and correct errors before they cause problems.

48.  Following the advice of broke people

Who’s financial advice are you following?  What is their net worth?  It is easy to go with the prevailing financial wind, but this often leads you to where everyone else is at — the poor house!  Make sure your advisor knows what he or she is talking about.

49.  Neglecting the march of time

Time does not stand still.  You will one day need a newer car, your kids will eventually go to college and one day, sooner than you think, it will be time for you to retire.  Are you financially prepared for these events?  Ignoring them will not make them go away!

50.  Refusing to live on a budget

Budgets get a bad rap.  Most people feel like they are too restrictive.  It doesn’t have to be that way.  Failing to plan how you want to use your money is probably the #1 bad money habit people need to overcome.  Give budgeting a try and you might be pleasantly surprised with what it can do for you!

Bad money habits don’t have to last a lifetime!

Recognize yourself in this list of bad money habits?  It is never too late to change!  I invite you to browse around my site for more tips, click one of the links in this article to visit some of my favorite sites and check out my recommended financial book reading list.

What habit strikes closest to home for you?  Leave a comment and let me know!

Photos by Leonid Mamchenkov and rafeejewell