Top 10 Reasons Living With Debt — BITES!
Is it really better to live debt-free?
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
One I put on there is funding corporations that don’t need my money! If I only was able to send all that money that I spent with the Credit Card companies to charitable organizations I could have done a lot of good, and that makes me sad. But it’s also got me mad and focused to remove them from my life. Keep rolling snowball!
Read Paul @ FiscalGeek´s latest article – A Low-Tech Pocket Budget System
Spot on Jeff! My breakdown is simple:
Debt = Modern day Slavery!
Read Matt Jabs´s latest article – Financial Philosophy & Sacrifice to Create Wealth & Live Off Your Interest
Debt means less choices. When you have positive savings then you have more choices and in essence you’re more free.
Read FFB´s latest article – Interview With Personal Finance Columnist Liz Pulliam Weston
@Paul – Paying interest on loans and credit cards does zap our ability to give generously to truly worthy causes. Imagine all the good we could have done in America if the interest we paid on credit cards alone went to feed the hungry around the world!
@Matt – Debt is certainly a form of slavery. The kicker is that we volunteer for it!
@FFB – I choose to be free! Free from debt and of course (like you) I choose to be free from being broke.
Thanks so much for your comments!
I agree totally. Debt means you are a slave to your prior choices, sometimes for years. At one time I had no debt even though I owned a home and two fairly new cars. I took on new debt when I moved and bought a new house twice as big as my old one. I should be free from that debt in a few years.
Read Stephen – Rat Race Trap´s latest article – Energize Your Success – Decrease Distress
Nice summary! Couldn’t be more dead on! I would like to link this post if I have your permission. Thanks
Read Diann´s latest article – An Amusing Frugal Post
You are dead right. When I remarried a few years ago, after being a widow for 15 years, my husband and I made really nice money (read that as working for the man) we went nuts, it ended in bankruptcy. It sucked. We couldn’t go ch 7 so had to go ch 13. Paid 800 a month for 4 years. Its done, its over. Our house is paid off as is all our vehicles. Now for the good stuff, they are closing the plant we both have worked for almost 20 years. Good thing its over…have learned a valuable lesson (so late) in life. If I can’t pay cash, I don’t need it.
You are right about debt, it takes away your peace of mind, and nothing in this world is worth more than that. That is why I am making it my number one priority to be completely debt-free. It’s pretty simple, but we have managed to somehow complicate it. If you don’t have the cash to buy it, then you can not afford it!
Read Missdebtfree´s latest article – Personal Finance Lessons: Tips I Learned from Suze Orman
Debt is just awful and makes you do things you don’t want to do and work at jobs you hate.
I know for me, I used to have this constant feeling of anxiety until I finally paid most of it off.
Read TStrump´s latest article – mysqlerror
A borrower is always a slave to the lender. I too believe in using cash at all times for my purchases.
Read Anthony´s latest article – Arizona jobs
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Excellent points. The three that I often preach are: 1) having money gives you options, freedom of choice; 2) being debt free gives you peace of mind; and, 3) debt is a form of enslavement – one organization of individuals riding on the backs of the many that are enslaved.
“I owe I owe, so off to work I go” is not a bumper sticker on my car.
Clair
This article rocks and is completely right on! Ever since we decided to eliminate the chains from our life, we have lived a less stressful life. No debt for us please! We are $3000 away from being debt free except our house!
I look forward to reading more from you!
Read Brad @ Enemy of Debt´s latest article – Are You A Genuine, Or Conditional Giver?
I agree with you, but there are certain things that most people could not pay cash for, namely, when buying a house, and also for college tuition.
I believe that if you are disciplined about paying your credit cards off every month, short-term financing like that made possible by credit cards can be a convenience when you’d rather not carry large sums of cash in your pocket. Assuming your card charges no annual fee and you pay in full each month, you’re paying $0 for a short-term loan.
Personally, I steer clear of the mega-banks who threw us into a global monetary crisis and then accepted taxpayer-funded bailout monies. I prefer doing business with small community banks and a credit union.
Dawn – Just because it isn’t very common doesn’t mean it isn’t possible to buy a home or pay for college without debt. If people had a BETTER and more responsible financial plan then they very well could do those things with 100% down. I agree that it is not very popular but if you look at the saving habits of MOST people you will see the reason it is not possible at the moment. I am going to school debt free and my kids are going to be going to school debt free. After we get our butts out of this house we will be buying anything else with 100% cash down. No more debt for us under ANY circumstances regardless. Our plan is going to help us accomplish this goal. I am not picking on you at all so I hope you do not take my comments that way. I just wanted to point out that most people feel the same as you but most people are broke too and living paycheck to paycheck. Maybe it is time for people to plan their future instead of running full steam ahead without knowing where the track leads.
If you want a perfect example of why it IS VERY POSSIBLE to do what you think is not, go check out budgetsaresexy (dot) com, and look how much he has put aside for savings retirement and emergencies. He is not even 30 yet! People need to slow down with their wants and focus on their needs. there is a difference.
Read Brad @ EOD´s latest article – Are You A Genuine, Or Conditional Giver?
Oh yeah, it is also my opinion that the banks are not the reason for our global crisis we find ourselves in at the moment. It is first the people who signed their name on any dotted line’s fault, to accept debt to cover the spending that exceeded their income. If you want to blame someone for allowing that to happen you can blame Washington for forcing some of these same banks to give loans to a larger amount of people in the name of equality. I am not a fan of big banks either but personal responsibility is something that should be considered before pointing the finger. If people did like this article so brilliantly suggests then there would be no banks to blame in the first place. It’s just something to think about and the very reason I feel so passionately about spreading this very message to all who are willing to hear it. Not accepting debt as the answer gives you MORE options in life instead of chaining you down. I hope you can at least consider what I have said as a possible alternative to using debt to get stuff. The solution is in us and our plan, not in blaming others for our own mistakes.
Brad:
I applaud your passion. I suppose Enemy of Debt says it all. You are right all the way around. It’s the person in the mirror that’s at fault.
To illustrate your points about how possible things are, I should note that a good friend of mine just bought a lakefront cottage at a private fishing and hunting club in Texas recently, and he paid cash. He also paid his own way through college. He also started his own successful consulting business (with his own limited seed money) when he was in bankruptcy only 10 years ago, and that was what pulled him out of bankruptcy and put him back on top (again).
He had married a spendaholic, and that’s what burned up his life’s fortune, but he didn’t blame his ex, instead he realized that he could have put the financial brakes on but didn’t. Instead of complaining, he reverted back to his former successful ways, and pulled himself up and worked his rear end off to get out of debt and back in great financial shape in just 7 years.
So, it all can be done.
This same guy is a big planner, a big debt chicken, and conservative with his money. He doesn’t waste it on fashions and fleeting stuff. He puts it where it will make the most for him. At 52, he is now debt free with a primary estate and a winter home – all fully paid for. Really quite an accomplishment for a guy who self-retired at age 49, and hasn’t had a payday since.
Many of us seem to think that we are on a “track,” that goes something like this: school, work, and retire when I reach a certain age defined by the government. For some folks out there, it’s more of a path that they make, instead of a track they get locked into. They get locked into it because they believe it to be the way it should be instead of imagining how they’d like it to be.
Here’s to the trail blazers out there who live with the right attitude – debt be damned!
Clair
Wow! What a great example and thanks for the kind words! i do have a very intense passion and hating debt is what fuels it.
You are so right about people settling for the idea that their life in more than one way is predetermined instead of taking the reins and making life what they want it to be. Retirement to me does not mean quitting life, instead it will be an opportunity for me to do whatever it is that I want to do which will likely be considered work not retirement to most people. When I realized what was holding me back, I began to grow in ways I thought not possible. What we think is what we become and sometimes someones attitude is the biggest obstacle.
“Here’s to the trail blazers out there who live with the right attitude – debt be damned!”
I absolutely LOVE THAT!!
Read Brad @ Enemy of Debt´s latest article – Keys To Effective Money Management – The Introduction
[...] was reading an excellent article from a fellow PF blogger today called, Top 10 Reasons That Living With Debt – BITES!. Jeff over at My Super-Charged Life gave 10 reasons that to him, explain why living with debt [...]
Brad says: “If you want to blame someone for allowing that to happen you can blame Washington for forcing some of these same banks to give loans to a larger amount of people in the name of equality.”
Umm, how did Washington force banks to give loans to people in the name of equality??
I’m sorry, but if you have the misfortune of just a high school diploma, the kind of work you can get may be just at checkout at Walmart. People at that income level do indeed live paycheck to paycheck and it is rather hard to pay the rent, utilities, etc. without going into debt, especially if you live in an expensive state like I do, here in CT.
I work as a personal finance writer at http://www.creditFYI.com, and i frequently write about issues related to debt and credit, so believe me, i can’t ignore the perils of going into debt and personally, in my own life, i have always been frugal.
But i think that people who see the crisis we’re in today as a one-dimensional problem solely caused by individuals who wrack up debt, often becus they have no other choice, have blinders on.
Were you aware that fully half of the bankruptcies in this country were caused by medical debt? And that seniors age 65+ represent the demographic segment where the bankruptcy rate is most rapidly rising?
http://www.creditfyi.com/Credit-Library/Articles/Senior-Citizens-Unmanageable-and-Retirement-Debt.htm
Lax bank regulation played a big role in the mess we’re in and bankers, having the training and lending knowledge, understood the risks better than lower income people trying to get ahead. The banks were out for profit only and by looking the other way, made it possible for people who could ill afford to purchase a home to in fact do so. If the banks said “no,” we wouldn’t be where we are today.
Dawn,
In that comment you quoted, I was specifically referring to mortgages. Congress forced mortgage companies to give loans to more people and I believe it was led by Barney Frank. The housing crisis launched us into this recession and I believe it was completely due to debt.
“I’m sorry, but if you have the misfortune of just a high school diploma, the kind of work you can get may be just at checkout at Walmart. People at that income level do indeed live paycheck to paycheck and it is rather hard to pay the rent, utilities, etc. without going into debt, especially if you live in an expensive state like I do, here in CT.”
I think you are underestimating what can be done by someone with a high school diploma and really it is quite disturbing that you think that way. There are many many people that are successful in this country without college. For instance I am one of those people you refer to and I have done quite well for myself. The truth is that I will be starting my own business even before I ever get a degree, and guess what, I will be starting my business debt free as well. OOOOHHHH! What you say is impossible is far from it, even for us high school graduates.
You are completely wrong about who is living paycheck to paycheck as well. 7 out of every 10 people live paycheck to paycheck and when you count the middle to upper class that number is more like 8 out of every 10 people. Income has nothing to do with it, it is behavior!! You’re right though it is rather hard to pay for pesky things like rent and utilities when you are spending what you do make on lottery tickets and things that you don’t need but want. It’s about having a plan and no matter how much you make, a plan will help make it easier to do.
Your assumption is that borrowing money is a tool for lower income people to help subsidize their income, but if that is true then why is there still so many people struggling? If it is the tool you say it is then shouldn’t it be helping people get out of trouble instead of just keeping them broke? You can’t borrow your way out of a problem without it eventually catching back up to you. If you don’t make very much money, then it is up to you to find out how to make more, NOT just sit there and stagnate and just accept your minimum wage position as how things must be.
I guess with your bankruptcy numbers you failed to consider the lack of planning that contributed to those bankruptcies. My whole point is that if you plan, plan, plan you will be able to handle that medical debt much easier. The truth is that those people that are elderly and filing bankruptcy did not plan for retirement but instead likely did what you suggest doing and that is borrowing money to get by.
No matter how many times you say it, I believe that I am responsible for me. Dave Ramsey has the best example of this when he refers to the McDonalds story about the person that sued McDonalds for getting burned by hot coffee. Since McDonalds served the person hot coffee, it became McDonalds fault the person got burned, but isn’t it the persons fault? Coffee is hot and you should be careful! Debt is dangerous and you should be careful with that too, because guess what you will get burned!
You believe you are helping people and I respect that. You are encouraging the problem by telling them that what they have been doing is NOT their fault, and I am saying maybe it’s time for people to start examining their habits, and try something else. You want to place blame and I want to empower people to take control of their finances. I like my way because I know my way works and your way just continues the problem. The victim mentality is a form of slavery and I am trying to free the slaves from their own peril.
Thanks for the discussion.
Read Brad @ Enemy of Debt´s latest article – Motivation 101 – Saving To Buy, Instead Of Buying To Slave!
Brad, i never said it was “impossible” for someone with a h.s. diploma to get ahead. Of course there are always exceptions and i’m happy that you are one of them. But generally speaking, success comes harder for those with just a high school education. And too many people in this country survive on minimum wage.
Again, Congress did not force banks to give loans to more people. Congress has no authority to enforce that kind of provision.
But you keep putting words in my mouth. I never said that borrowing money is a tool for lower income people to help subsidize their income. For many people, there’s no other choice. Are you familiar with the payday lending industry, where they routinely charge 200% interest rates on a loan that’ll get them through the next few weeks, til the next payday? People use payday lenders becus the big banks won’t make small loans. Why? Becus they’re not profitable.
As far as bankruptcy and medical debt, i think you’re being very hard on people, expecting that everyone should be completely prepared for every unanticipated life event that comes their way. That’s just not being realistic. Even if you have health insurance, the co-pays and deductibles can still be steep. We all do the best we can, but to expect that someone with a high school diploma who works at Costco earning $10 an hour who one day has a stomach ache and finds out he needs an operation for you name it can just whip out $10K in cash to pay for everything that insurance doesn’t pay for is pretty short-sighted.
There’s a big difference between someone who got burned by coffee becus they stumbled or were careless walking and someone who is forced to wrack up credit card debt becus they got laid off and can’t pay the bills.
Once again, I’m not saying individual borrowers are not at fault. I said at the very beginning that there’s enough blame to go around and be shared by banks, lenders and consumers, but i still maintain that banks bear greater responsibility for this mess becus the bottom line is, they had the power to reject loans for many people, and they didn’t.
and you’re right, it’s not just lower income people living paycheck to paycheck. I mispoke.
For brad, taken from a MarketWatch story posted today:
“For some patients, co-insurance may seem like a small sum — set at 10% or 20%, for example, when services are from an in-network health provider — but costs can add up quickly as absolute dollar figures rise. Insurance paid for 84% of the bill for five selected chronic conditions: asthma, breast cancer, diabetes, chronic obstructive pulmonary disease and hypertension, the study found.
Breast-cancer patients faced the biggest sticker shock. Even though insurance paid for more than 90% of a bill that averages $66,489, they had the largest out-of-pocket spending, the study found. Breast-cancer patients paid an average $6,250 for their treatment. Patients with chronic obstructive pulmonary disease had the second highest out-of-pocket costs, at $2,200 a year.”
“When that figure gets really high, even though you may be only paying 10% of the bill, it’s still a lot of money for somebody of modest means,” Gabel said. “For some high rollers…$6,000 for breast cancer is not much of a financial penalty, but it is for someone earning $30,000 a year.” “
My point was this. If I can do something OTHER than live on minimum wage and I have only a high school diploma, then others can do the same. I am not special! Instead of accepting my struggle I have decided to be proactive in how my life turns out. It’s really that simple. People can educate themselves about anything using the internet and resources from the library to help make their way. Anything is possible and that includes living without debt.
I didn’t mean to put words in your mouth but when you say that someone is FORCED to rack up debt, to me, it is just like saying it is a tool because in order to deal with the emergency the debt is seen as a tool to “help” them. there are other choices but you don’t wait to start making better choices and when you find yourself in a bad situation say you didn’t have a choice. The choice is to take control and make a plan before you have a problem! Does that mean that you will always be fully prepared for huge emergencies? Not at all, but you will at least be better prepared to deal with them. Medical debt is a different story though. I am in no way saying that people that have medical debt deserve it or caused it. What I am saying that there are things out there that come with a good financial plan that will help them. Dave Ramsey talks about a young family that the father ends up getting cancer and passing away. Because of the steps they took prior to learning about the cancer, the wife and family were able to deal with those things without debt.
As far as the Government not putting pressure on lenders, I will have to find you the stories, but it absolutely happened. It happened in the Clinton years and the Bush Presidency.
Even the worst medical emergency can be planned for, would you agree with that. Just because people haven’t doesn’t mean they can’t. Bottom line: People do not plan for life! That is what I am trying to change!
Read Brad @ EOD´s latest article – Motivation 101 – Saving To Buy, Instead Of Buying To Slave!
Brad, I really think that you and I are on the same page…we both want people to take responsibility for their financial wellbeing. Its not something that’s often taught in schools.
The difference, I think, is that I also work to inform people of various other forces at work that are often beyond the ability of the average person to control. I’m talking about various government regulations (or the lack thereof), global economic events and just plain bad luck. You seem to be single-mindlessly focused on personal responsibility without acknowledging that sometimes, despite the very best effort and intentions, shit happens.
You are right Dawn, I personally think it is a waste of time to try and figure out who was at fault. The bottom line for me is that when people look at their situation and say how can I make it better, instead of who caused it, I think they can be more productive towards defeating the enemies that cause the bad luck and other various forms of excuses that you named off. SO WHAT if the Government does or doesn’t have regulations concerning credit cards…don’t use credit cards and empower yourself to live without the crutch that has become credit. You seem to be overlooking the fact that if you have a plan then those things that happen, don’t really affect you all that much.
I personally believe that you are making people less active in winning because you are too concerned with having them focus on everything being out of their control, instead of allowing them to see HOW to climb those obstacles. People don’t want to know that there are obstacles, they already know that, they want to know how to overcome them!
Now for why I consider myself to be an expert in this area. I USED to do what you do! I USED to look at the supposed problems! I USED to focus on why things were happening to me! It wasn’t until I started reading more from Dave Ramsey, Dan Miller, Brian Tracy, and John G. Miller that I realized I was wasting my time, AND when I began to ask myself different questions. You should really read a book called QBQ- The Question Behind The Question, because I believe you focus on asking the wrong questions.
My life and direction changed completely once I started to think differently. I actually started defeating my obstacles instead of looking for who put them there. I now believe in myself and my ability to secure my own future, without relying on Washington or anyone else to put a rule in place that will protect me. What I learned is that there is hope and empowerment in realizing I do not have to accept your ideas and solutions.
With all of that said, I would like to respectfully say that we are hardly alike. Maybe you should re-examine which one of us is more “single-mindlessly focused”, since you are the one that is in the box, and I am the one outside of it telling people there are more options where I am.
I think this conversation is done since their is nothing else I can add without repeating myself over and over again. Thanks for the conversation and debate.
Read Brad @ Enemy of Debt´s latest article – Motivation 101 – Saving To Buy, Instead Of Buying To Slave!
[...] and I have been going back and forth for days now. I wanted to share with you the difference between her and I, mainly by pointing out [...]
The goal is not simply to blame for the sake of laying blame. Without thoughtful discussion and assessment of where we are today, what’s working and what’s not, there’d be no hope of making things work better.
Sure, you can pretend that the rest of the world doesn’t really exist and just focus on your own life, but i think that people who are informed about various external forces at work that do affect our lives, are better prepared for what life throws their way. More knowledge is always better.
If everyone settled for the status quo, we’d get nowhere. Each one of us has a personal responsiblity to be engaged and involved in our democracy, if only as a voter.
It’s more than “finding fault.”
Even people who “have a plan” can get whammied by unexpected events. Life happens. You can do a lot to protect yourself, but no plan is perfect.
[...] Top 10 Reasons Living With Debt — BITES! [...]