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3 financial opportunities that debt can destroyDebt, if you give it enough power over your life, can ruin your future. The only way that it can become powerful is when you borrow too much of it. Not only that, if you end up relying on credit even for your basic necessities, then you are handing over your financial stability to your creditors.
When you borrow beyond what you can afford to pay, you will be compromising a lot of opportunities in your life. You may think that debt today is justifiable. That may be true, but your priorities may change in a few years time. Do you really want to keep on paying for something that may no longer be of use to you in the future? Take for instance paying for an expensive vacation using your credit card. In most cases, you will be forced to pay this back in installment because it is too costly. You will find that paying for something that you are no longer enjoying can feel like a real burden. While there is nothing wrong about taking a break, there is something wrong about compromising your future self just because you want to overspend today.Before you take on more credit, make sure you understand what debt problems can cost you. If you read the real stories in the website StudentDebtCrisis.org, you will realize just how much debt can compromise your future. One entry there talks about how a borrower is forced to put off traveling, buying a house, getting married, etc. Debt has the power to affect all of these if you use it too much in your life. To give you a couple of examples, here are three opportunities that you can lose if you let your debt problems get ahead of you. Saving opportunities Let us start with the obvious - saving. Most of the time, we save our extra money. However, if you have money to spare, we are often times encouraged to use it to pay for our debts. Why? Because you lose more money if you take longer to pay off debt due to the high interest. You only gain a small amount from the pitiful interest rate of your savings account. This is what debt will take from you. It can take away your ability to save. We all know that there are so many things to save up for. On top of the list is your retirement fund. According to an article from CNBC.com, Millennials are facing retirement problems simply because their student loan debt is eating up a huge portion of their income. It is hard for them to commit to saving. Investment opportunities The second opportunity that you may be missing because of your debt problems is investing your money. An investment is one of the best ways for you to make your money work for you. Instead of merely putting it in your savings account, you can invest it in stocks, bonds, ETFs or mutual funds so it can increase faster. The interest rate of these accounts is higher compared to a savings account. Not only that, you can also invest your money in real estate so it can generate you some income each month. But since you have credit obligations, you do not have the extra cash to invest. That could be another thing that you are holding back on because of debt. Goodwill opportunities The last opportunity that you cannot grab because of your debt problems involves charity. There is something uplifting about being able to share your blessings. It makes all your hard work meaningful somehow. However, it is difficult to be there for others if you know that you need financial help too because of your debts. Not only are you being robbed of the opportunity to help those in need, you will feel depressed because of your current financial state. Do not let your debt situation rob you of the valuable experience that comes with helping other people. It will not only make you feel good about life in general, it will help motivate you to get past other obstacles in your life. There is another opportunity that you will lose, but we decided not to include here because it is a bit contradicting. However, if you analyze it carefully, you will realize that it is still a lost opportunity. You see if you have too much debt to your name you can also lose credit opportunities. While you may think that you do not need more credit because of your current debt problems, you still need to take care of your credit history. If you have to buy a house or a car in the future, you need a good credit rating. That is how you can borrow a low-interest home loan. It is difficult to buy a house without borrowing money. Sure you can save up to buy it in cash but what will you do in the meantime? Will you rent? Well, that is a waste of money. Although you will be paying interest on your home loan, that will help build up the equity in your house. If you are worried about your budget, you can arrange it so that your amortization will only be as much as your monthly rent. But before you can get a home loan, you need a good credit score. That is how you can a low-interest mortgage.
How to keep debt from destroying your lifeWhile we know that debt problems can be crippling, it is wrong for us to blame credit itself. Debt may be a problem, but you need to understand that it is our own doing that makes it so. It is our reaction to debt that makes it a dangerous financial transaction. Financially successful individuals are not debt-free. In fact, they have debts. However, they know how to use it to their advantage. You need to learn how to do that so you can increase your wealth. Here are a couple of tips that will help you keep debt from destroying your life.
- Pay your dues on time. This is one of the things that can make your debt manageable. If you can pay your debts on time, you can save a lot because you do not have to worry about late penalty charges. Not only that, you can benefit from the high credit score that will naturally happen because you are a responsible borrower. If you are having trouble, you need to look for side hustles that can help you get the finances to pay off debt.
- Build up your emergency fund. Some people do not really have a debt problem. They can afford to pay their debts. However, what puts them in danger is their lack of emergency funds. One emergency and they can be pushed in a position wherein they can no longer afford their debt payments. Do not put yourself in this situation. Make sure you build up your emergency fund so that when the unexpected happens, you do not have to sacrifice your debt payments and thus incur a lot of penalty charges in the process.
- Track your spending. Finally, you want to track your spending so that you can keep an eye out for your expenses. If you want to keep your debt payments updated and at the same time add more to your savings, you need to be cautious of where your income goes to. A spending plancan be a big help here. You have to track where your money is being spent so you can identify the unnecessary expenses and stop funding them.