Debt: The Road to Financial Ruin
Debt is the reason that many people have health issues and sometimes have to file bankruptcy. In this post we will discuss how quickly debt can put you on the road to financial ruin, and what you can do to overcome the burden.
Let’s talk about the basics of debt and how it can quickly ruin your current and future lifestyle. This can be very frustrating and lead to unnecessary stress.
Debt Comes in Many Forms
What really causes debt is not the fact that you borrowed money, it’s that you don’t have any collateral. You don’t have access to capital other than money you are yet to earn.
Medical bills, unexpected expenses and overspending are just a few of the ways people end up in debt.
Ordinary People and Families
You have a job, you pay your taxes, but you can’t afford to save or invest, so you spend everything you earn on your lifestyle.
As you go through life, you may encounter many unexpected financial pressures. You may have to make a major capital purchase or pay unexpected expenses. For instance, purchasing a car or paying for unexpected home repairs.
These expenses are anything that you can’t afford to pay for in full with cash or your regular, monthly cash-flow.
Unfortunately, these expenses can come along often. Whether they are expenses or purchases, they may force you to borrows funds, and go into debt by using credit cards or loans from a financial institution.
Collateral
Your job, or future income is the collateral. To repay the loan or credit card bill, you may have to reduce your lifestyle, either now or in the future. Future earnings are now earmarked to service the debt.
Debt can quickly become a slippery slope if you don’t have any other collateral other than your job. And, other unexpected expenses tend to follow. At some point, the banks and financial institutions will no longer loan you money.
How To Solve the Debt Problem
If you can get extra cash flow, it will reduce the debt which will reduce the financial pressure. This may require an additional job or finding another source of income.
If you have collateral, you don’t have to use debt to cover these expenses. However, discipline is required to stay out of debt.
Unconqured by Debt
Current Lifestyle Spending
If you have a job, but you aren’t saving, this could be a lifestyle spending problem. If you consider your personal finances as an economic barometer, you may be able to make adjustments to improve your financial position.
Saving for the Future
The first step to creating wealth for the future is to pay yourself first. You have to form the habit of saving.
By saving you can create an emergency fund to pay for life’s unexpected necessities. And, as your savings grow, you now have collateral that you can use for your future lifestyle.
Simple Interest Rate Calculator
How much interest are you paying to others? The true cost of debt is often unknown because we don’t calculate the real impact it has on our future lifestyle.
Paying simple interest when repaying loans can create an efficiency, saving vast amounts of money over your lifetime. If you practice infinite banking, you can recover these transfers by becoming the banker, and take control of your finances.
You can use this calculator to understand how simple interest varies from compounding interest.
Schedule a Discovery Call
If you’d like help with saving and creating collateral that you can use, just let us know. It takes time, discipline and commitment, but with the proper plan you can overcome the burden of debt.
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