Are you in debt? I am. If you are too, we have lotsa company. Currently the average American household carries over $15K in credit card debt and $130K in total debt, which includes mortgages, car loans, and student loans.¹ You know that means that many households carry much more debt than that! Well, my opinion is that the true cost of debt is not confined to just the interest we pay, y’all.
Being in debt has become a way of life. It’s become so prevalent that it doesn’t even have a negative connotation anymore. People see debt as “necessary.” 68% of people in a recent survey said that debt “enabled them to make purchases or investments that expanded their opportunities.”²
You know what? I don’t see it that way. I see debt as actually limiting our opportunities. Because when I go into debt, what I am really doing is spending future money. Do you see that? Going into debt to make a purchase now is stealing money from my pocket later on. It is putting a lien on my paycheck, so that I have to set aside part of my income each and every month to pay back the money I promised to someone else long ago. Which means that when new opportunities arise, I don’t have enough money to take advantage of them.
I’m feeling this right now, let me tell you. My husband is out of a job. There is NO paycheck coming into our house right now. But guess what? On the first of the month I still have credit card companies to appease. And the balance on those credit cards is made up of purchases I don’t even remember making!
You may argue that I could get a reduced payment on those credit cards temporarily, and you’re right; I could totally do that. But that balance will still be there waiting when the income does start back up again. Except now it will be higher because of the interest that has accumulated while I have been taking a break from making full payments.
That’s one of the tricky things about debt. We think as long as we can “handle” the payments, we are making a good buying decision. The truth is that spending future money is all about instant gratification. I want this NOW so I will borrow money to get it. And look! “Easy” payments of a “small” amount of money for the next few years! How convenient is that?
Related Post: 6 Reasons We Get Stuck in the Debt Cycle
We choose not to think about the final, true cost of the item we have just purchased, after we have made all those payments. I shudder to think about the times I have bought something because it was a good deal — but I used a credit card, on which the amount of the purchase sat as part of an overall balance that I paid interest on for months or years. Now how good of a deal was that?
And long before I’m done making those “easy” payments, the thing I bought is usually either damaged or not working or stained or I don’t even own it anymore!
Not only is this debt a drain on my wallet, it is a drain on my psyche. It sometimes keeps me up at night. I have anxiety about what might happen if the credit card companies decide to raise my interest rate or ask for higher payments. Or what if the economy crashes and they want the WHOLE THING?
Related Post: 5 Tips for Coping with Anxiety about Money
Almost every financial decision I make these days has to take those credit cards into account. My grocery budget is restricted by them. My ability to eat out is curtailed by them. Birthdays and Christmases have to be low budget. It’s not just me who is affected; my kids live in a perpetually penny-pinching household. I can’t buy things NOW because I bought things BEFORE.
I tell myself that I am just putting this on the card FOR NOW, and that I will pay it back right away. Um, good one. How often does that really happen? Almost never.
In actuality, choosing to use debt is a form of gambling. We are gambling that our income will remain sufficient to cover those payments far into the future. Well, as I sit here at my kitchen table while my husband gets ready to go to a job interview for a position which will provide about half of his previous pay, I can tell you that your income may not always be there.
Y’all. Debt is not just costing us interest. Debt is costing us QUALITY OF LIFE. It limits our opportunities, it strangles our paycheck, it causes us to pay way more in the long run than an item is worth, it affects our stress levels and our financial decision-making, and we put ourselves in an insecure position based on income that may or may not continue. CAN WE JUST STOP THIS MERRY-GO-ROUND?
The true cost of debt goes way beyond money. Let’s determine today that we will stop spending future money and will turn this train around. I’m sick and tired of being a slave to my past stupidity, and I don’t want to continue to be stupid now. It took a job loss to thoroughly wake me up, but now I’m just done. Are you??