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Wednesday, May 26, 2021

Why I Hate Debt So Much

Many readers who had been following my blog know that I'm not too fond of debt. I hate debt so much that I never touch it a single time in my lifetime. If I do not have the cash to purchase something in my life, I will avoid buying it at all. This means I will only buy that product until I saved up the cash for it. You probably say a little debt will not hurt, but this is exactly how it starts. You make a small purchase on your credit card, and then before you know it, you are thousands of dollars in debt.
Debt can be a constant pain for some people because of its sheer nature. Everyone knows that debt is a struggle, but not everyone knows the extent of impact debt problems can have on a person's life. The amount of debt that can pile up throughout your life can create serious problems. Not handling debt-related issues immediately can leave you open to worse financial issues down the road.
The prime reason I can create and build a wealth of my own is that I had always avoided debt all the time. I learn this trait from my father, as he also avoided going into debt as well. In this blog post, I am going to explain why debt is bad for you. Moreover, I am going to give my reasoning as to why I hate debt so much.
Debt Encourages You to Spend More Than You Can Afford.
There is something about the debt that tempts you to keep spending even when you cannot afford the payments. Part of the allure of debt is that you can get the emotional high from getting new things now without dealing with the immediate pain of parting with money. It can feel like you are getting something for nothing. Nevertheless, eventually, spending will catch up with you, and it will not feel so good then.
I only purchase things when I have the cash for them. I do not particularly appreciate getting into debt to purchase something. I am not too fond of the feeling of owing money for purchasing something I cannot afford. Because of this positive trait, I avoid getting myself into debt.

Debt Costs Money
Debt feels free when you are swiping your card or signing loan documents, but this is an illusion. In general, you pay the price for the debt you create. That price comes in the form of interest. The higher the interest rate, the more you will end up paying for your debt. Also, the longer it takes you to pay off, and the higher your debt load, the more interest you will pay.
This is another reason why I avoided debt. I do not want to pay extra on the interest payment for something I bought. It is about being able to delay gratification. If I do not have the money for something I want, I'll just wait till I saved enough cash for it.

Debt Borrows From Your Future Income.
Any time you take out a loan or charge something on your credit card, you're borrowing from the money you hope to earn in the future. Do you want to spend your money paying for something you've already used up and don't get much value from anymore? You never know what changes may happen in your income, so it is better not to mortgage your future.
You may have heard of the Time Value of Money and Compound Interest. Together, they form the basic concept that by investing money today and getting a return, your money can build on itself and become much more in the future. Here is a little secret: They work both ways! This means that the same concepts can cause much damage to your financial situation if not properly monitored. Moreover, the banks know this…
For example, when you borrow money from a bank to pay for a home and only make the minimum payments each month, you are really taking away future wealth from yourself. Have you ever looked at the amortization tables for your mortgage and seen the total amount you will have paid when it is all said and done? It is not uncommon to end up paying almost TWICE as much for your house throughout a 30-year mortgage!
If you buy a $250,000 home with a 5% interest rate over a 30-year mortgage, you will pay just over $483,000 in total costs, with $233,000 being on interest.

High-Interest Debt Causes You to Pay More Than the Item Cost
If you buy a $2,000 living room set on your credit card at 11% and only make the minimum payment, you will end up paying more than $3,600 by the time you ultimately pay off the debt. That is $1,600 more than the furniture cost. Even if you raised your monthly payment to $100 and paid off the balance, you would still pay close to $220 more than the cost of the furniture. On the other hand, you could set aside $150 a month for 14 months and pay in full at no extra cost.

Debt Keeps You From Reaching Your Financial Goals.
Even without being in debt, saving money for retirement is a hard thing to accomplish for anyone. Without proper retirement planning, there is no way you can peacefully retire without thinking about the money you could have saved. Lousy debt makes it that much harder to save for retirement.

Monthly debt payments limit the amount of money you have to spend on other things—not just retirement, but the trip you always wanted to take or Christmas presents for your family. The more debt you accumulate, the more your monthly payments will be, and the less you have to spend on everything else.
The wage that I receive from working in my dad's company is about $1700/month. Despite having a pretty low wage, I could still become a millionaire by the age of thirty. This is because I do not have any debt that I need to pay off. Having no interest payment, I am able to save up and invest the majority of my income. I have seen friends of mine who make way more income than me, unable to save and invest. This is because he owes so much that it requires him to pay a lot for the interest expenses.

Debt Can Keep You From Owning a Home.
Credit card, auto, and student loan debt are considered when you apply for a home loan. If your other debt payments are too high, you may get turned down for a mortgage loan. In most cases, your total monthly debt payments cannot take up more than 43% of your income if you hope to secure a mortgage. Many lenders want that number even lower. That means you will be stuck renting or paying on your current mortgage until you pay off some of your other debt.

Debt Can Lead to Stress and Serious Medical Problems
When you have debt, it's hard not to worry about how you are going to make your payments or how you will keep from taking on more debt to make ends meet. The stress from debt can lead to mild to severe health problems, including ulcers, migraines, depression, and even heart attacks. The deeper you get into debt, the more likely it is that you will face health complications.
I would not say I like the feeling of owing someone money. I cannot imagine myself getting into debt. I am not surprised that people who are deeply in debt live stressful life. Debt is not just a weight on your shoulders that can cause stress; it is a shackle holding you back from taking flight and living out your dreams.

Debt Can Hurt Your Marriage.
When it comes to marriage, money is one of the most difficult subjects to approach. I mean, handling your money properly as an individual is hard enough, let alone when you have two differing opinions.
Debt puts unnecessary pressure on the household's finances and creates a lack of financial security for your spouse and your children. When both partners feel overwhelmed, it can spark arguments about spending habits, who ​are creating more debt, and how much debt is too much. These fights can escalate and lead to a breakdown in the marriage.

Debt Hurts Your Credit Score.
Part of your credit score—30% to be exact—is based on the amount of debt you have. The more debt you have than your credit limits and original loan balances, the lower your credit score will be. Even if you are not shopping for a credit card or loan, your credit score affects your life and the cost of other products and services, such as auto insurance.

Bottom Line
I hope this article explains my reasoning why I hate debt so much. I believe getting into debt is a terrible idea because it can cost you dearly. In addition, being in debt slows down your process to the financial dream you always wanted. Avoiding getting into debt my whole life is why I can create and build the wealth of my own. So do not get yourself in this mess, and avoid debt as much as possible.
Your financial future depends on your ability to save and invest the money you make. So, every time you use debt to purchase something you cannot afford, you are essentially stealing from your future wealth. In fact, you are using your hard-earned money to fund somebody else's. Place your future ahead of your current desires, and stop using debt.

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