Did you know that you're being deceived? Right now, everywhere. On TV. In the newspaper. On the radio. In magazines. You're getting the same message over and over again: "buy now, pay later"; "consolidate your debt into one easy monthly payment"; "get a secure line of credit". Or the perennial favorite, "don't worry, it's good debt".
The truth is, there is no such thing as good debt. Debt is debt. It's money you owe someone, money that needs to be paid back at some point in the future. "Good debt" is a misnomer. There's better debt, sure, because there's also really bad debt. But debt is never good. Not really.
We live in a debt-ridden society. We're encouraged to buy things on credit all the time. Why? Because it's a profitable business for lenders. They're not doing it out of the goodness of their hearts. They're in it to make money, and their target is you .
Of course, it's hard to live entirely without debt. To buy a home these days you almost always need some kind of mortgage, this is true – few people can afford a house outright, especially at the beginning of their careers and families. But you don't have to be in debt for the rest of your life. A mortgage is meant to be a temporary debt, one backed by the (normally) stable value of the property you purchased with it. It should be for a reasonable, affordable amount that can be paid back within 10 to 20 years of the purchase. And you should have some of your own equity in the house right from the start. But that's not what people do anymore. They get mortgages for 100% of the appraised value of the house. Worse yet, they get interest-only mortgages that leave the principal – the amount you borrowed – untouched. Is it no wonder that these people eventually find themselves drowning in debt?
But it goes beyond mortgages. A debt mentality pervades our society. Once you have equity in your home, for example, the banks urge you to "free up" the money with home equity loans and secured credit lines. Use the money to better your life, they say, by renovating the house, taking that big vacation you've always wanted, or – here it comes – consolidating your other debt.
Your other debt? Sure. You think the only debt people have is mortgage debt? No, they have plenty of other debt. It's a banker's wet dream out there today … Credit lines. Cash advances. Overdraft coverage. Automatic credit card limit increases. Pay nothing now. If you're not careful, you can build up a lot of debt very quickly.
And that's the problem: those debts have to be repaid sometime. Rack up too much debt and soon you'll be worrying about the monthly payments. Your peace of mind will suffer, and possibly other things like your marriage and your job. Is that the kind of price you're willing to pay in order to have things you couldn't otherwise afford?
The solution isn't debt relief or debt consolidation. It's debt avoidance . You should do everything in your power to avoid debt. Because too much debt will tear you down, physically and mentally.
What if you already have a lot of debt? There are things you can do. Yes, you can consider consolidating the debt, but that will only work if you're able to stop accumulating more debt once your current payments are lowered. Otherwise, you need to attack your debt using a step-by-step plan that involves paying off the highest-interest debt as quickly as possible, then using the money you free from that debt payment to pay the next-highest debt, and so on. It's the snowball debt reduction method, and it works.
The key to all of this is willpower. Make the commitment today to be debt free as soon as possible. The peace of mind it gives you will make it all worthwhile in the end.