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Why debt matters...

Historically speaking, we as a society continue to increase our debt load, both as individuals and corporately. While our parents or grandparents understood the value of saving, our culture has not embraced this value and rather encourages us to spend beyond our means through easy credit in order to acquire more, newer, and better things. As a result, many people quickly end up with significant debt that can negatively impact their credit rating and cripple their spending power through large interest payments.

What is the problem?

Debt in some cases can be worthwhile. It is often worth going into debt in order to finance education, and in some cases a car or a house. The problem occurs when more debt is taken on than can reasonably be repaid, or when new debt is being used to pay for older debt. A significant source of debt is relying on credit cards and not paying off the full balance monthly. While credit cards can be a useful tool in some circumstances, they often cause people to spend more money than they earn and not keep track of what they spend until the bill arrives at the end of the month. Making only the minimum payment both increases the overall interest of the debt and prolongs the time in debt. While it can seem like a good idea at the time, it is not a good long term strategy.

What is the solution?

There is no one solution to debt, rather there are many things that can be done to limit or deal with debt. The first is to try to avoid debt before it becomes a problem. This can be done through making a budget that matches income to expenditures and sticking to it. Limit impulse buying and be very aware of how much you spend. If you are spending more than you earn, you need to find ways to either earn more or spend less. Cut out frivolities like eating out, going to movies, buying more clothes than you need, etc. If you are already in debt, the first step is to sit down with all your bills and determine how much debt you have. If it is credit card debt, I recommend cutting up all your credit cards. You can always apply for one later, but for now drastic measures need to be taken. Next, look online or at the library for free credit counseling. There are usually many services available that can help with either finding you a consolidation loan or negotiating with creditors to make your payments more affordable. The worst thing you can do is to carry on with the habits that got you into debt. Be aware of your problem and take the steps to solve it.