Wisebread: How debt fools people
Wisebread is bringing up some points about debt that are easily overlooked at How debt fools people.
A snippet:
The reality of debt spirals is more insidious. It results from the loss of flexibility when a household incurs a perfectly reasonable amount of debt — or even no debt at all, but some amount of fixed monthly expenses — and then suffers a negative economic event such as a large unplanned expense or a drop in income.
Because that’s the way that debt really works its harm. It’s not that it costs so much money (although it can), nor is it people obligating themselves beyond their means (although some do). It’s that it makes the household finances so much less flexible. It’s not the extra $28, it’s the inability to adapt.
Posted: January 11th, 2010 under Debt relief, Financial Literacy, In the Blogosphere.
Comments: 2
Comments
Comment from keith
Time: January 11, 2010, 3:13 pm
If I may. A good rule to follow is this; if I can’t pay for it then I shouldn’t buy it. This should be applied to everything excets autos and homes. The goal once one of those two purchases are made is to pay them off asap. Declare war on them. Living this way is the start to finanical freedom.
Comment from Paula Wethington
Time: January 11, 2010, 10:28 pm
Good point, Keith.
Those of you who are looking for motivation on how to do that may want to look into Dave Ramsey’s Financial Peace University program. I haven’t personally taken the class, but from what I’ve heard about it, participants become VERY motivated to pay off debts.
One way to free up cash for a debt elimination plan (or get by on a downsized budget) is to look for cost savings in every line item in your household finances. That’s my area of expertise: ideas on how to save money.
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