Debt = Financial Cancer, Part One


Debt can be deadly to your finances!  It’s so dangerous to your financial health, that I believe it’s not being too dramatic to say debt is like financial cancer.  However, the banking industry has done such a fantastic job marketing their product – debt – to the American people that we can scarcely imagine not having a car without a car payment, a house without a house payment, or a wallet without a credit card.  Let’s look at the ways that debt can eat away at your income and nest egg and cause ruin to your financial health.

·        Types of Debt – From Bad to Worse.  The least dangerous type of debt is mortgage debt.  Notice that I did not say it was safe debt!  With the recent housing market crash, it’s obvious that buying more house than we can afford with little or no down payment is a recipe for disaster.  Your best bet is to rent while saving up to buy a house with cash.  However, most Americans are not patient enough to do this.  The next best way is to put a sizable down payment on a house and get a 15-year mortgage.  Not only will you get out of debt sooner, but you’ll pay WAY less interest over the life of your loan.

            Many of us have fallen prey to the myth that “you’ll always have a car payment.”  The average car payment in the US is about $475 per month.  That is $5,700 per year!  The sad part of it is that many people owe more on their cars than what they are worth.  The vehicle that I currently drive, I paid for with cash over seven years ago.  I continued to drive my previous car for 2 years after it was paid for and saved the money I would have paid in car payments.  Then I took my cash to the car dealership and negotiated a great deal – with no payments!  I currently have enough money in my savings to purchase a newer car, so again I am holding out for a great deal. 

            The most dangerous type of debt is credit card debt.  Credit card debt is unsecured, meaning there is no tangible asset to back it up unlike a mortgage or car payment.  Why is credit card debt so destructive to your financial health?  It is SO easy to charge up purchases that you really can’t afford.  You can get trapped in the cycle of using your income to pay your credit card, then not having enough cash to pay for groceries and gas so you charge the card right back up again.  Did you know that on average people spend 12-18% more when using credit cards than cash?

·        Debt payments eat away at your income.  Your income is your most valuable wealth-building tool.  But if you have a house payment, a car payment, and a handful of credit cards, those payments are going to take a big bite out of your income.  Most of your paycheck is spoken for every month before it even hits the bank.  This leaves very little money left over for saving, giving, or family fun.  Just imagine what you could do with your money if you didn’t have any payments! 

·        Being in debt causes marital stress, which can lead to divorce.  Debt puts a financial strain on any marriage.  In fact, the leading cause of divorce is money problems.  Staying in denial about the state of your finances only makes it worse.  However, couples that get on the same page about getting out of debt and living within their means can beat the odds of financial ruin and divorce. 

Stay tuned for “Debt = Financial Cancer, Part Two” coming tomorrow! 

Article by Christine Luken Originally Appeared in  Healthy Times Magazine, January 2013


Comments 26

  1. This is definitely a helpful list. Since I opened a credit card at age 18 I have never held a balance. I am terrified of having credit cards debt, so I simply don’t spend what I can’t pay off. I use my credit card for everything because I get cash back, and I know I am always paying it back.

  2. debt is horrible. i had a LOT of debt when i met my husband. it took years of hard work and lots of extra side jobs but it’s gone. now our only debt is our mortgage.

  3. My grandfather was so adamant about my parents and their grandchildren staying out of debt. He actually took me to the bank when I was 18 and helped me learn about loans and taking care of credit.

  4. We don’t have any credit cards, and while sometimes I wish we had just one to have around for emergencies, I am actually glad that we don’t! It forces us to save for what we want and save up for emergencies too.

  5. Debt is definitely dangerous. I have been trying to teach my daughter and her fiance financial lessons before they get married and I have emphasized how bad debt is.

  6. Debt sucks. We do not have credit cards or a car payment, but it stinks having a mortgage. We are working really hard to get rid of that too. We do not live elaborate, but my kids do not go without and we are all happy.

    1. Post
  7. Great post! I had my share of credit card debt when I was in college. Finally got it paid off and now I have just one card. My AMEX that I use only in emergencies and pay off the full balance right away or as soon as I can. I like using cash/debit.

  8. Pingback: Overdraft Protection: Blessing or Curse? (Video) | Christine Luken

  9. Pingback: 4 Money Mistakes Entrepreneurs Make | Christine Luken

Leave a Reply

Your email address will not be published. Required fields are marked *