Debt sucks!!!! Seriously it does. But there are different types of debt and interest rates are generally the best way to determine which is which. If you equate debt with credit or credit cards that might be part of the problem. They seem to be two sides to the same coin but smart money managers only deal with the credit side. Hopefully all of these things seem obvious but when you're trying to make ends meet its easier to look at the options available to spend than it is to see the ways we can cut spending.
Imagine a monthly bill of $10 dollars. Maybe its a Netflix subscription or Pandora One that keeps taking a small amount of your monthly income. Now imagine living without it for an entire month. Some of these things we use nearly every day and its much easier to fork over what seems like a small cost in exchange for something that we would miss having on a regular basis. But lets say a couple of these small monthly costs sit in your budget untouched when you're struggling to pay off the credit cards used to pay for them.
If you don't see the problem with this don't worry. I didn't either. When you consider the loss of an element that serves your daily lifestyle, it can seem counter-productive to slash the "spice" of life if you will in an effort to pay back the cost of your old life style as supported by credit. In other words, you "paid" for a lifestyle on credit and have to downgrade that lifestyle to actually afford the good old days when you got to enjoy those things. Sounds like a bad deal right? It gets worse.
What's easy to miss is interest. If you make a monthly payment towards your credit card that doesn't cover the entire balance of that card it means you're paying interest on the subscriptions that you can no longer afford to use! So those small monthly costs continue to inflate every time you pay interest on the credit card balance held over from month to month. The tech boom has claimed to make life easier and more convenient but has it? Netflix at $10, $11, $20/month (inflated due to interest) may seem like a benefit of new technology but not if the "old school" alternative was watching network TV for FREE.
It's difficult to identify these small (or large) expenses unless they sit in front of you in a line item budget every day. When you make enough money to cover these costs they seem like the fruits of your labor (and hopefully they don't go on the credit card) but even if you can afford them now, you may not be able to afford them in the future. Recognize these expenses and decide if they are part of the reason you continue to struggle to pay off debt or that you can't seem to find enough money to save. Every little bit counts and the small, sneaky, monthly payments can grow into large problems. Or if you save that money, those same small, sneaky payments can grow into large savings accounts over time.
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| Where are your priorities? |
If you don't see the problem with this don't worry. I didn't either. When you consider the loss of an element that serves your daily lifestyle, it can seem counter-productive to slash the "spice" of life if you will in an effort to pay back the cost of your old life style as supported by credit. In other words, you "paid" for a lifestyle on credit and have to downgrade that lifestyle to actually afford the good old days when you got to enjoy those things. Sounds like a bad deal right? It gets worse.
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| Interest can add up to an ocean of debt |
What's easy to miss is interest. If you make a monthly payment towards your credit card that doesn't cover the entire balance of that card it means you're paying interest on the subscriptions that you can no longer afford to use! So those small monthly costs continue to inflate every time you pay interest on the credit card balance held over from month to month. The tech boom has claimed to make life easier and more convenient but has it? Netflix at $10, $11, $20/month (inflated due to interest) may seem like a benefit of new technology but not if the "old school" alternative was watching network TV for FREE.
It's difficult to identify these small (or large) expenses unless they sit in front of you in a line item budget every day. When you make enough money to cover these costs they seem like the fruits of your labor (and hopefully they don't go on the credit card) but even if you can afford them now, you may not be able to afford them in the future. Recognize these expenses and decide if they are part of the reason you continue to struggle to pay off debt or that you can't seem to find enough money to save. Every little bit counts and the small, sneaky, monthly payments can grow into large problems. Or if you save that money, those same small, sneaky payments can grow into large savings accounts over time.
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