Everyone has seen the television commercials with slogans such as “Buy now pay later,” and the like. You do not need to save your money to buy that new car, a wide-screen TV, that latest smartphone, or a holiday on a tropical island when you can have all these things now.
Avoiding Dumb Debt at All Costs
Instant gratification is a very expensive habit; one that will lead you to a life of financial challenges. There have been misleading statements in some of the advertising; one I saw read, “Helping you to get ahead.” That kind of slogan suggests that the finance company is doing borrowers a favor which is far from the truth.
Loan sharks and finance companies thrive on financial ignorance; a person with even a basic grounding in personal finance will avoid loan sharks as if they had tested positive for covid. One should ascertain whether the item is a want or a need before signing on the dotted line.
Many people go into debt because they want to live a champagne lifestyle on a lemonade budget just to impress their friends. They are not happy with living modestly. An expensive lifestyle is costly in the long run.
The parable of the prodigal son is a perfect example. Here was a young man who blew his inheritance on wasteful living and ended up living in poverty due to his lifestyle. He not only blew his inheritance but was most likely living on credit.
It is borrowing that really kills off a person’s chances of financial success. That interest rate is dead money; it is the cost of borrowing. Paying interest on stuff you have bought on credit adds to the cost of it and the value of a lot of stuff bought on credit is worthless as soon as you take possession of it.
“If you don’t have the money you don’t buy it,” is a simple philosophy to adopt. What you think you cannot live without is something others have learned to live without. It all comes down to the choices we make.
There are some circumstances when it may be wise to borrow such as when the value of the item you are purchasing is going to make it financially worthwhile such as a student loan.
This may or may not mean you will get a good-paying job but you must be absolutely clear that it is what you want to do otherwise the course will be a total waste of money.