It’s a fact: Every dollar that you spend on one thing is a dollar that you can’t spend on something else. If you’re spending some of your dollars every month on debt payments, you’re missing out on the opportunity to use those dollars for other things. So today’s question is simple: How is debt holding you back?
Debt is an insidious and tricky form of financial slavery. It’s easy to get in to, but can be very tough to get out of. And it’s very expensive: The amount that you pay in interest on borrowed money can sometimes add up to more than the amount of money you borrowed in the first place. And that money that you pay in interest every month is money that could be better used in other ways. There are plenty of great things to do with your money, but if you’re stuck with debt, it’s going to hold you back from accomplishing them.
The old saying is that debt is using your future to pay for your past. If you do that, then you’re selling your future short. When you borrow money for something, you tie your finances up for months or years to come, and limit the things that you can do in life. Debt is self-imposed slavery.
Unfortunately, large debt loads can hold you back from some of life’s most important financial goals, as well as some of the once-in-a-lifetime opportunities that the world may present you. Here are four common ways that debt can hinder your life:
1) It keeps you from giving.
Generosity is an incredibly important part of a balanced financial life. In fact, it shows up twice in God’s Master Plan for your money — God wants us to tithe faithfully to our churches and to give generously to people in need around us. There are rewards attached to these actions, both a spiritual reward and a financial reward. But if your monthly budget is dominated by debt payments, you’re going to be very limited in how much you can give. Some people have so much debt that they find it difficult to tithe; many people in debt are unable to give as generously as they would like. Living a lifestyle of debt holds you back from the opportunity to make a difference in the world with your money, and as a result it also holds you back from receiving the blessing that comes from generosity.
2) It keeps you from investing.
Over the course of life, the best way to build wealth is to diligently invest a little bit of money every month into a good mutual fund. In fact, doing so can very easily make you a millionaire. But if you have big car, credit card or student loan payments to make every month, you’re going to find it difficult to invest. And because the key into investment is the growth that happens over time, every month or year that you go without investing makes a big difference on the amount of wealth that you can build during your lifetime. Investing well can mean great college savings for your children, a wonderful retirement for you, and a healthy inheritance for the next generation. If you let debt hold you back from investing, though, it’s also holding you back from all of those important things.
3) It keeps you from exciting opportunities.
One of the things that makes life so exciting is the potential to do unexpected, extraordinary things. For adventurous souls, life is full of exciting opportunities. From backpacking through Europe to becoming a missionary in South America, staying home with your kids or starting a business based on a new idea, there are hundreds of great life paths available to young people today. The problem is that debt can get in the way of those things. If you have debt, you need a certain amount of income every month to be able to stay current on your payments. And that can stand in your way of exciting opportunities, because many of life’s great adventures don’t pay well (especially at first). A person with little cost of living and great financial agility can jump into new ventures with little fear. But if you have debt, it’s likely keeping you chained right where you are.
4) It’s self-perpetuating.
One of the most infuriating aspects of debt is that it often leads to more debt. Think about it: You need to replace your car, but you don’t have any cash to buy the car because you’ve spent years making payments on your current car (and your credit cards, and your student loans, and your consumer electronics, etc.). So what do you do? You borrow money to buy the next car. This cycle repeats itself over and over. Because debt prevents us from saving money well, it forces us to borrow again to buy new things. This creates an attitude and a lifestyle of debt. It begins to feel so normal that we forget that life isn’t supposed to work this way. Many people spend their entire adult lives in debt for this reason, permanently hindering their ability to save, invest and give.
Of course, it’s possible to defeat debt, and doing so makes a dramatic difference in the lives of the people that accomplish it. It’s not a complicated thing to do, although it does require a lot of hard work. Perhaps the best way to get motivated to pay of your debt is to realize what life would be like if you didn’t have any.
So, we’ll end with the same question we began with: What is debt holding you back from?
Photo by Steven Depolo. Used under Creative Commons License.