Why You Need to Start Treating Your Debt Like an Emergency

At some point debt became the normal way of living. Need a car? Just take a loan out for it. Need a new sofa or can’t afford your groceries this month? Just put them on a credit card. The average household boasts over $15,000 in credit card debt, $155,000 in mortgage debt and $32,000 in student loan debt, according to Nerdwallet. While you may not be alone in the debt boat, you shouldn’t consider it a normal part of your budget either.

This year, think of your debt as a blaring emergency. Because the truth is that your debt is a sign that your budget and financial situation is not as healthy as it should be. A very ill patient does not look around the hospital room and feel comforted that there are hundreds of others with the same disease, so it must be normal. No, that patient does whatever it takes to get back to a healthy way of life, even if it means going through the extremes of raw diets or painful treatments.

Make Your Money Work for You

Look at your debt as a sign of the failing health of your finances and be prepared to do anything to get your budget back to a healthy way of living.

Related: Dave Ramsey’s Advice for 2015: “Get Out of Debt”

The Consequences of Debt

Many people are fooled into thinking that some level of debt is beneficial. They overspend, thinking that they are improving their credit scores. This is not always true and the benefits of debt do not outweigh the consequences. Here are just a few of the negative side effects debt comes with:

Interest Rates

Even if you are paying a low interest rate on a debt or loan, you are still paying someone extra to borrow money you didn’t have. Interest rates can suck your finances dry and cause you to pay too much for purchases. For example, if your interest rate is just 2% higher than prime on your mortgage loan, you’ll end up owing thousands of dollars more for your house. 

Make Your Money Work for You

Lower Credit Scores

Lasting debt ruins your credit score. Even more importantly, your credit score will take a big hit if you miss a payment. A lowered credit score means it’ll be more difficult to qualify for a mortgage or other loan. Sometimes a bad credit score can even affect your job search. 

Restricted Freedom

You work hard for your money, so it’s depressing to see the majority of your paycheck go to debt repayments. Think about all that you want to do in life. How many of your dreams are restricted by financial issues? If you hate your job and want to quit, chances are you cannot until you get another job because you have too many bills to pay. If you wanted to travel to an exotic place, chances are slim you’ll get to do that because you don’t have the extra income to spend on things you want to do.

Make Your Money Work for You

How to Pay Off Debt Quickly

Once you realize that debt is not a good thing to have around, it’s wise to start paying off as much as you can, as quickly as you can. Here are a few ways to pay off your debt quickly:

No one ever said that paying back debt was easy, but with the right mindset, you can get out of debt and become financially healthy.

Photo credit: Matthew Rogers