27 Oct Living the Debt Free Life
by Mekelle Tenney
Last year the “American Household Credit Card Debt Study” showed that the average American household credit card debt is $15,762. They also found that the average household auto loans average out to $27,141. Currently only 20% of Americans are debt free. Many people do not see this as a bad thing. In fact, many Americans do not see why the problem is with having debt. Is debt a bad thing? I recently came across a list of 9 reasons why debt is a bad thing:
- Debt encourages you to spend more than you can afford
- Debt costs money
- Debt is borrowing from your future income
- High interest rate causes you to pay more than the item cost
- Debt keeps you from accomplishing your financial goals
- Debt can keep you from owning a home
- Debt can lead to stress and serious medical problems
- Debt can hurt your marriage
- Debt hurts your credit score
How exactly does debt affect the family? First of all, debt can harm marriages. A recent study showed that newlyweds who had high amounts of debt reported low marital satisfaction. For years, research has indicated that the top cause of stress within a relationship is debt. Debt can lead to depression, divorce and family breakdown. When couples disagree about financial priorities, when there is secrecy about spending, saving and debt, or when couples do not share decision-making about finances, the well being of the relationship is threatened. Kathleen Gurney, psychologist and author of Your Money Personality, says that debt “is a silent killer, chipping away at your self-confidence.”
However, the negative effects of debt are not limited to couples. Debt can affect the whole family. In addition to setting a bad example for children, debt is linked to low academic achievement and behavior problems in children. Children whose families have financial difficulties “have more attitude problems.” Money problems can also affect the parent-child relationship if children develop bitter feelings about their parents.
So the question is, how do we avoid unnecessary debt? Only one in three Americans prepare a detailed household budget. In addition, only 30% of Americans prepare long term financial plans outlining saving and investment goals. It is almost impossible to avoid debt and save if you do not have a budget. Budgets allow you to know exactly how much you need to spend each month so that you can know how much you save each month. Not only do we need to prepare budgets, but we need to teach our children how to do this as well.
A simple Internet search will provide expert advice, programs, software and apps available to teach budgeting skills, many of them for free. To get you started, here are a few tips for both staying on budget and avoiding debt.
- Pay with cash whenever possible
- Stay within your spending limits
- Avoid impulse purchases
- Avoid buy-now pay-later offers
- Compare prices before making purchases
- Take only the cash with you that you can afford to spend while shopping
- Keep a record of all credit card purchases
- Always pay more than the minimum payment on credit card bills when possible
The good news is that when a couple works together to reduce its debt, the relations begins to improve right away. Kathleen Gurney has found that “as couples experience success paying down debt, they start to see their partners differently, and the arguing ends.” So, keep your relationship and family healthy by avoiding debt, and if you have debt, begin today to improve your marriage and family by committing together to eliminate it.