Debt, America's Greatest Failure at All Levels of Society
Living in debt is one of the greatest failures at all levels of
American society. Many people have discussed the importance of
saving for retirement as early as possible, using the time value
of money as the major factor in achieving success in retirement.
The truth is debt management cannot start early enough either.
When your debt is minimal, for needs only, you can stop the
bleeding from your bank account and investments by buying less.
Begin to learn how your buying and spending habits contribute to
your debt. Uncontrolled Debt has the most disastrous effect on
your lifestyle and retirement.
Anyone living in debt will recognize how true this statement is
for them. Everyday brings a fear of not meeting the months living
expenses including the minimum payments on your credit cards.
Checking caller ID to prevent yourself from answering a call from
yet another collection service causes indigestion, or an upset
stomach, because the calls always come at dinner time. Going to
bed when you are ready to relax and sleep brings new nightmares
of losing your job and losing everything you were working so hard
You will recognize your responsibility in preventing debt,
because your lifestyle from this day forward depends on you...
your ability to control your spending, learning where you will
save money and the difference between good debt and bad debt.
You will not gain freedom to live worry-free or to retire without
changing your debt habits. Using credit cards and loans expands
your purchasing options and ultimately, your bad debt.
You must be careful that while spending cash, you are not falling
into the category of "Bad Debt". Bad debt pertains to those
things you want, but do not necessarily need. Bad debt may also
encompass impulse buying or purchases discussed with your
partner, decided upon, and bought without money to back them up.
Discretionary money is money that should be left over after you
have covered your living expenses. How does spending available
cash or debit/credit card purchases lend itself to bad debt? The
first problem I am describing is spending until your
discretionary money is gone each month. Many people feel that if
there is money left over, they should be free to spend it and
they do, until there is nothing left each month.
The second problem occurs when your expenses exceed your paycheck
.... needing an extension to your cash flow to meet the operating
costs of your home life. This is where the credit cards enter
into the debt picture, literally, painting yourself into a
Good debt is debt to cover necessities... the purchases that you
need: a roof over your head, transportation to and from work,
food, clothing, etc. It is responsible debt within your means and
does not extend into credit card usage. It does extend into
savings though, if necessary considering it a payment to
yourself, each and every month.
You need to learn to live not only within your means but to find
the money in your financial strategy to meet your contribution
goals for IRA's, 401(k), etc. and make sure when you retire you
will be fiscally capable of fulfilling your retirement dreams.
Because being debt-free is the cornerstone of your current life
and the basis of your future.
Good debt/bad debt: Confusion between your needs and wants are
dispelled by asking yourself how your life will be affected if
you do not have this item. This question is a very large factor
in preventing the occurrence of debt.
You and your family need to be clear on this concept of needs and
wants and learn to save for "wanted" purchases as well as
emergencies. I would ask questions, such as "Do you have a rainy
day fund in case you need to make important repairs or more
importantly, if you do not have a cash reserve fund, how do you
plan to pay the bill on your next repair?"
This is a major aspect of debt habits. Without a plan for
emergency spending, you will enter into a debt spiral. A debt
spiral causes your available cash to stay beneath the savings
line, continuously circling downward into deeper debt, paying
more and more in monthly fees, and consuming your discretionary
income. Then the next emergency occurs and the spiral deepens,
You and your family need to know how to save and eventually,
conquer this problem of increasing liability. Education remains
the most important concept for you and your family to assimilate
into your standard of living in order to recognize the issues
that tend to destroy your investment savings and your family's
Irene A. Majchrzak helps people retire debt-free with a sense
of well-being and the freedom to have the things they want.
Get her free ebook, Debt Free to Retire, by going to