Debt, America's Greatest Failure at All Levels of Society

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 to keep.

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 corner.

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, again.

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 lifestyle.

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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 debtfreetoretire.com