I just concluded training for a loan recovery company yesterday. It's alarming the number of people that live on debt.
According to Wikipedia, Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor.
In my opinion, I think it's better and healthier to live a debt free life. This is because once you start taking loans or making a small purchase on your credit card, your debt starts to accumulate.
That's how it starts and before you know it, you're thousands of dollars in debt. There are positive and negative impacts of debt in our everyday life.
Debt encourages you to live above your earnings. You end up spending more than you can afford. There is this temptation and also comfort you get when you are able to get things without having to deal with the payment immediately. It feels like you are getting something for free.
Contrary to the belief of others, debt is expensive. It cost more money and this is in the form of interest. There is usually a price you pay for every debt you create.
The longer it takes to repay your debt, the higher your interest rate. This will make you pay more than the amount you owe (principal).
Debt is also like borrowing from your future earnings. This is one of the major reasons I don't personally like debt. Although, it's inevitable sometimes but I try within my capacity not to indulge in it.
Anytime you are in debt, you are borrowing from the money you hope to earn in the future. Do you want to spend your money paying for something you've already used up and don't get much value from anymore?
You never know what changes may happen in your income, so it's better not to mortgage your future. Debt keeps you from reaching your financial goals and also causes anxiety and stress.
If you are already in debt, it is important to budget and manage that debt before it gets out of control.
Know how much you owe. It is advisable you make a list of your debts, including the total amount of the debt, monthly payment, interest rate, and due date. Debt reduction software can make this process easier.
Refer to your debt list periodically, especially as you pay bills. Update your list every few months as the total amount of your debt changes.
Stay committed to your payment as late payments make it harder to pay off your debt since the interest rate keeps accumulating.
Try as much as possible to avoid incurring more debts when you are yet to clear off your previous debt. It can be difficult, but with discipline you can live on a budget.