In times of plenty, the average amount of debt a person carries tends to increase as consumers use credit cards like cash and make big-ticket purchases on items like cars and expensive electronics.
However, such behavior may lead to an impossible mountain of debt when the economy reverses course or stalls.
Although the country has seen a few years of mediocre economic growth, that’s no reason to accumulate debt.
Getting out of debt at all costs is essential for future financial health, no matter the state of the economy. Consider the following problems that may develop when debt grows each month and spending is out of control.
Five Reasons to Get Out of Debt ASAP
1. Credit card rates rise out of control
Debt may sneak up on an irresponsible spender when a few small credit card bills turn into massive monthly payments due to exorbitant interest fees and charges.
Unfortunately, many spenders consider the available credit on a card as money to spend, instead of money that must be borrowed and paid back.
Old credit card debt is often costly debt because interest rates invariably rise and create financial hardships.
All spending on credit cards should stop. Even after debt is fully repaid, spending on credit cards is a bad idea for anyone who doesn’t have the discipline to pay balances in full every month.
2. The economy is volatile and unpredictable
Economic experts may throw out as many predictions about the economy as they can, but the future is never certain. Heavy debt may throw a life into chaos after a job loss or income reduction.
Surviving an economic downturn is hard enough for someone with a few credit card debts, but debt will balloon during an economic slowdown where jobs and livelihoods are lost. Paying huge credit card bills is impossible on unemployment benefits.
3. Negative impact on relationships and stress
When a couple or family must deal with problems putting food on the table due to heavy debt, every discussion becomes a money discussion.
Putting debt to rest is one of the best ways to restore balance to a relationship and reduce stress.
Difficult lifestyle changes may be required of an indebted family, but each month a husband or wife sees a lower balance on a credit card bill, spirits will rise, and anxiety will dissipate.
4. Heavy debt lowers credit scores
A credit score guides an incredible number of applications, and heavy debt may torpedo a family’s chance at a mortgage and may even make it impossible to secure money for less expensive items like vehicles or student loans.
When a person or family chooses to reduce debt, a credit score will naturally rise over time as spending becomes less reckless and debts disappear.
In recent years, employers have started to consider credit scores before hiring, so a low credit score could even make it difficult for a person to secure future employment.
5. Debt halts retirement funding
Many people don’t worry about retirement funding until it’s too late, and end up carrying heavy debts into retirement when life should be relaxing and enjoyable.
The Great Recession decimated the retirement funds of many residents around the country, putting into jeopardy the ability of some couples to pay for life’s basic necessities after retirement. Large debts make saving for retirement impossible.
Getting into debt is easy while getting out of debt usually feels like a Herculean challenge. Drastic life changes are required for anyone who is drowning in huge bills each month.
Working on reducing debt is the best way to a safe financial future and the ability to survive any of the economy’s invariable curve balls.