If you are finding your debts multiplying faster than your assets, you are not alone. Mortgage, credit cards, student loans, car loans… when you’re making room for it in your life, it can be quite overwhelming.
When our parents were young, debt was a bad thing. People spent their whole lives saving up for stuff, so that they wouldn’t have to embarrass themselves by borrowing money. Fast-forward 25 years or so and you don’t think twice about putting your groceries on a credit card if you’re a bit short this week. Then there is an extra credit card for an upcoming holiday, a payday loan to cover an unexpected dentist bill and so it goes.
All of which means that most of us have some form of debt hanging over us, most of the time. No wonder we’ve gotten used to the idea.
Early Debt
For many of us, the first major debt of our lives is student loans — either in the form of Commonwealth HELP debt or bank loans. Trouble is, it accrues without us really thinking about it, and then, with the HELP debt in particular, we don’t have to think about repayments either … those compulsory payments just start when we’re earning about $38,000 and ATO takes care of it. The fact is, though, that you can make extra voluntary repayments to the tax office at any time. That’s right, you can make major inroads into that debt whenever you have a bit of extra cash. But how many of us do?
Pyramid of Debt
Debt is what you create when you are living beyond your means. It’s not the amount you spend, or what you spend it on; it’s whether you can afford to pay it off.”
If you are borrowing from one source to repay another – that is not a debt solution, it is a debt Pyramid.
Borrowed cash is still Debt
In these days of easy credit and relatively low-interest rates, it’s not that hard to slip into the habit of living beyond your means. You make the minimum repayments and life goes on — after all, everyone you know is in debt too. It’s just part of life. Except it doesn’t have to be.
Borrowing Money from friends or relatives is not a solution unless you recognise this money as debt and treat it as debt.