3 Little White Lies That Keep You In Debt

Every so often, when we hear or read about debt, it seems like an ordinary and necessary part of our finances since everybody ‘seems’ to be servicing some kind of debt.

I do not know anyone who is particularly thrilled to be in debt, although in many cases the unsuspecting individual can easily amass huge amounts of debt due to little white lies wrongly interpreted as good advice.

Personal debt can very easily spiral out of control and ruin you financially, so it pays to have the right information and make good use of it in a timely manner.

In this article, I am going to help you identify 3 little white lies that keep you in debt, so that you can make an informed decision when it comes to borrowing money.

Lie #1 – You can borrow money and spend your way to wealth

Every penny you borrow has to be paid back at some point in time, and in most cases with interest.

One sure sign that you are caught in this trap is finding yourself borrowing money to buy things that you believe will make you look rich, whether you can afford them or not.

This is also fueled by the erroneous belief that borrowing money to display wealth is the starting point to becoming wealthy.

Outward appearances can be extremely deceptive. Wealthy people save and invest as opposed to borrowing for grandiose consumption.

Lie #2 – Always use other people’s money

This is a fantastic principle when it comes to business but can be outright dangerous when applied to consumer loans.

When you take a consumer loan with this attitude in mind, you are presupposing that you are using the lender’s money to your advantage by buying whatever you want now, yet in essence you are consuming your future income today.

Debt has a cost, and for most businesses, the borrowed money is used to generate enough money to pay off the loan (with interest) and make a profit.

This is not usually the case when it comes to consumer loans.

Lie #3 – Always pay the smallest amount per month and ensure that your debt is spread over a longer period

Small loan payments usually translate into huge costs when you opt to spread your debt over a long period of time.

When making loan repayments, you will usually pay both principal and interest per instalment. However, the longer the loan remains outstanding, the more interest you are likely to pay.

This is one of the reasons why you can pay a debt for what seems like forever without a significant change in the outstanding balance.

For instance a $2,000 laptop computer could cost you about $3,600 if you opted to pay 24 easy monthly instalments of $150.

As enticing as it sounds, the interest component alone comes to $1,600 over the 24 months or $67 every month.

Always be aware that for as long as all you keep paying is the interest, you will take a very long time to clear your debt and you will pay a lot more than necessary.

Managing your debt

Debt in itself is not bad, but its value is justified by its use. When used incorrectly, debt can tear families apart, destroy friendships and leave you with an overwhelming feeling of despair.

The worst thing about debt is that it makes you do things you would not normally do, based on the Biblical truth – “The Rich rules over the poor and the borrower is slave to the lender” (Proverbs 22:7).

Understanding when and why you should be borrowing money is the first step to avoiding the unnecessary experience of feeling too deep in debt to ever get out and wondering what it would be like to be debt free.

If you’re struggling with debt and simply can’t see a way out, click here to download a copy of 7 Steps To A Debt-Free Life, your complete step-by-step guide to getting out of debt and staying out of debt… starting today.