Is Consumer Debt Making You Poor?
Ouch! As this article’s title illustrates, plain speak can be a bit painful. However, understanding what consumer debt really is, how it hurts you, and what you can do to beat it – can take some of the sting out of consumer debt’s bite.
What is Consumer Debt?
According to Stats Canada – Consumer debt is the “amounts outstanding on credit cards, vehicle loans, other personal loans, instalment or revolving debts, and unpaid bills.”
Although they can have a serious impact on your financial health, long-term debt such as student loans and mortgages are not normally considered Consumer Debt.
Isn’t buying stuff on credit the easiest way to get the things you want? Only if you don’t count the interest costs and the months/years it can take to pay back the debt generated by these ‘easy’ purchases.
In plain terms: Consumer Debt is a financial penalty (usually in the form of interest) for purchasing something before you have the cash to buy it outright. Whether it is the latest techno-toy, a holiday trip, or true necessities – the net result is the same – an increased debt burden and reduced disposable income.
For some it can become a vicious cycle – consumer debt leads to reduced disposal income, which leads to reduced ability to save, which leads to more consumer debt.
How to Get Out of the Consumer Debt Cycle
- Accept that you have power over your debt. Faith is not required – you really do have power to control your debt load.
- Take a hard realistic look at your debts. It will take some effort on your part – but we have set up some straightforward instructions in Clearly Identify Your Starting Financial Position that will help you complete this essential step.
- Set realistic goals for getting out of debt and making the most of your money. Clearly Identifying Your Financial Goals can help you take this essential step.
- Set up a realistic plan to achieve your goals. Set Up Your Plan (aka Budget) – be confident, you really can do this, and you can succeed!
- Stick to your plan – You Can Beat Consumer Debt.
You can do this!
It might not be easy, and the temptation to give up might be strong – but just remember what your goals are. Picture your life, using your money to make the most of your life – and not loosing large portions of it to the financial penalties that Consumer Debt inflicts on all its victims.
