Debt is a difficult plague to avoid. In fact, in the United States, around 80% of consumers carry a debt. It’s often argued that debt is what makes developed nations what they are. However, while borrowing money will give you the ability to buy things like cars, houses, and more, there’s also a seriously dark side to debt.
Harsh Reality #1: Most Americans Die in Debt!
When it comes to debt, we take in on in hopes to pay it off and become debt-free one day. However, for most Americans, that doesn’t actually happen. In fact, according to recent data, around 73% of American consumers die in debt with an average balance of $61,554 left over. The types of debts range, but remaining unpaid balances were on average, $25,391 in student loans, $4,531 in credit card debt, $17,111 in auto loans and $14,793 in personal loans.
Harsh Reality #2: Rewards Don’t Pay the Interest!
One of the most common credit cards being used are known as rewards credit cards. These credit cards offer various rewards including cash back, free airfare and more. In most cases, rewards are tracked through a system of points, turning spending into a game. However, while you rack up those points, keep in mind that rewards don’t pay the interest. At the end of the day, credit card companies would not be offering the rewards that they do if it wasn’t for the money they make in doing so. The fees associated with credit cards will generally outweigh the rewards as the borrower continues to fall further into debt.
Harsh Reality #3: It Takes a Serious Change in Lifestyle to Become Debt-Free Once You Start Taking on Debt
Taking on debt is ultimately a lifestyle decision. When you swipe your credit card for the first time, buy that first car on credit, or take out your personal loan, you’re making a decision that you’re willing to buy more than you can afford and live life as a borrower. Ultimately, to reverse this trend, serious lifestyle changes are necessary, just ask Jim Davies.
Jim Davies is a doctor whose story of becoming debt-free hit the mainstream as an inspiration to demonstrate how he paid off more than $400,000 in debt in less than 2 years. While Davies is a doctor with a great income, even he realized that he and his wife could live the lifestyle they had become accustomed to, or they could undergo a very big lifestyle change, become debt-free, and live that same lifestyle without $4,000 per month in minimum payments. To get a good idea of the lifestyle changes that are necessary to truly become debt-free, I would strongly suggest reading the article linked to above.
Harsh Reality #4: The Bank Is Not Your Friend!
While you may feel as though the institution that provides you with money to spend when you don’t have it is a friend, they’re really a foe. At the end of the day, that bank wouldn’t be providing you with the money if it wasn’t for the fact that they believe they will make money off of you in the process. When that money stops coming, the banks will do everything in their power to get money back. Sure, it’s not as bad as borrowing from the Mob, but after taking you to court and with a judgement in hand, banks can go after your car, your paycheck and even your home!
However, there is a silver lining in this one. While not all banks care, many will be willing to work with you if you are in desperate need and make a phone call. Ultimately, the lenders want their money back. So, if you can’t make your full payments and call your lender to inform them of your hardship, they may place you in a financial hardship program with a lower interest rate and monthly payment. However, this is more about self-help than helping borrowers as well. After all, if they don’t offer these programs, many debts will default and the bank won’t get anything. So, they are ultimately trying to squeeze every bit out of the borrower that they can before this happens.
Harsh Reality #5: Only You Can Do Something About It
While some banks offer financial hardship programs, and there are debt consolidation, debt settlement and other debt help services out there, it’s ultimately up to you to do something about your debt. At the end of the day, if you do nothing more than pay minimum payments, you may end up like the 73% of Americans that die in debt. However, if you become proactive about paying off your debts, you could end up like the 17% of Americans that actually feel debt freedom before they pass.
Final Thoughts
Debt is no fun, we all know that. However, the harsh reality is that debt is a plague, one that follows borrowers around until they die in many cases. Don’t be one of them! It’s time to break free and pay off your debt. Start considering lifestyle changes and getting your debt reduced as quickly as possible in order to find your way to true financial freedom!
