Consumer Debt Is Costly.
The hard truth of the matter is that...
Consumer debt... is simply too costly.
It costs us... much more... than we realize.
In fact... failure to "realize" this truth... may be the most costly mistake of your life.
Driven by our desire to "have it now"...
We unwittingly obligate ourselves... not just to the more obvious (but generally ignored) direct costs... but also to the less obvious (and perhaps even more damaging) indirect costs... that consumer debt extracts over long periods of time.
While the direct costs are large... the indirect costs are huge.
And yet... cost is often considered least among all the factors that influence our decision... whether or not... to make new debt.
Most of us have experienced... or are still experiencing... the weight, the burden, and the effect of years of carrying consumer debt.
|Two things are infinite: |
The universe and human stupidity.
And I'm not sure about the universe.
~ Albert Einstein
Everyone Knows How The Burden Of Consumer Debt... "Feels".
But... feelings are intangible. They cannot be calculated and quantified.
And... feelings alone... may not demand our attention to a degree that will cause us to sincerely focus on the source of the bad feeling.
The odds are... that merely "feeling uncomfortable" about your consumer debt load... will not be enough to motivate you to take decisive and aggressive action.
We humans are often... quite accepting of our circumstances.
And so... it normally takes something more tangible and quantifiable than an "uncomfortable feeling" to compel us to act.
Something more "definitive."
Something more "in your face."
Perhaps even more "threatening" or "ominous"... before we will act.
That clarity of perspective can only be obtained... by first calculating and then fully comprehending... the total long term impact of...
The real cost of your consumer debt.
Expressed in dollars... not "feelings".
But before we discuss how to calculate and evaluate just what your consumer debt really means for you... let's first define consumer debt.
What Is Consumer Debt?
Consumer debt... is debt made in order to purchase consumable items.
It is debt which is used to fund consumption... rather than investment.
According to Wikipedia... Consumer debt is consumer credit which is outstanding.
Consumer debt is created by "borrowing money" or using "credit" to purchase "something" that... will not increase in value over time.
For instance... if you buy a "big screen TV" and put it on the card... you have created consumer debt.
A "big screen TV" is not an investment.
It will not increase in value over time.
The most common form of consumer debt is credit card debt, payday loans, and other consumer finance... which are often at higher interest rates than
long term secured loans... such as mortgages.
The Light Bulb... That Must "Turn On".
A complete evaluation of the full impact of consumer debt requires...
- First... that you accurately understand the direct truth about your current debt situation... which is... the total cost in dollars.
- And also... that you fully and completely comprehend... the significant impact that a long term reduction in available investment dollars has... on your future financial
Putting it another way... when it comes to debt...
- You must fully understand... "what you are taking on".
- You must fully understand... "what you are giving up".
Absolute clarity is required... regarding both of these areas... in order to fully appreciate the danger associated with consumer debt.
Until this light bulb "goes on" you will not likely be motivated to take decisive and aggressive action to change either... your attitude about debt or your debt payment
Please... don't let that happen to you.
Focus on this until the light "goes on".
This is too important. This can change your life.
I know that sounds dramatic. But it is the truth.
This stuff is certainly not "rocket science"... but it trips up so many really smart people.
Your failure to "get it" will dramatically diminish the quality of your life and your financial future.
Don't let that happen to you!
What You Are Taking On.
That said... let's start by thinking about the following question...
When it comes to debt... what would you say matters most?
Many would say that... payment and interest rate are most important.
Their attitude is... if I can handle the payment, and the interest rate sounds about right...
what else would I need to know?
Others might also include the total amount borrowed or the current principal amount owed as certainly one of the more important aspects of any debt.
However... the truth is... most people give very little consideration (if any at all) to the absolutely most important aspect of any debt that they take on.
And that much overlooked most important element is...
The total number of dollars that you are actually going to end up paying in order to entirely eliminate the debt.
It is incredibly ironic that this most important element... that represents the truth about "what you are taking on"... is so often given hardly a thought.
Generally our interest is primarily focused only on... rate and payment.
And thus many commit financial suicide... without even realizing it.
Interesting enough... total cost is something that you will never see on your monthly statement.
Creditors really don't want you to be aware of how much you will end up paying them.
They fear what might happen if you spend too much time focusing on the truth about what you are "taking on".
And so... they simply avoid reminding you of it.
After all... it is not in their best interest for you to know.
Their mere existence depends on keeping you in servitude to them for as long as possible.
|Yesterday is not ours to recover, but tomorrow is ours to win or lose.|
~ Lyndon B. Johnson
If it is better for them that you don't
know... then it must be better for you
if you do know.
Wouldn't you agree?
In order to protect yourself and have the right perspective... it is imperative that you know exactly "what you are taking on".
And "what you are taking on" is...
The total number of dollars that you are actually going to end up paying in order to entirely eliminate each and every debt.
How Costly Is Your Debt?
I warn you... this can be scary!
For each of your fixed payment debts... simply multiply your required monthly payment by the number of monthly payments remaining.
The answer is the total
number of dollars (principal and interest) that you will pay eliminating that debt.
For credit card debt... click the link below to access a calculator and compute your total cost (principal and interest)... based on how you intend to pay.
Then select "Roll Down Your Credit Card Debt".
Total everything up and see what you think.
This number is the combined total of both principal and interest. This is what you will actually pay if you change nothing.
Subtract the current balance of each of your individual debts from the above number and you will know the total number of dollars in interest that you will pay.
Consider this example...
- Say you have a credit card balance of $20,000.
- The interest rate is 18%.
- You make the minimum required monthly payment (2% of balance for this example).
This approach will take well over 30 years to get rid of this debt.
And you will pay $50,225 in interest alone.
So the total cost to you will be... $70,225 dollars ($20,000 balance plus $50,225 interest).
Are you OK with paying $70,225 for $20,000 worth of products or services?
The use of consumer debt will often cause you to ultimately end up paying an amount two or three times more than the actual cost of the item.
This is the truth about what you are taking on... when you take on consumer debt.
What You Are Giving Up.
If the brutal awareness of "what you are taking on" when you take on debt is not bad enough... wait till you understand the rest of the story.
The rest of the story is about... what is given up or sacrificed... when you spend your life paying two to three times more for items than you should.
I will use an example from the debt stacking page of this website to illustrate my point... about what you are giving up... when over the course of a lifetime you
routinely "give in" to the temptation that says "you can have this now".
On the debt stacking page of this site I gave a detailed example of the power of the debt stacking method to quickly eliminate all of your debt and save you thousands of dollars in interest.
Here is the summarized result of that example...
- Total beginning debt balance... $171,900.
- Required total monthly payments... $1,805 per month.
- Debt totally eliminated... in just 12 years (using debt stacking) rather than 32 years (without using debt stacking).
- For the same $1,805 dollars per month. No additional required.
- Interest saved... a mere $119,142 dollars.
can help dramatically reduce the heavy toll of debt.
Saving $119,142 in interest... is certainly big.
But it pales in comparison to what is "given up" as a result of "not really understanding" what is ultimately at stake.
So what is "given up" due to long term consumer debt?
The debt stacking illustration goes on to show how...
- After becoming debt free in just 12 years.
- If you invested the now available $1,805 per month for the next 20 years.
- And earned an 8% annual rate of return on your investment.
- You would end up with a balance of $1,179,533.
This is what a lifetime of consumer debt ultimately puts at risk.
Over a million dollars in assets... that might never have been possible due to consumer debt.
This is a life changing shift in financial position.
This is "what you are giving up"... by having lots of consumer debt over long periods of time.
Now consider this...
What if you were debt free? And therefore able to invest each month an amount equal to what you are currently paying on debt?
How much money could you have 10 years from now?
How about in 20 years or 30 years?
What will be the result of your current plan?
Click the following link to calculate just what you may be putting at risk.
First click here... then click "Savings Calculator.
In the future... ask yourself...
Is what I am considering really worth it?
Is it really that important to me?
Before creating any more consumer debt... that you will...
Thoroughly consider... "what you are taking on".
And you will also...
Thoroughly consider... "what you are giving up".
Consumer debt carried over the span of a lifetime will dramatically diminish your financial future.
Consumer debt... is simply too costly.
"Because It Matters"... Jim
Are You "Genuinely Serious" About Debt Elimination?
If so... download this very powerful and totally FREE
Debt Stacking Software.
Find out just how quickly you can eliminate all of your debt... including your mortgage.
And then... evaluate what saving and investing those "freed up" debt payments could do for you.
Take Control, Stay On Track, Be Highly Motivated,
Change Your Future!
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