Getting Into Debt

The one lesson we need to learn from recent years is how easy it is getting into debt. Spending money we cannot afford to spend is all too easy when we avoid thinking about the consequences.

When credit cards, mortgages and loans were available to all and credit card offers were being pushed into our mailboxes every day we all allowed ourselves to think that this was like being given free money. The truth of the situation was we were being encouraged to take on debts because big financial corporations could sell on those mortgages, loans and debts and make loads of money without fear of the consequences of us suddenly discovering we could no longer meet our repayments and pay our debts.

Why do we get ourselves into debt when the math says paying cash is cheaper?

If you sit down and do the sums it almost always works out cheaper to save up and pay cash instead of using debt and credit cards to fund our lifestyle but lifestyle is the key factor here because we all want to live a lifestyle we can't really afford.

It's human nature to want to live the good life. We all aspire to the millionaire lifestyle and borrowing money and credit cards allow us to think, for a moment, that we are better off than we really are.

Every now and again we hear about some famous film star, music legend of celebrity who has filed for bankruptcy because they ran out of cash. Most of us find it incredible that anyone who has earned millions of dollars can end up bankrupt but it demonstrates the point that we always try to live a lifestyle we cannot afford no matter how much money we have.

Afyer a couple of years of job losses, home repossessions and financial problems at home and around the world it is surely time we faced facts. We cannot afford to live on borrowed money.

It doesn't matter if you are an individual, a company or a country. Living on borrowed money is a recipe for disaster unless that money is being invested for the future and is likely to produce profitable and positive returns.

Borrowing money to fund a lifestyle you cannot afford is travelling on the road to financial ruin.

Borrowing money doesn't make you happy. Buying something on borrowed money might make you happy for a moment as you make the purchase. It may make you happy for a while as you enjoy the use of what you purchased but when the credit card bill arrives and you struggle to make the repayments that purchase may make you very unhappy.

I write this as we are approaching the festive season when many of us go a little mad with our plans for gift giving and extravagance. We all want to treat our friends and family to interesting and exciting gifts but this year, more than any other, we should be able to resist the temptation to spend more than we can comfortably afford.

When thousands of homes are being repossessed every week and families are being destroyed by the debts and financial burdens they have suffered we surely should be able to say enough is enough.

If you can afford to pay for things with real cash and not get yourself into financial difficulty that's great. Go ahead and treat everyone but if you are running your finances close to your financial limits try to be realistic about the situation.

If your friends and family care about you they will not want to see you facing financial disaster. If they would sooner have an expensive gift than see you happy then they don't deserve that gift.

We were told the secret to a successful country was for us all to spend money on our credit cards and buy lots of stuff. It was a lie. It may have been good for business temporarily but it has left us all with major financial complications and rehabilitation is going to take a while.

So, as the season of gift giving approaches talk to the friends and family you usually exchange gifts with. Suggest you do things differently and purchase smaller and less expensive gifts or even no gifts at all. What we all want most of all is to know people care about us and demonstrating that care by not expecting expensive gifts is perhaps the best gift of all.