Wednesday, April 10, 2013

Real Effects of Debt In Your Life

Debt can be very destructive if you are not careful. This is especially true if you mostly have credit card debts. The interest rate of this type of debt can make your balance grow exponentially. If you do not make significant contributions, you may find yourself paying off your debts for a long time.

What makes debt even more dangerous is the effects that it has on your life - especially your future. It can have serious negative effects on the quality of your life in the next few years.

One of the things that can be affected is your career choice. A lot of people want to switch careers but are hindered by the need to have a bigger income. They opt to practice their craft in the corporate world - sacrificing professional fulfillment just so they can satisfy profitability priorities of their employer. Some of them grow tired of the busy work schedules but they have no choice but to stick to it because of the debt obligations that they have to meet.

Early retirement is also another sacrifice that you will make. Some of us could be good candidates for retirement at an early age but we cannot do so because of the debts we acquired in the past. We are all tied to these past purchases that have sometimes grown into a big amount because of the bad financial choices that we have made.

Debt, when it has gone out of control, can also ruin your relationships. A lot of marriages have fallen apart because of financial difficulties. If you cannot practice wise financial management skills, you may find yourself hurting your spouse or partner in the long run. As you restrict your household budget because of the debt payment that you now have to include, resentment may rise in the home. You will be lucky to have a supportive family but this is not always the case.

Living a quality and fun life is also something that you may have to forego. One of the first things that you will get rid of when you are in the midst of debt payments is your fun activities. Of course, you are still encouraged to have fun to maintain the motivation that is needed to complete debt payments. However, you may have to change certain activities to suit your limited budget. If you used to buy expensive gadgets as they became available, you may have to think twice before you do that again.

Any financial plans that you have in the future may also have to be put on hold - especially if you need to get a loan for it. These include buying a home or starting the business that you’ve always wanted to own. Having a lot of debt will lower your credit score and that could make you a high risk borrower. The result of that is a high interest on your loan - which is not a good idea. Also, lender may disapprove of your loan if they see that you have a high debt to income ratio.

The lesson that you need to learn from all these effects is the value of simply saving up for a purchase instead of getting yourself in debt just to get what you want. For instance, if you want to buy a car, you can always save up for a modest and sturdy one instead of buying a luxurious and expensive model. That eliminates the need for your to get a car loan that you have to pay off with interest.

Make smarter spending choices and realize the importance of simply saving up for a purchase. In the end, that is a lot better than spending years in the future paying off a debt for a product that may have lost its appeal already.

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