Growing Rich is Getting Out of Debt
Part of growing rich is, not only keeping your money, but getting out of debt.
Everyone is at different levels for the amount of money they have in their savings accounts, whether that be RRSPs, savings, Mutual Funds and/or real estate investment. Nonetheless, a bit of cash is always nice to have, especially in the bank for either future investments, loss of a job and retirement.
Part of growing rich is getting out of debt, especially credit card debt. Many of us have low interest credit cards, for a time being, but that is one of the ways that the credit card companies get people to use credit–to give them an introductory offer for a short period of time. As long as you can pay your credit card completely off by the time the introductory period expires, there is no problem. It becomes a problem, however, when the credit card companies hike the interest rate to a high percentage and you cannot pay the credit card off. It’s like a trap that is very difficult to get out of. Of course most of us know this by now, but it is good to be reminded of the importance of getting out of debt.
People who are living debt free are rich. How can that be? They have no obligations to anyone. They can do whatever they want, when they want to. They have their freedom. They don’t have to work for anyone if they don’t want to, except to get their own needs met. They don’t have the burden to pay extra cash each month to pay off debt. And, most importantly, every dollar they earn can be used for them, not blown out the window paying off interest.
Am I talking about mortgages? Yes and no. I believe mortgages are in their own little category all on their own. To be in reasonable debt for a mortgage can work for a person. However, if a person has too much debt on their mortgage and it is a struggle to pay it every month, then that may be another story. You never want to get into default to pay your mortgage. So, like anything, you have to be wise with your decisions. Don’t buy a house that is out of your budget. Buy a cheaper one if you can. Even an extra $300.00 per month for paying a mortgage can make or break a person, so be cautious. You have to make a sober judgement when it comes to being able to afford something. There always seems to be extra hidden costs in every mortgage transaction, that come to surface at the end of the day, whether that be paying house purchase tax, repair, GST and administration fees. So be careful.
The bottom line, is have a plan to get out of debt. Some people say the best way to get out of debt is to set up automatic payments from your checking account to pay off debt. From there, quit incurring debt. It may be very difficult to get out of debt because you cannot spend your hard earned money on what you desire, instead, you have to put it on paying off your debt!
So it’s best not to get into debt in the first place. But, if you are in debt, like most of us are, start paying off one debt at a time, the highest interest rate one first and keep going from there. Stop your overspending and put your money on paying off your debt. Then when you are out of debt, use cash when you want to buy things. You’ll be surprised by how much more you would rather have your cash than the “thing”. You probably have enough stuff, or more than enough stuff right now to last you for at least one year–except for food. So, in the meantime, while you are getting rid of your debt use the things you have. It’s a discipline, but well worth it.
