I wonder if anyone has ever gotten out of bed, thrown off their covers, sat up, and said “Thank God, that I’m in debt It would really be a terrible thing if I didn’t owe anyone anything!” Nobody likes owing other people or banks money, yet the super majority of Americans are. People borrow money for everything, homes, automobiles, computers, furniture, appliances, clothing, even food. No one likes debt, yet debt is seemingly everywhere. How did this happen? I don’t owe anyone any money, and I sure don’t want to owe anyone any money, so I’m not ever going to borrow money again, period. The best way to stay out of debt is to never borrow the money in the first place.
At this point nay-sayers will chime in. They’ll tell me that I need to use other people’s money to become very wealthy, and that debt is a valuable financial tool. They’ll attack me, tell me that I’m out of the mainstream, and am just outright crazy. That’s fine; they were never going to seriously consider a completely debt-free lifestyle anyway. In fact, I’ll be surprised if I don’t get quite a few comments telling me I’m crazy in response to this article.
Don’t worry; you can do just fine in your financial life without ever borrowing money. Recently a survey was conducted of the Forbes 400 wealthiest people in America. In the survey, 75% of the respondents said that the best to become financially independent is to get and stay out of debt. You can build your business without debt too, Microsoft, Cisco, and Walgreens are all run without debt.
What makes debt so bad? Let’s stop a minute and think about it. When you are borrowing money, you are agreeing to pay someone more money so that you can have whatever item you want now. Borrowing money for purchases causes you to pay far too much for them. Instead of paying $10,000 for a car now, you get to pay it over a period of 5 years and end up paying closer to $12,000 for that same car. When you start looking at some of the very undesirable loan products such as credit cards and payday loans, the numbers even look more egregious. That $30 pair of pants you bought at the retailer could easily cost over $150 if you threw it on top of a credit card balance and made the minimum payments until it was paid off. Yes, it is that simple. Most of the times, for instance, if you get credit or låna pengar med skuld hos kronofogden, you may be able to build your credit worthiness and history but you should always remember that there are some factors that you have to consider.
Most people are very poor in their use of credit. MSN Money reports that 43% of American families spend more money than they earn. The average household has more than $8,000 in credit card debt. Personal bankruptcies have doubled in the last decade, and Americans owe a total of $2,000,000,000,000 in consumer debt, yes, that’s trillion with a t. That’s almost $7000 of consumer debt for each person in North America. Knowing these figures, why would anyone even consider borrowing money? Some will say that they are the exception and that they pay their credit cards off every month and pat themselves on the back for doing so. And some are, but for the most part Americans mishandle borrowing money, so why not avoid this mess all together and just not borrow money?
But what about buying a home?! Everyone has to borrow money to buy a home, right? This is a very rare occurrence, but it is entirely possible to buy a home without ever borrowing a dime from anyone. All you have to do is live on a fraction of your income for a few years, it does work. It might not be easy, and you might not get to go on vacation and have all of those luxuries that most yuppies think they cannot live without, but five years from now instead of a mortgage, you’ll have a paid for house.
“But But But…!” There are just no instances when it’s necessary or desirable to borrow money. You can avoid having to pull out a credit card for emergencies by making what’s called a rainy day fund. Your grandmother did it, and so can you. When you borrow the money, you are making the bank money. When you save money and pay for cash, it’s like you’re paying yourself interest. You might not get that purchase right away, but you can wait. It’s called delaying pleasure, yes, you can do it. It’s called maturity. You don’t need to borrow money, and it’s just not a good idea!