The internet is full of articles about debt. Everyone knows that debt is a bad thing. At least, they know it intellectually. It hasn’t really set in as a reality for many people. They know it. But they don’t really KNOW it.
The problem with debt is kind of like the problem with driving under the influence. Everyone knows you shouldn’t do it. But a shocking number of people still do, including people you know well. They have done it before and nothing happened. So they did it again, and again, and… You get the idea. It happens so often without consequence that they became convinced that they are good at it, and are highly unlikely to suffer any real consequences.
So it is with debt. Everyone knows it is bad. But we all have to carry a little debt at some point. And nothing happens. So we try a little more. Nothing happens. Nothing keeps happening until we think we have it under control and no real harm will come of it. But as with impaired driving, the bill always comes due. This is what happens when you don’t take debt seriously enough:
You Can’t Buy a New Car Within Your Budget
No matter what your situation, you will always find some shady dealer willing to get you into one of their back-catalog vehicles. The monthly payment will be way too high. It will have a LoJack-style system on it so that it can be remotely stopped and repossessed when you miss your bill (and you will). And it will be far from new. You really better check the history.
If the dealer does not offer you comprehensive coverage, maintenance is going to be expensive. About all you can do affordably is get some auto body repair in Oregon or whatever is closest to your neck of the woods. Much of that routine sort of work is covered with insurance. Don’t skimp on insurance.
That said, there are always things that insurance doesn’t cover. When that bill comes due, it is often more than what the car is worth. But that is the vehicle your debt-laden credit could get you. In that situation, your best plan of action is to reduce your debt and take public transportation for a while.
Have a Comfortable Retirement
Don’t retire while you still owe money on your house. Social Security is probably not going to handle that $2,500 in mortgage along with other living expenses. It is not that there aren’t any ways to deal with debt in retirement. It is just that none of them allow you to do the thing you really want, which is to retire comfortably.
You want to pay off your house, car, and all other major bills before you decide to discontinue your primary source of income. You will also want to have money put back for possible health emergencies. Most people want to actually do interesting things when they retire such as travel. You will need money for that, too. You can’t have any real freedom in your life without freedom in your finances.
Start a Family with the Best Chance for Success
There is clearly no law against marrying while in debt. However, there is the law of common sense that indicates heavy debt should probably be a dealbreaker. If you are dating a person with a head of house mentality, their personal financial train wreck should deeply inform you of what is in store.
You should insist on a few things before accepting the ring:
- See that there is a comprehensive and realistic debt-management plan in place. Give it time to make sure it is working.
- Wait till the credit score is above 700. Below that, and things get a lot more expensive with worse terms.
- Insist on a period of time to see if the person really will stay within their means. A debt problem might hide bigger problems that can’t be easily resolved.
You can live with debt. But you cannot live well. There will always be an asterisk beside everything you do. When debt is in control, you cannot buy a new car on good terms. You cannot retire with confidence. And you cannot start a family with the best chance for success. Tackle debt first, and all these roadblocks mostly disappear.