Avoid Debt, the Enemy That Can Drag Down Your Finances

Personal finance blogs are filled with stories about people who have overcome big personal debt over the years and then write about it to try to help you defeat your own debt. Debt is such a major problem! I get messages from regular folks who need help dealing with debt all the time. Of course the best way to deal with it is to avoid debt in the first place, but that’s easier said than done.

Cartoon of man trying to avoid debt with debt weight falling down on him

About 15 years ago, after my divorce, I too had racked up thousands of dollars in debt and when I remarried, my wife and I had a combination of over $25,000 in debt on our books (not including my mortgage). That isn’t a real good way to begin a new relationship and frankly, much of it was divorce-related expense, so that there wasn’t really even any shiny, fun stuff to look at and play with despite that debt.

We managed to fight and pay off that ugly enemy—debt—and since that time, we have never ever found ourselves in that same situation again. That’s one thing that comes through almost every personal finance blog where a story is told about debt: it teaches you a lesson. If you are even a little bit smart, you learn from it and avoid debt in the future.

Who Is In Debt?

The short answer is: everyone it seems. You are not alone if you find yourself overwhelmed with debt. With a few simple steps, you can make a plan that answers which debts to pay first, and how much to pay. Based on strategies used by bloggers and debt advisors alike, having a good plan minimizes harm to your credit score and finds the most effective ways to defeat your debt and beat an ugly enemy!

Make Good Choices and Avoid Big Debt

I understand that sometimes having debt is just unavoidable if you don’t have a job or income. If you are ill or you have had a terrible run of bad fortune, then debt happens and it may take a while to recover from it. And some debt can be for good reasons.

No one is saying it’s always your fault. It can happen to anyone. That’s the reason when you are in better times, you need to prepare for the worst of times and save money so you can stave off debt as long as possible. Thinking that it can never happen to you is the kind of thinking that can spell disaster.

Debt in the 21st Century

Debt comes in many shapes and sizes, but no matter what it is or where it comes from, it takes from your pocket and it steals from both you and your future.

These problems aren’t going to go away easily and there are lots of reasons for that.

From the beginning of time, one caveman saw a rock that another caveman had and wanted it. Not only the same rock, but an even bigger and better rock. In our time, that rock may be a car or a house or a phone or some other such thing and the problem is it never really slows down or stops until someone has nothing left but debt!

It may seem silly, but I have always been a believer that TV makes all of this even worse today than it was before the 1950’s. Today we can see in “full color” every creature comfort and new shiny toy there is as soon as it is available. And even worse, we can see TV shows where everyone has it or wants it, too. It’s just ingrained in our brains that way and it’s hard to shake loose.

It all comes down sometimes to those “wants” versus “needs” and so many times we choose the wants.

When you fight back and finally take the time to win back control of your brain and your money, you will be able to defeat debt. Are there things you need to know and do? Of course there are! You can start living the life you want again as soon as you make the decision to begin to defeat debt.

First, What Is Debt?

Debt is when you owe anyone or any entity money. Any time you don’t pay all of your bill(s) when they are due, then you accumulate a debt.

If you are making payments on something you bought, if you are paying for your car every month, even if you borrowed money from your cousin Fred in Cleveland and are attempting to pay him back over the next year, you have accumulated debt. No matter how you say it, debt means you’re at the mercy of someone else until you pay them back.

Student Loan Debt

One of the biggest debts you can have, especially when you are just beginning at life, is student debt. In 2021, Americans are more burdened by student loan debt than ever.

Among the Class of 2019, 69% of college students took out student loans, and they graduated with an average debt of $29,900, including both private and federal debt. Meanwhile, 14% of their parents took out an average of $37,200 in federal parent PLUS loans.

You’ve probably heard another scary statistic: Americans owe over $1.71 trillion in student loan debt, spread out among about 44.7 million borrowers. That’s about $739 billion more than the total U.S. credit card debt. How can you defeat it?

Student Loan Debt Relief?

There is some possible good news here for those who do owe money for their education. Although it hasn’t arrived as of yet, it appears that help is on the way. President Biden has promised money to help students pay off debt. Will it be a total payoff? No. But there eventually will be monies to help budget for it.

Just last week, Joe Biden announced that the Department of Education is forgiving $500 million in federal direct loan debt owed by 18,000 former students of the for-profit higher education chain ITT Technical Institute. The chain closed all 140 of its locations and fired most of its 8,000 employees in 2016, following a legal battle with various state attorneys general and the U.S. Department of Education. “These borrowers will receive 100 percent loan discharges,” according to a Department of Education press release.

Avoid or Limit Student Loan Debt

One consideration in the meantime for students to sincerely pursue is going to community colleges as a first step to higher education with little or even no cost and debt. This no-cost effort is gaining traction and is well worth exploring to cut potential debt for a 4-year degree nearly in half.

Student Loan Refinancing

To avoid falling behind on your student loans, consider refinancing them. Make sure you keep paying your current lenders until your new one confirms the completed transaction. Your new lender will set a date for when your monthly payment is due.

After approval of a loan, your payments will be lower and more manageable even though you are still obligated to make payments on your existing loans. Remember that missed or late payments can cause your credit score to drop, hurting your chances of borrowing money in the future.

The Tons of Other Debt

(Divorce debt, credit cards, gambling debt, tax debt, mortgage debt, auto debt, and mismanaged money debt)

Just about every way and reason to be in debt happens, and in almost every case it’s not a good result. I guess the key is to plan to get out of the debt before it ruins your finances, credit rating, and life.

When you want to buy a home, a car, and furniture, ask yourself exactly how and when you will be able to pay for it before you plunge ahead.

You generally need to borrow when you buy a house and a car. You may need to borrow to buy furniture. The point is this: what are the terms, interest rates, and all of the details, and will they work for you? If not, don’t borrow or buy and make another plan to get housing and transportation. With food and healthcare, you don’t have as many choices to move in different directions, but with these things you do. Pain now may get you where you want to go later, but certainly burying yourself in debt when you can’t pay it off won’t. Reality is truth.

Plan Your Recovery

Nothing I say here is revolutionary. It’s all been said and done, and yet people still get into debt that they can and should avoid, still can’t pay it off, and still declare bankruptcy because of it. So how can you avoid all that?

First, stop making decisions that are just not very smart. Don’t buy what you can’t afford and figure out ways to improve your income and limit your expenses. That’s a way to avoid debt from the very beginning.

If that has failed you, then you must start putting money towards debt, principal and interest! Accelerate that plan as your income (or reduced expenses) improves. If you have a plan and a timetable, even if it isn’t overnight, it will work for you.

Final Thoughts

If you are in a dangerous situation, no place to live, food deprived, and need health care, there are places in every community that can help you. Local, state, and federal programs help, as well as local charities and I say go there if you need to for help. Debt, however, doesn’t only hurt the really unfortunate among us.

Many people actually choose debt over common sense and do it because they just can’t imagine that they will be eventual victims of it. How wrong many of those people turn out to be!

Self-inflicted debt is really unforgiveable, but you can recover from it.

Are you in debt now? If so, what is your plan to get out of debt? How will you avoid debt in your future?

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