There isn’t anything about money management, debt,
and planning for retirement that is exciting reading. I know it’s a ways off
for you. I do have some thoughts. Hopefully they are worth the time to read.
Incurring debt is a real landmine. I admit that I am
carrying more debt than is good, and I am working hard to clear it all before I
can consider calling and end to my working career. There are many reasons that
debt can be incurred. There are the ‘good’ reasons, like buying a car, getting
a mortgage to buy a house, paying for an education.
Over the years, I have accumulated debt that had I been
wiser, wouldn’t have happened. Some things that have been added to my load were major home costs (water in the basement, a replacement roof etc.)
as well as replacing appliances that are essential. Other significant additions
occurred when there were family emergencies of one type or another that we helped with.
What is a danger, and one that I let myself get trapped by,
are minor purchases, charging routine expenses and the like. That is the real
trap, and I admit, that it has bitten me, and I am paying for it.
The trap of charging something insignificant, and not immediately
paying it off is the cost of interest.
Interest is a real threat to your ability
to pay your regular life bills and to have money for other things. You see that if you buy something major that you
fully plan on paying off over a few paychecks, but then you put other smaller charges
on the account, they all contribute to the problem. Than the payoff date slides, and interest is added, and the balance slides up.
Now when you pay the monthly bill, that interest soaks up a
significant part of your payment before any dollars touch the base amount. Interest is
just your hard earned money gone forever with nothing in return. I hope the warning is something
you keep in mind. If you have any debts, be they cards, or education loans or
whatever, please pay them off as soon as you are able.
The challenge to pay off all debts for me now is all about
getting each and every debt down to zero. I have a plan for this, and while unforeseen
events, emergencies or required major maintenance can impact it, and extend my
target date, be reassured that I am working on it. I do have a working target date for
being debt free. Currently, it is in the second half of 2017. (Maybe we'll need a party?)
So near my target date, and when the zero balance is fully
in hand, then I can plan for a retirement date. I may not retire right away, but for the first time, it will be in MY control.
This event rounds the topic
back to my warning. Don’t let debt gain a foothold in your life. I know that
stuff happens, and debt can be a tool, but beware of the danger.
Dad
Hey dad. Thanks a lot for bringing this up. If I may ask, how does this topic apply to my thinking about higher education? I ask because I currently am and I have been wrestling with the idea of whether or not it is wise to go back to school. While you did mention and I agree that student loans are 'good' debt, it is still debt. I don't know. Is school something I should pursue despite the debt?
ReplyDelete-Bradley
Not an easy question, but here I go.
ReplyDeleteEducational debt is balanced by your judgement on 1) what you want to do with the rest of your life, and 2) what realistic advantage in potential additional income would that education make possible.
Really 1. is most important, as your life satisfaction is tied, not directly, but substantially to your occupation. Will your new potential occupation provide personal fulfillment? However 2 needs to be kept in mind. WIll you have a reasonable expectation that you can discharge the debt in a reasonable time, and still have adequate means for day to day living?
Educational debt can be sneaky. There are tools to defer costs and those are useful. Beware that once interest starts, it can be added to the principal,and then interest on that new balance, and that can be added etc.
I'm not at all suggesting that education isn't worth it. My caution, is like any other debt, that once incurred, that it remain a priority to pay off so that isn't a drag on your ability to do other things in your life.
I didn't answer your question, that must be you, but I'm always available to discuss, and I hope that I can add information to your decision.
Dad