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DEBT- A Short Term High For A Long Term Low

Recently our Government passed a new $1.3 Trillion (with a "T") dollar tax bill which has raised much controversy with both members of Congress as well as us, as Americans. Not being in the "Trillionaires Club" it's hard for me to think in terms of that staggering amount of money, and what to do with it. The great American dream has always been to become a millionaire, and with home prices back up to levels not seen in decades, there are more millionaires out there than they realize. Net worth is defined as the sum of everything you own, minus everything you owe. Owning is nice... owing... not so nice.

While I work with each client as an individual, the one commonality I do try to convey to all is to live debt free, not counting mortgage and car payments. Debt seems to be the Great American Equalizer: by borrowing from Peter to pay to Paul, you too can look like a successful, rich person. The definition of rich, or wealthy is different for everybody. I know people who support a whole family on a $50,000 salary and live happily and want for nothing, and I know families who have an income of $500,000 and want for everything, living month to month. Keeping up with the Jones' (it must be a metaphor day!) is part of life for some folks, wanting to look like they have more than they really do. Living on credit cards and borrowed money is a deep pit that becomes much easier to jump into than to climb out of, and most people don't realize how deep the pit is until they wake up one day and try to climb out of it. The euphoria of buying quickly wears off when the monthly bills start coming in, too late to back out and killing the joy of the purchase. Thus, the short term high of the acquisition quickly drops to the lows of the realization that the bill has to be paid... when you usually don't have the funds to pay it. There's a reason the credit card companies are so nice... they all have Americans in their tight grasp of greed and want.

With interest rates at virtually zero for so long a protracted period, the art of buying on credit has become an everyday practice to most. Low interest rates means low pay-back rates, and the borrowing to buy ratio has been climbing for years. Now, with interest rates slowly rising, your payment, of which most went to pay back principal, is now going more to interest, thus stringing out your period of pay-back. After years of borrowing, most are finding themselves deep in debt, often with things long thrown out or antiquated while the payments linger on. Debt is a drag on your personal economy. Think of yourself as a sovereign nation- you have people to pay, infrastructure to keep up on, taxes to deal with... you are a country unto yourself. The only problem is- you can't print money as you need it. Most of us don't have it in us to get a second job, so we work harder, become more tired, and the depression sets in due to thinking about money on a constant basis. It's a revolving door... we spend, we owe, start again, and so we find ourselves in the same place day after day. It's time for a solution.

The solution, as easy as it sounds, is to stop charging and racking up debt and at the same time pay down the debt you have. There's few better feelings than that last payment of a debt that won't come in the mail next month. If you are within 5 years of retirement, living debt free is a must for you to financially survive. I've read that therapist's spend at least half of all sessions dealing with the psychological issues of debt, which is very understandable for most of us. So, it's time to put a plan in place. Don't just cut up your cards-that can have a negative effect on your credit rating. Consolidating and eradicating debt takes a well-designed plan, and today is a good day to start. If you have a problem with spending, I urge you to see a professional. If it's just a bit of over-indulgence and you recognize it, simply stop the madness... and get ready for the best night's sleep you've had in quite a while. Speaking of debt, if the price of Pro-V's would only come down my monthly expenses would too... See you on the tee!

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