Living Cheap – Debt and Credit Part 1: Managing Debt

This will be a featured two-part article dealing with credit and debt. Let’s face it, in order to learn the art of cheap living, you’ll need to have a handle on these two things. In Part 1, I’m going to talk about unmanaged debt and how it can severely affect your lifestyle. I’ll also talk about how you can do something about it and begin living cheap, like me.

What causes most people to get into a large amount of debt? I believe there are two primary reasons, and those are:

1. Living a King’s life on a peasants salary - Everyone wants to live the ‘American Dream’. We all want to have new cars, new houses full of new furniture, a dream job, etc. Well, sometimes we need a little patience. We should build towards that dream life and not expect to have it right out of high school. My rule about debt has always been: You should only borrow money for investments and emergencies. You, too, should follow that rule and you’ll be living cheap in no time.

2. Nobody taught them about financial management - I’ve always thought our high schools could be better at teaching students about money management. Sure, we learn about Economics, but there isn’t enough practical education about personal finance. So, it is left to parents to teach their children about handling money. And let’s be honest, most parents aren’t very good at this.

What’s so bad about debt? The answer to this question is: it depends. If you borrow some money because you have a need to fulfill and then you pay that money back in a reasonable amount of time, that isn’t a big problem. However, too many people just continue to borrow more and more until it gets out of hand. One big problem with buying things this way is the fact that you are paying much more than the item is worth. Once you pay the interest charges, the purchase becomes overpriced. Now, doesn’t that break the rules of cheap living?

I’ve put together some personal ideas and recommendations to try to help you reduce your debt. Please check these out and see if they are any help:

1. Don’t use your current credit cards to buy anything. Just concentrate on paying them off. In addition, concentrate on paying off any loans you may have outstanding. Part 2 of this article has another strategy to use in conjunction with this.

2. Don’t buy anything you can’t afford. If you don’t absolutely need it, don’t buy it.

3. When making payments on debt, pay as much as you can afford towards eliminating it. If you only make the minimum payments, the debt will hang around forever.

I hope you found this article useful. In Part 2, I’ll discuss credit, which doesn’t always have to be associated with debt. If you can master credit and debt, you’ll be well on your way to living cheap as a way of life. Live cheap and prosper.

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