Debt. It is a word that stirs up all sorts of emotions. For some it brings up intense feelings of shame and guilt. Their financial obligations have simply become too much for their income to keep up with and they find themselves in a deeper and deeper hole every single day as unpaid bills keep getting larger and larger. Each day is a struggle as they strive to make payments on their outstanding obligations. Their family life becomes affected by it and the excessive strain is felt from the smallest child to the most caring and understanding spouse. Families can be torn apart from this type of pressure.
For others this word can make them feel hopeless and trapped. Some can literally see no way out of giving a significant portion of their paycheck over to creditors and credit card companies - they have fallen too deep too quickly and no matter how much they work they simply can't seem to get past paying the minimum payment. Balances keep rising since the family still needs to be feed and the rent still needs to be paid. It just keeps growing and growing and there seems to be nothing that they can do about. This is a suffocating, life-stealing experience.
Then there are those who see the word debt and hate it with all that they are. These are generally the people who have at one time or another felt shame, guilt, or hopelessness when it came to their financial situation but have since found a way to dig themselves out of it. They have grappled with their money problems and come out on the other side stronger for it, but forever scarred by the battle. But it is a battle that they look back on and are incredibly glad that they fought.
They now have financial freedom. They can sleep well at night. They can spend their evening relaxing. Intense worry is gone. They are now the master of their life once again.
You see, debt has a funny way of doing that to a person - stealing their life away. When you think about it, it really is a form of life stealing. You might be wondering, "How's that? How does borrowing money result in having your life stolen?" Well, let me tell you a little story:
John is a happy and young single male who works at a relatively decent job. He gets paid well enough to cover all of the basic necessities of life: food, clothing, shelter, and transportation. The problem is that John wants to have more than the basic necessities. In fact, he wants much more. He likes being entertained so he eats out a lot and goes to movies with his friends all the time. Since he is young and young people are supposed to travel he takes long and expensive vacations as often as his work will let him, gambling his money away at Vegas or partying in the Mexican riviera.
Because John's salary is only modest he has had to go into a little bit of credit card debt to make sure that he can live the life he wants to live. Just a little bit of credit card debt mind you. He can easily make the minimum payment and still has plenty to spare. His last trip might take a year or so to pay off, but it was totally worth it.
But John is finding that his current car simply won't do for the life he wants to live. After all, what self respecting woman would go out with a man driving a 1995 Toyota Corolla? John certainly doesn't know any because he isn't going out with anyone. This must change so the car has to go.
Since most chicks love SUVs and they love a Lexus, he decides to go with a Lexus 2010 RX. It is sleek and it is fashionable. It only costs $37,000. He can still handle the payment even with his credit card debt, but things are definitely a little tighter now. He goes ahead and buys the car with a car loan since he doesn't have the cash on hand.
Shortly after getting the car John finds a girl that he finds stunningly beautiful and he quickly falls deeply in love with her. She loves his car and loves being taken out to eat a couple nights a week. She is a movie buff too and likes seeing all the latest flicks in the theaters on opening night. She even loves the traveling, just like John does. This is great for John because he comes to realize that he really, really likes Jane and want to take things to the next level in their relationship.
As a result, he mans up and starts paying for everything they do together since that is how he was raised. So now instead of just paying one person's way for trips and entertainment, John is now paying for too. He rationalizes his spending by betting on a promotion at work or a nice fat little bonus. He was already spending money he hadn't earned yet and now he is spending money that he hopes he might earn.
Then the unthinkable happens - John seriously injures himself playing basketball with his buddies. His ankle is broken and his shoulder is dislocated from his awkward tumble and fall after rolling his ankle on a friends size 11 foot. John was not expecting this.
His shoulder and ankle injury ends up costing John some more money in hospital bills and physical therapy. He also has to miss an extended amount of work because his shoulder makes it too painful to sit at his desk for more than 30 minutes at a time. All the while the payments on his credit cards, car loans, and medical bills keep piling up. With no income coming in to cover his costs those are added to his credit card debt which is becoming very sizable by now.
A month after his accident John finds that all his payments on his outstanding debt obligations amounts to 63% of his take home pay. This is a percentage that is far too high. His high interest rates on the credit card are really something of a concern to John because that is the debt that he is having the hardest time reducing since he has to keep charging his cards to pay his bills and eat. Even after cutting back significantly John finds that after another month his debt obligations amount to 64% of his take home pay. Thing are getting worse for John.
Is what John is experiencing living? Is this the life that he wanted to live or has his life been stolen by debt?
What is John to do? How is he going to get out of debt and make up for the bad financial moves that got him into this mess in the firs place? Is there any hope?
Yes, there is hope for John.
He has a lot of work ahead of him, but there is hope. He is going to need to find real ways to get his life in line with the income he generates. He is going to need to focus on earning more money and spending the money that he does earn more wisely. He is going to need to work a debt snowball.
One of the tools that a person in John's position may want to consider is debt consolidation. In short, a debt consolidation loan would try to help reduce John's current payments (while potentially increasing the total amount paid in the long run) so that he can fix his current cash flow situation. No everyone should take advantage of this financial tool, but it is definitely something that could have a very positive effect on a person like John's life.
In this blog I hope to demonstrate some of the different options available to those seeking out a way to bring all their debt under one umbrella - to consolidate it into one payment. Not every option is going to be useful to every person, but perhaps there will be some who would benefit from a thorough examination of the debt consolidation opportunities available to average people in need to some help.