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Why Was Debt Created?
Posted By Ron On December 8, 2009 @ 12:50 PM In Credit,Debt,Personal Finance | Comments Disabled
 It’s a chicken and egg type question – which came first, borrowers or lenders? Of course you really can’t have one without the other (legally, that is), but my instincts tell me that it could go either way. Just mention the word “debt” and many people automatically think of credit cards  but those little pieces of plastic with the magnetic stripe were late to the party when it comes to debt. Debt has been around for centuries and many historians suspect it was one of the reasons humans created writing – to record financial transactions!
I’m always amazed when I write an article extolling the virtues of a debt free lifestyle. There is always a segment of the population that cries foul, insisting that debt is the path to wealth and riches … or at least cash back rewards. You CAN make money with the temporary cash that debt gives you. Debt can help you buy a home, provide an education, or finance a business, so there! I said it! But for me, debt was and has been indicative of five things:
The ultimate “DUH” moment, right? I used debt because I was short of cash. If, at my next annual review, my boss said, “You’ve done such a fine job, we’re going to multiply your salary by a factor of ten and make it retroactive for the last six months. Here’s your check!” I can tell you right now, I know I wouldn’t be thinking about rewards cards, getting a home equity line of credit, or wondering what my credit score  was. When I don’t need debt, I rarely, if ever, use it (and I’m not talking about credit card  debt you pay off each month either). So my question to myself is: do I really “need” it at all?
I know it did for me. In almost every case where I used debt to finance a certain lifestyle, I was impatient and wanted it now. I used debt because I was unwilling to save to buy certain things. I wanted them NOW and was willing to pay the interest to satisfy my impatience.
In addition to impatience, I was discontent with the results of my poor financial decisions up to that point, so I used debt to ease my covetous heart and to buy the things I wanted because I didn’t like the things I already had. Vacations, clothes, cars, you name it, I wanted to appear better off financially than I was at the time and I was willing to pay the interest to make myself appear successful.
I’ve charged tires and transmissions, vacations and vet bills, clothing  and car repairs, insurance and ice cream, and why? Because I didn’t prepare for those expenses by having an emergency fund  or by making small monthly “payments” into a dedicated savings account. It was poor planning, plain and simple and debt with interest charges was the result of my failure to plan.
How much would I have today if I had waited until I had the money, learned patience and contentment, and planned a little better? It all boiled down to my own shortsightedness. You may have read how I paid off over $120,000 in debt  (true story) but the sad fact is that I went that far into the hole in the first place. The amount of interest I’ve paid would probably make me sick if I added it up.
I just refinanced my house at 4.75 percent … why? Because of reason #1 – I don’t have the money to pay it off … yet. Since I have no other consumer debt than one small student loan (which I am attacking), my cash can be used to pay down the principle of my mortgage  and free me from the burden of debt forever. I gotta tell you – it’s a good feeling to be THIS close!
Photo by Kath Walker Illustration 
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 credit cards: http://www.thewisdomjournal.com/Blog/credit-card-information/
 credit score: http://www.thewisdomjournal.com/Blog/go/myfico.php
 clothing: http://www.thewisdomjournal.com/Blog/ways-to-cut-your-clothing-costs/
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 I paid off over $120,000 in debt: http://www.thewisdomjournal.com/Blog/how-i-paid-over-120000-in-debt-in-52-months/
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