How can we get out of this debt crisis and be living debt free. A question often asked by many, but few follow through with truly finding the answer.
Modern Day Debt Crisis
According to the Bank of Canada our household debt has been on the rise for 30 years, with the total sum coming to around $2 trillion dollars. Certainly over time consumer companies, sales, marketers and the like have been learning how to improve ways to separate consumers from their cash. Furthermore, financial institutions have become wise to helping separate consumers from cash they don’t even have yet!
And then there was Debt
Debt has always been a nice investment vehicle for financial institutions and those with lending power pretty much since the dawn of monetary exchange. Literally thousands of years before Christ, someone owed, and someone else charged a premium due on repayment above and beyond what was owed.
It was likely based on the same principles we follow today. The lender has to be willing to take a risk and they wont put their capital at risk without some promise of a positive return on their capital, or whatever the monetary tool may be.
Over the centuries financial institutions and merchants have evolved rapidly to what we have now. Debt has climbed steadily and quickly has been adopted as an element of normal life.
Consumerism, Interest, and Growth
Two factors that have contributed to our current debt situation are consumerism and growth. Consumerism has flourished in the interest of growth. Consumer product companies work tirelessly to figure out how to get people to spend their hard earned money on stuff. The more sales the better.
Financial institutions give people credit to buy such items and charge interest on those loans. The more interest to be made the better. Together, both consumer companies and financial institutions strive for growth to make more money to raise profits, and possibly appease shareholders, or attract more investors.
This combination leaves the general populous at the mercy of advertising and subconscious sales tactics. As a person or even a society begins to take on more and more debt to keep consumer companies and financial institutions happy, they begin to normalize debt, by living with it.
Slowly but surely having debt becomes normal, and continues to grow and burden people until you are basically working to pay massive interest on meaningless consumer products you bought.
How Do I Get Out Of Debt?
This question comes after one has fallen victim to the consumerist traps they have been presented with. Often it can be quite difficult to get out of debt and it can alter ones life greatly, especially if people have to start thinking about filing for bankruptcies in Canada. Our society is largely driven by consumerism, so one has to be careful to protect their well being as financial health can in many ways be directly proportionate to physical health.
Getting out is not easy, but not impossible. A person has to shed all of the non-essential spending in their life, sell everything that isn’t absolutely necessary for survival.
That is the most painful stage, but once complete, then a person can start chipping away at their debt. Once it is gone, the battle begins to keep it that way.
Look Out For Number One
When you buy stuff you don’t absolutely need and go into debt doing it, you are not helping yourself. You are lining someone else’s pocket. They own you in a way. Once you are out of debt it is important to stay out of debt. Look out for number one. Don’t put anything on your credit card or lines of credit that you don’t have the cash to pay for.
Use debt for a highly leveraged investment, such as a mortgage on a home. Don’t use debt to buy material goods that you just end up working your life away for.
Ask Yourself This…
Here is a great question to ask yourself before buying stuff with credit that you don’t have the cash to pay for. Would you work for a company day in and day out but instead of them paying you, you paid them?
Buying things on credit with nothing to back it up is pretty much the same thing. They now own your pay cheque, and you own some random thing that you probably could have lived without.
Don’t normalize this situation!
Don’t fall for the traps! Life is easier outside of the realm of being in debt. If you don’t believe it, ask someone who is in a lot of consumer debt if they are happy with their situation.