Debt Traps

Other Things Debt makes you do
Keep an eye out for the warning signs, which tell you if you are getting deeply into debt. The main things are that your cash flow will start to slow down and you won't have sufficient cash to meet your needs.

Here are some warning signs:

  • You start arguing about money with your spouse and other family members.
  • You find your savings starting to fall back.
  • You find yourself worrying about your finances and how to make your ends meet all the time.
  • You start worrying about how your credit cards can be used to pay off other cards – i.e. you start to juggle your payments.
  • You can never get your credit card balance down and you are always on the maximum limit.
  • Most of your bills are never paid on time, so you take longer and longer to settle.
  • You find yourself waiting for your weekly pay because you are now living from week to week.

These are some sure signs that debt is becoming a problem.

The Various Costs of Debt

The results of debt can be summarised as follows:

  1. Financial Cost
    It would horrify you to calculate how much interest you pay on your credit card over a period of say, 5 years. Here is an example. If you put $3,000 on your credit card and they charge the average interest of around 26 – 29%, it would take you 42 years to clear that card totally if you were just paying the minimum each month. That means that if you are 23 years old when you incurred the debt, you will be at retirement age of 65 years before you have cleared that card totally.

    In that time you would have paid $13,000 (at least) in interest alone, on that $3,000 debt. The 42 years is virtually your entire working life. It does point out that one financial mistake can wind up being a master over you for 42 years. There have been a lot of ads similar to this; “Lower your payments with out loans.” Once you get sucked into taking these loans and making the payments, the banks or credit card companies will have “got you” and they will have “got you” good.

  2. Emotional Cost
    This includes anxiety, depression, anger, shame, etc. As bad as the financial cost of debt is, it is nowhere near the emotional cost. It is difficult to measure the emotional baggage that comes with debt. If you dislike opening up your mail each month to look at your credit card bill when it arrives, this is anxiety and you don’t always recognise it. Do you lie awake at night worrying about your debts? Do you go to sleep at 2.00 am, depressed and stressed about your debts? There is no doubt about it – being in debt is miserable. It robs you of the joy of life and will cripple you under a load of stress.

    You need to point the finger at the credit cards and tell the card; “I’m never going to let you ruin my life again.” Then get out the scissors and cut the card up. Once it is cut up, work out a plan and allocate a certain amount of your income to clean up the debt, even before you start spending money on other things. It’s amazing the relief you will feel once you do the cutting. However, you need to do one more thing and that is: commit yourself to cleaning the debt up.

  3. Social Cost
    This can be isolation, divorce, etc. The cost to society is immense. There is the shame of not being able to settle one’s debts and this can manifest itself in the weight the family will carry because of having this over their heads. Because of debt, children are sometime berated for asking for things their friends have. Their friend’s family may be able to afford these items and when anger breaks out, the child does not know why there is all the yelling. They don’t know you cannot afford to buy the items, because you don’t want to explain your situation to them, because of the shame.

    It’s common for a member of a marriage to run up debts and hide them from their spouse. This breaks trust and the relationship suffers. Communication is reduced and arguments break out, which affects the marriage. If these symptoms apply to you - do something about it. You need to stop creating debt today – it’s simply not worth the hassle.

  4. Final Cost
    Sickness, death, suicide, murder. Even if this is going to the extreme, it does happen in some cases. The volume of debt is so heavy on one’s shoulder that suicide seems an easy way out. When this happens the whole family and friends suffer – just because of debt. Too often it is found that someone has taken their own life because of the weight of debt that they have not revealed to the family or spouse. The same and the pain becomes so much that they pay the ultimate price. Sadly all the problems of meeting those bills are left behind for the survivors, as well as the pain of losing a parent or child.

There are stories of some people who are so overwhelmed with debt that the only way they could solve their problems is by taking their own lives and those of their family. While these things are not common they do happen and they are real. Having debt is a serious situation and something that is not to be trifled with. The results of debt can be enormous.