Why Do We Get Into Debt?
One couple’s tough lesson and how you can avoid it happening to you!
by Beau Henderson
We want the latest and greatest, the newest and fastest. Their job is to convince us that if we buy X, we will be happy and fulfilled, good-looking and loved. And it’s getting worse – the marketing is getting more targeted, it knows our likes and dislikes, it follows us wherever we go . . .
Sometimes, in a weak moment, you think, why not?
Andy was looking for a new vehicle. Because he traveled a lot for his job, fuel efficiency was a big concern. He also wanted something fairly new so he wouldn’t have to worry about the cost of repairs. His wife, Lisa, managed the family finances, took a look at their numbers and said, “All right, we can afford a car payment of $400 a month.”
Enter one very good car salesman. Three weeks later, Andy drove off the lot with a brand new vehicle and a whopping new payment of $679 month.
What happened?!!? How was he talked into that?
“It made sense to me that by investing in a new, more efficient vehicle, I would save the difference in the cost of fuel over the course of the loan,” says Andy. “So I let myself get talked into a payment that, at the time, didn’t seem that much higher. Only 200 some-odd-more dollars a month, right? I thought, I can earn that! Lisa and I were very hopeful. We just thought it would work out somehow.”
When it comes to our money, the plan of hoping it will work out somehow never works out at all.
It will only get you into trouble.
“When the dealership was able to get us the loan at a competitive interest rate, we thought, wow, I guess this was meant to be. Two years later, my wife and had over $6,000 of credit card debt.
The biggest mistake we made was going off their numbers, and not our own.
I thought because the dealership gave me the loan, that meant I could afford the loan. All it meant in the long run was that my wife and I would be stressed out, stretched to the max, and worried constantly about making ends meet. It was the most stressful two years of our lives.”
I am happy to say that Andy and Lisa are doing better today. They have consolidated their debt into one monthly payment they can afford. They still have a balance to pay off, but, more importantly, they now have a plan.
You always want to position yourself for financial success with certainty,
not luck.
That means going off your numbers, not theirs. The banks, the underwriters, the financial institutions – they stand to gain from you over-spending!
It is in their best interest for you to borrow as much as possible, not in yours.
By going along with their numbers, you are turning over the power to create your own spending plan, and the success of your financial future as well.
Whether you earn $200,000 or $20,000, you can become wealthy
if you have more coming in than going out.
Living below your means is the way to accomplish this, and it is one of the key principles to living rich. What this means is that even though you think you can afford a higher payment, you don’t. You pay the price now by investing the difference, putting that money to work for you.
In a world where people have grown accustomed to spending everything they earn, you can make the choice to keep the bigger picture in mind!
This is how you can actualize your RichLife.
Have you ever been tricked into jumping over your priorities? Spending more than you could afford? Thinking you needed it right now? What’s your debt story? And what was the most important lesson it taught you? I’d love to hear it!
Follow the complete, step-by-step process outlined in Beau’s book, The RichLife, 10 Investments for True Wealth and discover your RichLife! Get clear about your priorities, life purpose, and finances. Begin building your blueprint for true wealth at: http://www.richlifeadvisors.com
Oh, yeah. That trap of "it's only x-number more than…" Thank you for waking people up so they won't fall into that pit.
Beau,
Do you recommend debt consolidation? I've heard tons of conflicting information on this and would appreciate your take on it. And of course I realize there may not be a simple answer and everyone's situation and habits are different.