As Americans, most of us are up to our eyeballs in debt! It’s a way of life in this country, and most of don’t think twice before buying that car, putting those clothes on our Visa, or making payments on a computer, a fancy vacuum or a stereo system.
It’s only $ xx.xx a month/week/year, right? Wrong. Some sound debt advice has always been don’t spend more then you make, but how many of us really follow that rule?
Americans have been conditioned to accept debt as a way of life. Many of us don’t even realize how much we owe, or how long it will take us to get out of debt. We could all use a crash course in debt management.
Secured and Unsecured Debt
It is important to understand the difference between secured debt and unsecured debt.
The average working class citizen, if asked what secure debt they owe, will say immediately “My house and my car.”
A car, contrary to popular belief, is NOT secured debt.
The value of the car is rarely as much as the total owed debt, and your creditor will not normally accept the surrender of your vehicle as payment in full.
The ONLY secured debt most people have is their house loan.
You may be asking yourself at this point “So what? I have debt. How bad can that be? After all, everyone has it.”
Unfortunately, being in the same pickle as everyone else doesn’t make it less of a pickle.
Why Debt is Bad
If you are heavily in debt, you are tied to your current income situation. You can’t move laterally or even take a better job somewhere else if you can’t afford the intervening gap with no paycheck. If your job is stressful, you don’t have the option of taking a less stressful job if it would mean a large cut in pay.
As a mother, you may be tied to your job, unable to come home as a stay at home mom due to debt.
You could have to invest in a new wardrobe for some work environments, and pay for alterations and dry cleaning.
You might even have to buy a second car so both you and your spouse can work, and then pay extra insurance, gasoline and maintenance costs.
When you decide to go into debt, you are gambling that you will be making the same money tomorrow as you are today.
But what if tomorrow’s income disappears? Another piece of debt advice: don’t count your money before it’s earned.
Upside Down Debt
Upside down debt is when you owe more money than an item is worth. This is usually because the finance charges add so much to the original debt that it outstrips the current value of the item, or because the item depreciates faster than you can pay down the debt.
Remember the car? Most consumer debt is upside down.
Is Any Debt Acceptable?
A home loan, IF it is not upside down and the homeowner put down a good deposit is generally the only form of secured, or ‘good’ debt.
Car loans are sometimes a necessary debt.
They constitute one of the only circumstances under which consumer debt may be acceptable.
A good piece of debt advice; keep your vehicle for double the length of your loan.
If you finance a vehicle for 4 years, keep it 8 years, and keep making payments for your vehicle into a savings account for the last 4 years.
When you are ready to buy another vehicle, you will have the cash available to do it.
Student loans are the other ‘acceptable’ form of consumer debt, but this only applies if the college education is geared towards a career goal – you shouldn’t go to college just for the ‘experience’. Parents should refrain from paying for their children’s college tuition if it is going to force them into debt.
Credit Cards
The number one rule of debt advice experts everywhere: ONLY ONE credit card, and ONLY for emergencies. An emergency is NOT an impulse to buy the on-sale sweater, or being too tired to cook dinner.
A credit card is for times when one is required, like paying for an emergency tow or a deposit on a rental car, and should ALWAYS be paid in full at the end of the month.
Can You Afford to Be a Stay-at-Home Mom?
For some families, being in debt is the one reason moms work outside the home. Once you are out of debt, staying at home with your kids and living within your means is not only possible, it just might be the most rewarding part of your life.
Nearly every family, who does not have an overwhelming amount of consumer debt, is able to have one parent stay at home by following tactics on this site.
Check out this Cost of Working Calculator to see how much it costs you to go to work every day.
A good piece of debt advice: when you say “no” to debt, you set a good example for your children by saving and you provide them with a better future. You can rest assured that your children are under the best care possible: yours.
Being a stay-at-home mom has benefits that can touch every aspect of your life, and learning debt management can bring you closer to achieving that dream.