I have a close friend whom I greatly admire. She’s fabulous with a capital marvelous.
She and her family are deeply in debt.
I asked her once if it bothered her, being so far in the hole, and she responded, “I guess so, but we’re never going to get out of debt, so what’s the point?” So they kept digging.
I let the conversation end there because involuntary financial exorcisms aren’t really my thing, but there was a lot more that I wanted to say.
I don’t know the details of my friend’s situation because getting involved in friends’ personal business is also not my thing (same reason I don’t go through their underwear drawers or glove boxes). But I do know that even in a seemingly hopeless debt situation, there is a point to worrying and working to get out of it; and it’s a pretty BIG point.
FORTY THOUSAND DOLLARS
Here’s a lot of debt:
$25,000 Auto Loan
$25,000 Credit Card Debt
$50,000 Student Loan
*I’ll leave out the details to keep the example clutter free.
Assuming only the minimum payments are made AND no more debt is added, this debt will cost close to $40,000 in interest and it will take 34 EXCRUCIATING YEARS to do it.
But that’s not all. If the money spent on interest each month was instead invested, it might add up to be $130,000 in the bank instead of nothing.
It’s psychologically tempting to justify adding more debt to an already large obligation by saying, “what’s one more purchase?” But in mathematical reality the greater the amount of debt, the more critical its containment and total destruction.