"The Great Recession is exposing people." This is a comment I read on a blog post about celebrities who were in debt. The comment was posted by a reader who was referring to the fact that before the Great Recession, celebrities were living high off the hog on borrowed money. Since, the recession, however, a lot of people's credit, including celebrities, is limited and, therefore, they are exposed; exposed for being a poser with a financed lifestyle. But, it's not just celebrities who are living a rented lifestyle.
Before the recession, a lot of people's emergency fund was their credit cards. The fallout from the credit crisis and its subsequent limitations on credit access, has caused a lot of people to question the true cost of debt. The true cost of consumer debt is almost always negative. Some of the negative consequences of debt are:
Debt is stressful because, most times, the amount of debt that one carries feels overwhelming. And despite making payments towards the debt, high interest rates make it appear as if no progress is being made. Additionally, when debt was used to secure depreciating assets, it is not uncommon for one to owe more than what the item is worth. Debt can become a crippling condition that can leave the debtor feeling enslaved and depressed.
How many times have we heard, or even said ourselves, the phrase, "I would take advantage of this opportunity, if I only had the money." How many times has there been a great deal on a great vacation that you would have taken if you had only saved, in advance, and had the money when the deal was available? How many times have you known you needed to start saving for a new car, but didn't because you didn't have the money to spare? Then, low and behold, you see a great deal on a car right as your clunker has kicked the bucket. How many times would you have loved to allow your kid to join the sports league or go to that summer camp, if only you had the money. For many people, missed opportunities are a source of stress and regret brought on by debt.
It is well documented that money issues are the number one cause of divorce in America. But even for those couples who don't end up in divorce court, how many arguments has debt or poor spending habits caused? How much stronger would your marriage be if you had the money to have a date night, at least, once a month?
Loss of Income
Since the recession and its negative affect on many people's credit, it's more common than ever for employers to run credit checks on employment candidates. Issues such as low credit scores can cause an otherwise viable candidate to lose a job to a candidate whose only edge was a favorable credit rating. The lost of a new employment position is a double blow when the new job would have come with a higher salary, which would have alloted more descretionary income that could have been applied to debt repayment.
Prolonged Retirement Date
Too many people don't take into account how debt will affect their retirement plans until it's too late. Despite the fact that some future retirees may have enough money to afford their life's necessities during retirement, they fail to take into account how much of their fixed income would be consumed by debt repayment. Oftentimes, by the time the person nearing retirement finally analyzes their entire financial situation, their only recourse is to extend their retirement date until they have eliminated all or most of their debt.
These are just a few of the ways debt cost debtor. It's been said time and time again, but the saying still holds true--debt, is in fact, a form of slavery.