Understanding debt slavery: How can you break the burden?

By: on 2018-05-31
Ask Barbara Delinsky
Understanding debt slavery: How can you break the burden?

Well, it is true that people are trying to improve their lifestyle. To do so, they have to spend more. But most of them are using their credit cards to upgrade their lifestyle. When you have debts, you are liable to pay them off. If you ignore your debt, you will fall into the debt trap. Your lender can take legal action against you. So, debt means you are not free; it signifies enslavement.

Well, you can argue that in the modern world, slavery does not exist. We select our President by voting. So, the power is in our hand to select or vote out our ruler. The concept of debt slavery doesn't fit in.

But unfortunately, in today's world, having debts means we are liable to lenders, creditors, or banks from where you take out the loan.

These days, most of the people, in our nation, are in huge debt, which is dragging them down. Since they owe money to the creditors or lenders, they are slave.

Our society is becoming debt driven day by day

The credit card issuers, banks, and the car dealers are constantly trying to influence us to borrow money. They are portraying that borrowing money is normal by featuring misleading advertisements.

The media is spreading wrong messages by saying that if you don't possess the latest gadgets, a bigger house, an expensive car, and good clothes, then you are somehow inadequate.

You have to upgrade your lifestyle to own all these things, no matter what your income is. If you can’t afford to buy them, then borrowing is the only option to upgrade your lifestyle.

People are participating in the race and have started living beyond their means. They are applying for the easy and dangerous tools - the credit card.

By using this tool, they are getting what they want and becoming the debt slave in their life.

They are struggling to get out of the debt burden.

Since they don't stop living an extravagant life, they fail to secure their financial future.

How to get out of the vicious debt cycle to secure your financial future

To get out of the debt, you should learn how to live within your means. To do so, you have to stop believing the marketing gimmick.

Remember, you need to prioritize your financial independence first. Once you prioritize your FI goal, you will be able to stop living a lavishly.

Remember, accumulating debt is easier than paying them off.

You have to work hard to pay off those painful debts. Because most of the unsecured debts have a higher interest rate.

If you make only the minimum payments, then your debt will cost you more. Because it will take longer to repay entire debt amount. Your hard-earned money will go just to make the costly interest payments.

How can you kill the debt demon to become debt free?

1 Save as much as you can

To kill the debt demon, you have to save enough first. It will help you to make your monthly debt payments along with paying your monthly bills (utility, gas, insurance, grocery, etc). So, setting aside a certain amount can be helpful.

To get out of your painful debt, you have to make larger payments toward it. Otherwise, you will not be able to get rid of it. To do so, you have to save more.
How can you save more?

Some people claim that they can't save money. The reason is they don't follow a budget.

A budget not only helps to save money, it also helps you to manage your monthly bills easily. Once you follow a budget, you have to include the debt payments as the necessary expenses. To do so, you may have to eliminate unnecessary expenses or increase your net worth. Find out all the unnecessary expenses and eliminate them to save more.

2 Choose the right debt repayment method

Only saving money is not enough. To pay off your debt, you have to follow the right debt repayment strategy, too. Many such strategies are popular these days; just you have to pick the right one that suits you the best.

Some are professional debt relief strategies like debt consolidation program, debt settlement program, debt management plan, and some are DIY debt relief methods like debt snowball, debt avalanche, balance transfer method etc.

If your debt amount is huge and you want to get out of it relatively fast, then you can follow the debt avalanche method.

What is debt avalanche method?

In the debt avalanche method, you need to arrange your debts from highest to the lowest interest rate.

You need to make larger payments toward the highest interest rate debt while making the minimum payments to the rest of the debts.

You have to continue the process until the highest interest rate debt is paid off. Once you pay off the highest interest debt, you have to make biggest payments to the second highest interest debt while making the minimum payments to the others.

This method is difficult to follow but it helps to pay off your debts faster.

3 Build an emergency fund

Did you ever analyze the reason behind your overburdened debts? Some people live beyond their means and accumulate debt, while others don't pay their credit card bills within the stipulated time and acquire debt.

But, there are some people who fall into debt to overcome an emergency.

If you don't want to live as a debt slave forever, then build an emergency fund first.
Why is an emergency fund important?

During an emergency, either you have to take out a personal loan, payday loan, or tap the retirement fund to manage the situation. Doing so, you accumulate more debt in the long run.

Remember, tapping money from the retirement account is also dangerous. By doing so, you are spoiling your financial future.

If you have an emergency fund, then you can easily manage unforeseen events like a job loss, an injury, an accident, a serious illness, etc.

Remember, you have to save at least 3 to 6 months of income into an emergency fund to avoid accumulating costly debt.

So, before anything, start building a fat emergency fund to avoid debt slavery.

4 Say "No" to any debt to secure your financial future

According to a recent survey, people in our nation are working more than the average retirement age (60). The reasons are, they have to pay off their debt and they have less or no retirement savings.

You have to secure your retirement days by saving enough.

Living a debt free life, saving money, and making wise investments can help you to achieve financial freedom earlier as well.

If you carry debt into your retirement, then you may experience a dire poverty in your retirement.

5 Avoid using credit card debt proactively

If you really value freedom, you need to avoid the trap of credit card debt. Some people love to carry the plastics in their wallet. They have every possible type of credit cards - gas credit card, travel credit card, and reward card, etc.

They think that by using separate credit cards, they are saving money. In reality, they are digging a hole in their own pocket.

Because, nothing comes as free; to get the reward points, you have to spend a certain amount on your card. There are many hidden terms and conditions that are not told before.

So, before saying "Yes" to the multiple credit card offers, you need to analyze your affordability first.

If you can’t afford an item with cash, then you can't afford the credit card bill, too.

If you don't make your credit card bill payments, the card issuer can sell the account to a debt collection agency.

The debt collection agency applies many ruthless tactics to get the money back from the debtor. So, it is important to avoid credit card debt in life. So, be aware!

At least by avoiding debt, you can sleep peacefully. Thus, it is imperative to live within your means without caring about the seductive marketing strategy.

Once you stop living the way your credit card issuers want, you can avoid debt forever.

So, know your affordability first; this is the key to live like a king without doing slavery to a lender, creditor, or any financial institution.

Last Updated on: Thu, 31 May 2018

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