Step 2, getting out of debt, gives me so much to talk about that I would like to continue on the subject in answer to the question, "why is debt so bad?" I don't profess to have all the answers or that my opinion is the only correct one. However, I do hope you at least take a step back and consider the impact debt is having (if you are in debt) or will have (if you're considering going into debt) on your life. Especially consider how debt adds risk (and stress) to your life.
Consider how many financial risks we face in life that we can't always avoid, such as serious injury or illness and job loss. Such unfortunate events can cause us serious hardship if don't have debt, but those hardships are compounded when debt is in the picture. In addition to worrying about the essentials of life, such as food, clothing, transportation, and shelter, what if we also had to figure out how to pay that $700/month car payment, $400/month minimum credit card payment, an $200/month furniture payment? In that moment we would gladly take back our hand-me-down furniture and reliable but not-so-flashy, 10-year-old car. When we are having trouble putting food on the table, we would regret that great vacation we charged to our credit card.
Don't get me wrong - I'm not saying that we should live in paranoia of something bad happening and not enjoy life. However, I am saying that we should distinguish between our needs and our wants and enjoy our wants when we are financially ready to enjoy them. It is my opinion and experience that the first 4 baby steps should come before expensive wants: start with $1000, get out of debt, get 3-6 months of expenses in savings, and contribute 15% of your income to RRSP's. After that you can balance extra money to fund kids college, pay off your house early, build wealth, give, and save to pay cash for your wants. Take a nice vacation. Buy a nice car. There's nothing wrong with that - if you have the cash and you've taken care of more important things first. This is one of my favorite Dave Ramsey quotes: "Children do what feels good. Adults devise a plan and stick to it."
If you have any questions or comments, please email me
Consider how many financial risks we face in life that we can't always avoid, such as serious injury or illness and job loss. Such unfortunate events can cause us serious hardship if don't have debt, but those hardships are compounded when debt is in the picture. In addition to worrying about the essentials of life, such as food, clothing, transportation, and shelter, what if we also had to figure out how to pay that $700/month car payment, $400/month minimum credit card payment, an $200/month furniture payment? In that moment we would gladly take back our hand-me-down furniture and reliable but not-so-flashy, 10-year-old car. When we are having trouble putting food on the table, we would regret that great vacation we charged to our credit card.
Don't get me wrong - I'm not saying that we should live in paranoia of something bad happening and not enjoy life. However, I am saying that we should distinguish between our needs and our wants and enjoy our wants when we are financially ready to enjoy them. It is my opinion and experience that the first 4 baby steps should come before expensive wants: start with $1000, get out of debt, get 3-6 months of expenses in savings, and contribute 15% of your income to RRSP's. After that you can balance extra money to fund kids college, pay off your house early, build wealth, give, and save to pay cash for your wants. Take a nice vacation. Buy a nice car. There's nothing wrong with that - if you have the cash and you've taken care of more important things first. This is one of my favorite Dave Ramsey quotes: "Children do what feels good. Adults devise a plan and stick to it."
If you have any questions or comments, please email me
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