As I exercise, I listen to podcasts and once of my favorite financial ones is Suze Orman, author of The Money Book for the Young, Fabulous & Broke. She takes calls on her show from people who have serious financial problems, but are quite often in just as serious denial.
Examples of the Financial Crazy
1. Someone has $60,000 in credit card debt, but they just leased a $20,000 car.
2. Another person is struggling to pay the bills each month (and often aren’t), but some of those bills include smartphones for the entire family, or eating out 5 meals out of 10.
3. Or perhaps, there is a fifty years old who has no retirement savings, but they want to take a vacation around the world, financed with credit cards.
4. Finally, maybe a person just out of college has massive student loans and no job prospects but wants to take a year off to go backpacking.
You Tell ’em Suze
ALL of these things make me want to go into the studio and shake some sense into these people, but Suze Orman does a fabulous job of that, so I can rest easy.
The situation that seems the craziest to me is the in-debt jet-setters. They ask themselves, “Can I afford a vacation?” and the answer always seems to be yes. I think to myself, “YOU are taking a vacation???” Sure, we all work hard so we deserve a rest, a bit of sun and fun. Except when you’re in debt, it’s all kinds of bad news and short-term, without an eye on the future can really set you up for bad things. I hear the same excuses all the time.
Excuses for Lingering in Debt Forever
“You only live once.”
“I’ll never pay off my debt so why try.”
“I’ll just work forever.”
“You can’t bring money to the grave with you.”
“I don’t know what the future will bring.”
“I want to have fun while I’m young.”
Pay Off Debt Now, Have More Fun Later: there is a better way
But, these excuses for lingering in debt forever are just that: excuses. Excuses for being too lazy to figure out a basic knowledge of personal finance. Or, excuses so that they can have everything they want now for themselves, friends and family, without having to pay for it. Excuses so that they don’t have to say no to anybody. Excuses so that they can appear to be wealthier than they are to the world around them.
A basic thing that these kind of people that I hear on the Suze Orman show fail to realize is that a little sacrifice in the short-term can pay off huge dividends in the long-term. Having compound interest work for you through savings or investments instead of against you with credit cards or students loans is huge. HUGE. It’s like free money in your bank account, every single day for the rest of your life. Or, it can work the other way and it’s money draining from your account, making a banker rich, every single day for the rest of your life.
The much better way is to get on Dave Ramsey’s Total Money Makeover Plan and pay off debts as quickly as possible. Yes, it likely will be painful for a year or two. No, you can’t take exotic vacations, get take-out coffee, join that expensive new gym or eat out at all your favorite restaurants. Yes, your friends will think you’re a bit odd. But, after that pain, you will have huge gain as the all the money you save is going straight into your bank account, earning compound interest, or even better, being invested in the stock market. Then, a few years after that, you’ll have an abundance of money to jet-set around the world to your heart’s content. It’s worth it!