Savings And Debt

The American economy thrives on debt. Debt is how credit card companies and banks make their money; it's how car salesmen and electronics retailers increase their profits. It's also why millions of American families are forced to move out of their homes, and why many families cannot afford to send their children to college. But you can avoid it. You don't have to be in debt. It's possible to not owe anyone a single sent for anything (even your house!). Here's how:

1. Don't spend money you don't have
It sounds simple, but it can be very hard. What happens when you go to Best Buy and you see that 60" flatscreen TV. Of course you don't have the money now, but you'll have it eventually, right? Sure, but don't forget that the longer it takes you to pay for that TV, the more money you'll eventually spend. You don't want to buy a $5,000 TV, then end up paying $10,000 to your credit card company over the next 5 years.

2. Just wait
Be patient! Even if you don't have the $5,000 now, if you just continue not to spend money you don't have (rule #1) you will eventually (and sooner rather than later) be able to afford what it is you want.

3. When you overspend, do it right
Here's what I mean. Very few people have the income to simple buy a house. Houses and perhaps cars are among the few exceptions to rule #1. But even so, there's a right way and a wrong way to go about buying a house. You have to make sure that it's a house you can really afford. That is, with each payment you can not only pay off the interest you owe the bank, but some of the principle as well. It may take a couple decades, but if you choose the right-price house for your income level, you will eventually own your house.

It's seems silly to think about how many people are in debt when it's so simple to not be in debt. The trick is, once you're in debt, it's pretty hard to dig your way out. So please, think about my rules, and if you can get out of debt, that's great. If you can avoid debt entirely, that's even better.