Debt: The Real Foe
When it comes to building wealth, you have one real foe: Debt. Yes, your obligations to your creditors hinder you from becoming rich. Think about it: If you had no car payments to make, no credit card bills to pay, or no student loans to take care of, just how much of your income could go to your savings and retirement funds? A huge chunk, right? Without debt, you can even finish paying for the house years earlier!
Statistics from the Federal Reserve reveal just how much of an enemy debt is on the average American household’s quest to become financially rich: The average household credit card debt is pegged at $7,093 but when only the indebted household is considered, the average debt more than doubles at $15,204. The average student loan debt is $33,005 while the average mortgage debt is almost $150,000. These debts are only the tip of the iceberg. You also have to factor in the common things that American breadwinners normally continue to pay for month after month—a second car and personal loans taken from other sources, among others.
All in all, the monthly payments for these debts can eat up a third or more of one’s take home pay. Debts can make you lose opportunities to build wealth. For instance, if you were paying $1,500 per month for all your financial obligations, imagine just how much that same amount would grow in ten or twenty years if you were to invest it in mutual funds that offered a rate of return of 10 percent per year? As you can see, you can fatten your nest egg faster if you didn’t have to make all these monthly payments.
The reality, however, is that many American households have to make these monthly payments. They are saddled with seemingly insurmountable debt. The figures are so large that getting out of its deadly claws is seen as an impossible feat. However, if you really want to, it is still possible to get out debt without declaring bankruptcy. Make no mistake, the process is not going to be easy. It will take a lot of sacrifice from your end. But once you can finally call yourself debt-free, the benefits are going to be well-worth it.
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