Addicted to Debt and the Fixes Are Getting Pricey
George Boelcke FCI
August 03, 2007
An RBC study from last year found that just less than 50% of us don’t believe a debt-free retirement is a must.
I was somewhere between shocked and in disbelief. Is that really true? Do we really believe that still having a bunch of monthly payments is OK when we reach the point of living on a fixed income?
Or have we just thrown up our hands and given up and given in – to the fact that we’ll never be debt free the way we’re going right now?
The stats for those families who have just given up trying, or those just barely able to keep their head above water – for this month at least – doesn’t exist. But those figures would tell the real story and it’s reality for millions of families. Because I have to believe that 100% of us dream of a debt-free retirement, if not way sooner than that, but it seems a long way away right now.
And when millions of families are barely able to keep their head above water, the financial decisions get worse, instead of better, in order to create some breathing room:
Cash advances from credit cards or lines of credit just to make it to the end of the month.
Refinancing credit cards into their HELOC or mortgage loan – yet still keeping the credit cards open that caused the pain in the first place.
Car loans way beyond the life of a vehicle or including them in a refinance where this car loan is now part of a 30 or 40-year loan!
Buy now pay later plans – where the paying part gets close to 30% interest
Payday lenders – just once – but the payments every two weeks just cover the charges, interest and rollover fees creating an almost permanent debt
Every time I hear an advertisement to entice families to refinance and pay off their credit cards, it drives me crazy. Yes, it might be tax deductible and it will likely lower the overall payments, but at what cost? I’d rather owe $2,000 on a credit card at 17% that’s in my face every month, and to focus on paying it off, no matter what it takes.
I am a great fan of being able to refinance once – for any number of reasons. It might be to avoid getting burned by an ARM or to consolidate once, but anything more than that is often a sign that someone is treating their home equity as an ATM to be tapped, and not an asset to be built, paid off and protected.
Imagine a lifetime of savings contributions of maybe $100,000. Then on the day of your retirement you get a statement that says you have $30,000. You’d go nuts, wouldn’t you? Where did my money go? But isn’t that the same as our home equity when we keep taking it out as we go along, almost guaranteeing we’ll never have it paid in full? Come to think of it – have you heard of anyone having a mortgage burning party in the last few years?
The biggest thrill in life, and the largest check we’ll likely ever see, is when we sell our home and get the money for our equity. But stop a moment and think about how large that check could have – and should have been, instead. How much did you pay into the mortgage to get that equity?
I was somewhere between shocked and in disbelief. Is that really true? Do we really believe that still having a bunch of monthly payments is OK when we reach the point of living on a fixed income?
Or have we just thrown up our hands and given up and given in – to the fact that we’ll never be debt free the way we’re going right now?
The stats for those families who have just given up trying, or those just barely able to keep their head above water – for this month at least – doesn’t exist. But those figures would tell the real story and it’s reality for millions of families. Because I have to believe that 100% of us dream of a debt-free retirement, if not way sooner than that, but it seems a long way away right now.
And when millions of families are barely able to keep their head above water, the financial decisions get worse, instead of better, in order to create some breathing room:
Cash advances from credit cards or lines of credit just to make it to the end of the month.
Refinancing credit cards into their HELOC or mortgage loan – yet still keeping the credit cards open that caused the pain in the first place.
Car loans way beyond the life of a vehicle or including them in a refinance where this car loan is now part of a 30 or 40-year loan!
Buy now pay later plans – where the paying part gets close to 30% interest
Payday lenders – just once – but the payments every two weeks just cover the charges, interest and rollover fees creating an almost permanent debt
Every time I hear an advertisement to entice families to refinance and pay off their credit cards, it drives me crazy. Yes, it might be tax deductible and it will likely lower the overall payments, but at what cost? I’d rather owe $2,000 on a credit card at 17% that’s in my face every month, and to focus on paying it off, no matter what it takes.
I am a great fan of being able to refinance once – for any number of reasons. It might be to avoid getting burned by an ARM or to consolidate once, but anything more than that is often a sign that someone is treating their home equity as an ATM to be tapped, and not an asset to be built, paid off and protected.
Imagine a lifetime of savings contributions of maybe $100,000. Then on the day of your retirement you get a statement that says you have $30,000. You’d go nuts, wouldn’t you? Where did my money go? But isn’t that the same as our home equity when we keep taking it out as we go along, almost guaranteeing we’ll never have it paid in full? Come to think of it – have you heard of anyone having a mortgage burning party in the last few years?
The biggest thrill in life, and the largest check we’ll likely ever see, is when we sell our home and get the money for our equity. But stop a moment and think about how large that check could have – and should have been, instead. How much did you pay into the mortgage to get that equity?
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