"Debt is Dumb, Cash is King” - Dave Ramsey
What is debt?
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase (www.wikipedia.com,retrieved December 12, 2020).
Reasons Why we incur Debt
1. We cannot afford the purchase at that particular time
2. We think we will have the funds later
3. We Binge or peer pressure shop with friends
4. Need Transportation
5. Emotional spending
6. Education
7. Lack of savings and/or budget account
8. An emergency occurs that requires a financial expenditure
9. Loss of income
10. We just don’t care
The more distant we are from cash the easier it becomes to invisibly spend it by using credit cards. We cannot feel the cash or see the cash leave our hands to make a purchase. We are not mentally ready at the point of purchase to devise a payment plan to clear the purchase in full.
Large expenditures are somewhat different, such as car loans and student loans. We clearly do not have the funds to make payment in full, however good credit affords the grace of long term installment payments. Unexpected loss of income from the bread winner in a household may result in incurring survival debt.
Who is responsible for the debt?
The Individual who legally incurred the debt*
A surviving spouse may be responsible according the laws of their state*
The estate of a deceased family member through probate*
Protection from Debt
Pay with cash whenever possible
Avoid overspending or unnecessary spending
Save, Save, Save – have a cash account
Plan, Plan, Plan – when purchasing major items such as an automobile
Secure scholarships, purchase college tuition plans
Consider a low investment Entrepreneurial venture over college
Consider a survivorship/beneficiary/trust plan to cover debts for loss of life or accelerated death
*consult with an attorney for more information
Comentarios