Most people have goals they want to accomplish. Some people want to retire by age 55 or travel the world. Others want to put their kids through college to give them the best start in life or become a homeowner.
The financial decisions you make will determine whether your dreams come true or not. In particular, how you manage debt will influence which path you take. Today, American households hold $17.6 trillion in consumer debt, illustrating the dramatic rise in personal debt.
Not all debt is bad, but failing to manage your debt properly can land you in a heap of trouble that follows you for years into the future.
The Mental Health Impact of Bad Debt
Mental health issues can prevent you from achieving your potential in your personal and professional lives. According to a Forbes survey into debt and mental health, they found:
- 48% of Americans reported sleep problems.
- 40% reported an increase in anxiety.
- 38% said their social lives were diminished.
- 30% claimed they experienced depression.
In short, debt doesn’t only impact the numbers but also has a tangible effect on your mental state.
Dealing with debt together with mental health problems can set you back in your life goals. However, there are options available via debt management and relief programs with companies like TurboDebt, it could be a debt relief program in Illinois, NY, or Texas. These programs are designed to help borrowers manage their debt and create a plan to pay it off. They provide guidance and support to help borrowers take control of their finances and become debt-free.
Whether this is credit counseling, renegotiating your debts, debt consolidation, or even bankruptcy, confronting the problem can increase your quality of life and give you peace of mind.
Damaged Credit Scores
Your credit score measures your financial health and shows creditors that you are a reliable candidate for borrowing (or not). Approximately three in five Americans hold credit card debt, which can either boost or damage credit scores.
Your credit score increases when you successfully repay your debt on time and drops when you miss your repayments.
Bad credit scores make it difficult to obtain all forms of credit, including mortgages, auto loans, and credit cards. In some cases, poor credit scores could even make it difficult to rent a home.
Once your credit score turns bad, returning it to a serviceable number can take many years. Credit reporting agency’s such as Equifax state that a “good” credit score ranges from 670 to 739.
It may also surprise you that the average American credit score has reached an all-time high of 718. This is despite debt hitting record levels, which shows Americans today are handling their debts well.
No Chance to Save
Saving money is essential to planning for life’s little emergencies and achieving your financial goals, such as saving up enough for a mortgage downpayment.
With no savings, you are vulnerable to events entirely out of your control. For example, thousands of Americans have found themselves in financial turmoil due to increasing inflation and interest rates in the post-pandemic world.
Likewise, your car breaking down or your boiler experiencing problems in the dead of winter can make life miserable, forcing you to take on even more debt.
Debt today prevents you from building up your safety cushion for the future.
Working More Than You Wanted
Another issue impacting your financial future is being forced to work multiple jobs to increase your income. Debt that forces you to work your fingers to the bone doesn’t just impact your quality of life but also makes it more challenging to progress in your chosen career.
Do you really think you can give your all in pursuing a promotion when working one or two extra jobs?
Although taking on seasonal work can be a short-term fix for debt management, it’s not a silver bullet for bad debt.
Not Saving Enough for Retirement
Most Americans underestimate how much they need for retirement. According to a CBS News poll, more than half of Americans feel behind on their retirement savings.
It’s no secret that Social Security alone isn’t enough to live a comfortable retirement. Financial experts say that Social Security should be considered a supplement to a private retirement pot.
Bad debt prevents you from socking this money away throughout your working life, forcing you to make up the ground later or curtail your post-work plans entirely.
To enjoy your retirement, you must start early and consistently save enough, or you may find the ground impossible to make up.
Inability to Make Large Purchases
Landmark purchases are life’s milestones. Homes, cars, and college for your kids are some things you might be saving for.
Unfortunately, bad debt doesn’t just prevent you from getting the best deals on your loans. It prevents you from taking on debt to make the big purchases you could never hope to put down cash for.
A questionable credit history can mean a lifetime of renting, meaning you ultimately spend more on an essential you can never own.
Additionally, when it comes to assets like homes, if you spend much of your working life in debt, you may never achieve your dreams of paying off a mortgage because it’s standard to spend 20 years on these loans.
Quick Tips for Handling Your Debts
Need help dealing with your debts? The best solution is prevention. Follow these quickfire tips to get started:
- Create a budget.
- Slash your expenses.
- Renegotiate your debts.
- Practice saving part of your paycheck before you do anything else.
- Ask for a raise.
- Seek professional debt counseling.
These are just some basic tips that can help you to practice good debt management. Of course, every journey is unique, so it makes sense to seek professional help and build a plan tailored to your financial situation.
Debt is a cancer. Leave it unchecked, and it can soon dominate every part of your life, thus preventing you from achieving your financial goals going forward. If you’re struggling, the answer is to confront the problem head-on. You can consult a professional be on your way to control your finances today.
