Whether it is credit cards, car loans, or student loans, consumer debt continues to present a major problem to personal finances. Debt is the disease that slowly kills your ability to win with money. It is very hard to prosper with your money when you are weighed down by a big debt burden.
But there is a remedy for the disease of debt: learning how to save money. When you are able to build savings, you can rely less and less on the crutch of debt to get through life. For example:
- A starter or beginner emergency fund will keep you from going further into debt to address most emergency expenses. This also helps you to gain traction while you are working on paying-off your existing debt.
- A fully funded emergency reserve will give you peace of mind and keep you from relying on credit to survive an extended period of illness or a job loss.
- Saving for large expenses will keep you from jumping into debt at the first sign of a deal such as: “90 Days same as cash!” or “No payments until 2013!“. This will also help you grow in discipline and patience, as you learn to wait to pay cash for the items you want.
- Building a college fund for your kids will keep you and them from relying on student loans to pay for their education.
- If you start saving for retirement now, you can retire with dignity. You will avoid the temptation of using credit cards or other crazy ideas such as taking out a reverse mortgage on your paid-for home.
“By wisdom a house is built, And by understanding it is established; And by knowledge the rooms are filled With all precious and pleasant riches.”
Proverbs 24:3-4 (NASB)