Creeping Slowly Into Debt

Experience has shown that success in retirement is highly correlated with little or no debt. If your monthly fixed expenses are low, you often have the financial flexibility to handle whatever comes along. Accumulating a significant amount of debt has an insidious cost as well -- low savings. Not only does debt make retirement more expensive, it limits the size of your "pot of gold" that's available to live the life you desire after you stop working.

It's easy to acquire debt. Most of us can't afford major purchases such as homes, cars, and college with available cash. We need to borrow money to leverage our purchasing power. The benefits are obvious though -- shelter, transportation, and a chance for a better career.

The most obvious way to avoid excessive debt is to dial-back on big ticket items. A more reasonably priced house or a less expensive car definitely help.

But a stealth factor also comes into play in amassing debt -- lifestyle creep. As the Wall Street Journal noted in a recent article, as we progress professionally, our income tends to rise and we begin to add luxuries into our lives without really thinking about it. "It starts with little things: adding premium cable channels, buying the more expensive bottle of wine, making more frequent phone upgrades, giving nicer gifts for birthdays, adding impulse items to your cart on Amazon, buying tickets for better seats at an event, staying in a nicer hotel, paying for slightly nicer airline seating ..." Does any (all) of this sound familiar?

Life is a series of trades-off. We all want and enjoy the nicer things in life. The cumulative impact of all these choices, however, adds up over time. The difficulty is that it creeps up on you without notice.

The solutions are varied. A lot of suggestions focus on keeping better track of your expenses so you can reign them in. A more effective approach may be to determine your financial goals and make sure you first save the requisite amount necessary to achieve them. The remainder can be spent knowing that you have already taken care of the "future you."

Words of Wisdom

I am heavily in debt. Right now my goal in life is to be just broke. I wanna get back to zero. Someday, I'm gonna have nothing. I'll leave it to my kids. "See this? None of this is yours." -- Tom Ryan