Is being in debt really a big deal?  I believe that debt contributes to poverty.  Am I right? Or, am I making a big deal out of nothing?

Let’s say that I have a couple credit cards, a student loan, a car loan and a little overdraft on my checking account. Hey! C’mon! It’s not really a big deal! I can handle the payments. I’m going to get a house soon. And when I do, a mortgage is good for taxes, right?

As a society, we’ve bought into the lie that debt is OK. It seems that everyone has some debt. So, it’s easy to assume that it’s normal to have a credit card balance and to owe on our cars, student loans and other stuff. Just so long as we can handle the monthly payments, we’re good. Debt is so rampant that many people talk about the cost of a car and the only thing they refer to is the monthly payment. They ignore the purchase price and the interest they are going to end up paying!

Remember that phrase, “Money doesn’t buy happiness?” I’ve heard some great answers to that expression. Like, “If you believe that, then you don’t know where to shop!” I also laughed when I heard this answer, “How would you know? Were you once rich and now you’re poor and you decided you like poor better?”

Consider this thought. “Money doesn’t buy happiness. But, debt will absolutely bring misery.”

In his book, Financially Fit For Life, Steve Down writes, “They who understand interest, receive it; those who don’t understand interest, pay it.” For most Americans, over their lifetime, the difference between the interest they pay on debt and the interest they could earn for themselves is literally the difference between poverty and wealth.

When you have to pay interest on debt, you are giving away the resource you need to become wealthy. Let me show you in an easy example.

The average American household owes more than $15,000 on credit cards. They owe more than $15,000 and they somehow manage to always carry approximately that balance over their working lifetime (or longer).  The average household builds up that credit card debt balance over a few years. They get used to making the minimum payments every month. They don’t like it, but the pain isn’t so great that they get rid of the debt. They become accustomed to the debt and then they let the balance ride year after year after year.  And over their lifetime, at any point in time, they are carrying around that average $15,000 in credit card debt. It’s just part of who they are and how they’ve chosen to live.

They don’t intend to always have the debt. In reality, the balance goes up and down. Sometimes they make an effort to pay it down. At other times, they decide they need that new dress, the new car, the vacation to Florida or the trip to Las Vegas with friends. And sometimes, something breaks and needs repairing on the car or at home. It’s just life! Everybody does it, right?

We make purchases with our credit cards and we tell ourselves, “I know I’ll have to pay interest, but I really needed that dinner out.” Or, “We’ve been working hard and we deserve this weekend trip. I wonder if we would make different decisions if we understood the real cost of being in debt.

If you have the average credit card debt, you will likely pay about $81,000 in interest over 30 years.  In the process, you lose $81,000 of your money. And that’s after-tax. You have to earn, $90,000 to $100,000 or more to have the $81,000 to pay to those credit card companies!

If the loss of $81,000 isn’t bad enough, let me show you the real cost of that credit card debt. The truth is that the $81,000 is only a drop in the bucket compared to what you are really giving up when you go into debt.

The real loss is the potential that $81,000 held for your future. You have to pay the $81,000 on the debt. The average household has found a way to earn the money to pay the interest every month. We could say that it’s money you are going to spend anyway. What would happen if you spent that money, that $2,700 per year, in a way that would help create wealth for you and your family? That average credit card debt is costing you a literal fortune! Let me show you why it’s a HUGE deal!

If you put that $2,700 per year to work earning an average of 10%, it would turn into more than $440,000 in 30 years!

When you reach age 50 or 60, it’s one thing to stop and realize that you lost $81,000 in interest you paid on the debt. It’s quite another level of pain to discover that the real cost was $440,000 that might have been yours. The $15,000 credit card debt ends up costing an average American family almost a half million dollars. Is that good enough reason for you and me to hate debt?

But wait! That is the result of just $15,000 in credit cards! Most people have more debt than just credit cards. Can you begin to understand the impact on your life when you consider the other debt that most people carry around? Do you have retail store accounts, car loans, student loans, overdraft accounts all added on top of your mortgage, second mortgage, and home equity loans?

Every debt results in interest that you must pay. Each debt represents some of your wealth that you are giving away rather than keeping to grow and work for you. Is it any wonder the banks and credit companies get rich and most people end up dead or broke or dead broke?

It is important, in fact it is vital, to realize the real long-term impact of debt. The interest you pay is only the smallest part of the real cost. The real loss is what you could have created with the interest you are giving away.

Begin creating that awareness in your life using the simple example that an average credit card debt can cost you nearly a half million dollars in wealth over your lifetime. Then, the next time you are tempted to make an impulse purchase with your credit card, think of the half million dollars!

If you currently have credit card debt, put together a plan to get rid of it. If you need help with the plan or if you need help sticking to a plan, get professional help. The cost of the help will be small compared to the cost of carrying the debt forever. It should be obvious that overcoming just their credit card debt would dramatically change the wealth opportunities for most people.

A friend of mine wrote, “Interest is non-emotional, is no respecter of persons and grows 24 hours a day, 365 days a year. It works holidays and takes no time off. It grows geometrically and exponentially in either accumulation or the downward spiral of compounding debt.”

Debt is a killer of your wealth, opportunity and even your happiness. Debt is a fast lane on the road to poverty. Remember that $15,000 in debt can cost you more than $440,000 of potential wealth over your lifetime. Make it a passion to get past debt so that you can reimagine wealth.

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