What is money problems?

Not having enough? How to get more? Where to get more? If someone asked me to define money problems my answer would be, debt. Yep, debt is the killer. You are slowly strangling yourself if you have too much debt. 

Anyone can argue with me over this point. Look at whats happening in the world today. A year or so ago the whole world was in a financial crisis. Why?. The short answer, debt. We are still trying to get out of it. I have learned this the hard way. 

Debt is not a complicated concept. Let me explain. You want to buy something for which you don't have the money right now. Well, not all of it and for some reason you need that thing now. So you apply for a loan at the bank and if your loan is approved, they give you the money and you pay them back. Easy enough. 

So, whats the problem, you ask?. Here's the thing. If you only had to pay the loan amount back without any interest, then everything would be fine. But that's not how it works. You have to pay interest. This is probably old news to you and you are getting bored with this post and want to click away. Just bare with me a little longer.

Let's say you want to buy house. In South Africa they calculate the repayments over a 20 year period. If you do the math you will find that you could have paid off your house 3 times in the 20 year period. Hmm, this doesn't sound good. You see, the first 12 to 13 years of your mortgage payment covers the interest. If you look at your mortgage statements you will notice that your loan amount barely goes down. The reason, interest. 

This is not only true for big amounts like mortgages or vehicles, it's also true for anything you buy on credit. You are making the banks rich. They want to be your friend cause you make them money. They like you if you take out huge loans. You are their  best buddy. Only until the interest rate goes up. 

Oooh, that darn interest rate. In the good times people buy more and more on credit. They make their payments and all is beautiful. The birds are singing the flowers are blooming, until the interest rate goes up. I'm not going to explain to you why and how interest rates goes up. My short explanation, a monster called inflation. I'll write a post on it one day. I get very angry when I talk about this topic.

With interest rate going up you pay the banks even more. They love you even more. Then one day you cannot make the payments anymore. You struggle to survive. Ugly unhappy people knock on your door and want to take your stuff back. You get blacklisted. The worst thing is, you start getting depressed. You might start to drink heavily and neglect your wife and kids. Some people start to gamble in the hope that would strike it lucky, and more often than not, loose everything. 

Remember this. Banks don't care that you have a family. The reserve bank doesn't care that you have a family. They don't care that you struggle and are put under immense stress. In these ugly times people start to loose their jobs. Don't think it cannot happen to you, it did to me and let me tel you, it's no joke. I have learned my lesson. If I did not have any debt and I had an extra income, I would not have stressed as much as I did. 

If I can give you advise, stay debt free. Don't buy anything on credit if you can buy it cash. Rather save the money and buy the item cash. You will save a lot of money on interest. I know if you buy a house it's difficult, but try to at least save some money and pay a big part as a deposit. Try to make the loan amount as small as possible. 

I realized two things when I struggled with debt. One, get an extra income. Two, get rid of my debt. I use a simple and inexpensive system that generates extra income so I can pay of my debt more quickly.  You can too.

If you don't have debt and you have an extra income you can easily say, "Money problems, what money problems?".