Thursday, May 5, 2011, AM | Leave Comment
Common sense has been defined by dictionaries and many experts as “Good sense and sound judgment in practical matters.” Some say sound judgment is not based on specialized knowledge. Time and again, the last few years, millions of folks who borrowed ruthlessly so to speak have proven it to be wrong. They used common sense against their own sound judgement. It led millions to brink of bankruptcy.
They borrowed heavily because others were borrowing. For millions it is still hard to understand that everyone’s family finances are not necessarily the same. On the contrary, they may be totally different.
Instead of using common sense and get yourself in deeper debt, why not use your own judgement. Examine your own personal finance (and not that of others) and come up with a sensible approach of borrowing for what you really need.
Both lenders and borrowers followed common sense. Borrowers kept borrowing and lenders kept lending – more like giving out money in the sense they didn’t give a damn whether consumers were able to repay the loan. Banks didn’t want to lose out to their competitors in the market. And borrowers thought if they didn’t borrow, when the time came that they really needed the money, there would be no money left in the banks.
Everyone thought they were screwing others but in reality they were screwing themselves by following common sense. Many borrowed just for the heck of it. It feels good when you use other people’s money but no one seems to think of the cost associated with loans.
Wiser folks don’t repeat mistakes
Lenders abandoned basic lending rules and consumers abandoned their own judgement. Loans coming out of lenders were like water coming out of kitchen faucet. Even water at times in some communities are occasionally rationed. Not loans. It seemed that banks had more money than we had water.
The result was that millions of households kept themselves getting dangerously in debt. High debt makes us vulnerable to economic shocks such as unemployment and rising interest rates as well as falling incomes, housing prices, and asset values. Lenders and borrowers must be wiser now and not make mistakes of the recent past.
If we somehow want to be financially independent, we must manage our debt efficiently and not be at the mercy of lenders. We must not be unnecessarily reliant on others for our own financial well being. The sooner we get out of debt, the sooner we can be on the path of financial success. That includes retirement as well. Having manageable debt means having more control over our financial lives. Only then we can have the flexibility of not working just to make ends meet.
Have debt manageable
Having manageable debt also means less stress and less worry, which means a healthier and more enjoyable life. The current recession can repeat itself many times over in our lives and especially in our kids’ lives. Who is to say that it will not return again? To be on the safe side, not being in debt can really give us the life that we always wish for.
Personal debt consists of all debt that are not used to generate investment or business income. Most folks don’t use credit card debt to generate any kind of income. On the contrary, ruthless use of credit cards can generate layer after layer of debt. To get rid of debt is like peeling an onion. You keep peeling, you keep crying thinking why you were not careful to use credit card debt to your own advantage and not just to fill the card issuers bellies.
Getting into debt is very easy. We keep bombarded by advertisements with offers of easy credit. Resisting these temptations and actually paying off debt may seem the hardest thing to do but it need not be. Many folks have done it and there is no reason why you can’t do it too.
In a Nutshell
To stop getting into debt, you must use your own sound judgement, examine your own finances and act accordingly if you need to borrow. Stop using common sense. It got you in deep debt shit in the first place. If you use banks and other lenders websites, be warned that they are designed to encourage you to borrow more, not less.