Debt brings with it a slew of day-to-day consequences, including everything from money-related anxiety to collection calls and letters. Debt impacts consumers’ present-day lifestyle, to be sure. But perhaps the most damaging aspect of excessive debt is how it can easily kill your future dreams.
Here are five examples illustrating just how detrimental debt can be in the long-term.
Limits Travel Opportunities
If you asked a group of people what they’d do if they had more money, there’s no doubt some—if not most—would say travel more. Some people yearn to take a good old-fashioned road trip to explore their country. Others dream of hopping on a jet and flying across the sea. Many enjoy the adventurous aspects of hiking, backpacking and camping. Yet others prefer the urban comforts of visiting the most iconic cities in the world. To each their own, but all these scenarios share one common limitation: Traveling costs money.
Debt makes it that much harder to justify buying that plane ticket or booking that hotel room. If you dream of globetrotting or launching your travel blog without worry, you’ll need to address your significant debt first.
Impacts Ability to Get a Job
Did you know some employers perform credit checks on prospective employees? While they can’t see your credit score, they can see records of payments, debt owed and available credit. This gives employers the power to respond to any financial red flags they see, such as late payments, staggering debt or a high credit utilization ratio.
The best way to ensure you pass an employer-initiated background check is to clean up your credit report by paying your balances in full by their due date and keeping usage to a low percentage of your total available credit.
Puts Homeownership on Hold
Many people dream of owning their own home—a space they can control without having to answer to a landlord. But debt jeopardizes this dream by making it harder to get approved for a mortgage and making it harder to keep up with monthly payments if you do get the financing you need.
Complicates Having Children
NerdWallet estimates that raising a child with a “no-frills” upbringing costs more than $260,000. That’s just for the essentials! An upbringing with more “extras” like extracurriculars, college savings and family vacations can cost more than $745,000. Needless to say, it can be tricky to come up with the money necessary to provide for your child(ren) and stay on top of debts.
Ruins Your Retirement
Hoping to retire around the traditional age of 65? Well, it takes a chunk of change to pay for living expenses once your income ends. Even if retirement is decades down the line, debt can hold you back from reaping the benefits of compound interest, meaning you’ll have less to show for your savings efforts.
Suggestions for Eliminating Debt
So, what can you do in the present to prevent excessive debt from diminishing your dreams? To start, small lifestyle changes can add up quickly, freeing up more money to pay down your debts and save. As Andrew Housser, co-founder of Freedom Debt Relief, advises, cutting down on “small” habitual expenditures—like cigarettes, lattes or drinks at bars—can “save $10, $15, $50 or more a month.” The same principle applies for cutting back on non-essential memberships and subscriptions.
For significant debt, it’s worth exploring a full range of options. There’s debt consolidation, which involves taking out a personal loan to pay off high-interest debts then paying it back at a fixed rate over time. There’s also debt settlement programs: Clients build up a dedicated account until they’ve saved enough, then negotiators contact creditors on their behalf and attempt to reach a lower settlement.
Excessive debt affects the present, but it doesn’t have to kill your dreams for the future if you proactively address it now.