Thursday, August 3, 2017
The Worst Debt There Is
This week is all about debt here at Budget Boss so it’s only natural that most debts can and should be removed from your budget. Today I am going to speak of a very troubling debt that many of us have. Many people think of there being good debts and bad debts. I have gone on the record as saying all debt is bad, but I do realize some is far worse than others. Most people tend to think of unsecured debt like credit cards or lines of credit as the worst debt possible. While for the most part, they are right, in my opinion, there is one type of debt that is worse. This kind of debt is even thought of as good debt by many. I’m speaking about student debt. Many see student debt as an investment in your future. While that might be true, I also look at student debt as the number one contributing factor in the impoverishment of young people in Canada. In this post, I will go over my reasons for proclaiming student debt as the worst debt there is.
It isn’t going anywhere….ever
Although consumer debt like credit cards and lines of credit often result in very little to show for the burden of their amounts, they are in your control. What that means is you can choose to pay them or not. Now I would never advocate not paying one’s debts, but if you were so inclined you could not pay those debts. It would result in a poor credit rating and all the bad things that go along with that, which are many, but it could be done. Your government student loan, however, is not going anywhere. It is attached to your Canadian Revenue Agency Account which follows you around like a bad disease. You cannot outrun the CRA and you cannot hide. The second you have an address you will be found. The second you earn a dime you will also be found. The CRA can garnish your wages to take back its loan if you try to avoid them. You cannot get rid of it with bankruptcy either. You must stay in good standing with them in order to avoid this which means you have to pay. If you cannot afford their minimum amount you can negotiate a smaller amount for your monthly bill. Doing this will prolong the repayment period, which hurts you big time in the long run. You might not care as it is hard to meet those monthly minimums when you are just starting out. That leads me to my next point.
10 Things College Kids can do to Save Money – Budget Boss
Student Debt comes at the worst possible time in your life
I remember when I signed the papers to get my OSAP loan. I also remember when I signed the papers for every credit card I had in those early years. One thing I don’t remember is where that money went beyond my tuition. I was young, foolish and irresponsible and all of a sudden, full of cash. That was a deadly combination. I had very little experience with money, other than spending it frivolously. I also didn’t know the consequences of debt and not paying it back. You take a debt like the one I had and plop it on my plate right now and I would know what needs to be done to get rid of it. I would also know the importance of getting rid of it. Back then it seemed normal in my mind that I had this cloud hanging over me. I assumed everyone did. Well, many did, but the way it is handled was different I’m sure. I thought I was some sort of big man who could handle anything. Wish I could have gone back and listened to my parents, that’s for sure. Saddling these sums of debt on young people is borderline criminal in my eyes.
How to Regain (or gain) your Money Optimism – Budget Boss
Right now, our economy is killing those with student debt
We live in an era of wage stagnation. This era has seen the rise of access to easy credit and fall of pension plans. This era has seen a decline in employer-sponsored health benefits and the rise of automation. Good paying jobs for younger people have become scarce. The price of buying a home has gone through the roof. The cost of living is insanely expensive as essentials like food and electricity have become very pricey. Just meeting your monthly bills every month is a challenge let alone a crippling student loan. Add to that trying to save a little every month for that expensive house or a car or anything for that matter. Young people these days are stuck between a rock and a hard place and it’s hurting them immensely. In my opinion, it is hurting the economy as well. It is not economically sound to have a segment of the population stuck in such a bad position. Any extra expense such as health issues, job loss, or even a small rise in interest rates pushes many over the edge. This has become the defining mark of a generation. So what can be done?
77% of Canadian graduates have regrets about student debt – Global
We as young people have to be vigilant. The deck is stacked against us; the writing is on the wall. You are not meant to have an easy path to success. I do not hate which is right in front of me, only which sneaks up from behind me. An economy built on the debts of its future leaders cannot flourish so we must change that if we wish to have a chance. Understand what you are getting into when you take on these loans. Limit your borrowing when it comes to student lines of credit and credit cards. Work and save while you are in school. Act like you are poor because quite frankly, you are. When you get out of school, save like a madman. Delay the purchase of the home, the car or the vacation. These types of debts can be erased with a few years of hard work and diligence. As much as it might hurt you, live at home for a year or so if you can after school. I wish I had done that; it would have saved me time and money. Talk to someone about your debts and get some help with a plan to get out of it. It is not the end of the world, but it could affect you far longer than you would wish.
“We shouldn’t be profiting from our students who are drowning in debt while giving a great deal to the banks. That’s just wrong.” – Elizabeth Warren
Email – joe@budgetboss.ca
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