Background Information
Let’s take you back to your school days, when you first learned about the concept of borrowing. Remember when you would trade your lunch box snacks with your friends, promising to return the favor the next day? That, in its simplest form, is what debt is all about.
What is Debt?
Debt is money that you owe to somebody else. It’s like borrowing lunch from a friend, but instead of food, it’s money. And just like how you promised to return the favor to your friend, when you owe money, you promise to pay it back, usually with a little extra. This ‘little extra’ is called interest.
How Does One Acquire Too Much Debt?
Now, imagine you kept borrowing lunches from different friends each day but never returned the favor. Soon, you’d have a whole bunch of friends waiting for their return lunch, right? That’s similar to how one gets into too much debt.
When you borrow money, be it for a new car, a house, or even a credit card purchase, you’re taking on debt. If you’re not careful, these debts can pile up. Like forgetting to return the lunches, if you forget to pay back your loans, or if you borrow more money than you can pay back, you could find yourself in a situation of too much debt.
Sometimes, it’s not just about forgetting. Unexpected events, like losing a job or a medical emergency, can also lead to too much debt. That’s because, during such times, you might have to borrow money to cover your expenses.
The Debt Scenario Today
In today’s world, debt has become almost unavoidable. We use credit or loans for everything from buying a house or a car, to paying for education or a medical emergency. While debt isn’t always bad, the problem arises when you have more debt than you can handle, kind of like owing lunch to too many friends.
Now, you might be wondering if you’re in this situation. Well, the next sections will help you figure that out. We’ll explore the signs of too much debt, the impact it can have on you, and importantly, how you can stop drowning in debt.