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Thursday, November 16, 2006

Reality behind the magic curtain

Went out with a friend yesterday. He was a bit down, so decided to take him out to lunch. During our conversation, he mentioned about his growing debt. Both he and his wife work and make decent salaries. Apparently, however, they have been living a high life which has caused them to spend beyond their means and max out their credit cards and take out home equity loans. I was actually surprised to hear about his debt problems since I always thought that he and his wife were making good money. As a result, I thought they could afford to have nice cars, big house, large screen TVs and all the latest gizmos. I had heard and read about many such cases where seemingly rich people were actually not-so-rich in reality but did not think that it could happen to a close friend also.

Most of us carry some debt in the form of mortgage and student loans. Some times, many people have to take on debt because of medical reasons or personal emergencies. However, some people get into debt simply because they seem to want instant gratification. They buy things they cannot afford to buy based on their bank balance. However, because of credit cards, they can buy it and then they end up paying high interest on it. I have myself made such mistakes and spontaneously bought stuff and high priced goods. However, with experience, I have now realized that the "happiness" you get by owning such material things is momentary and lasts for just a few days. After about a week, most of us do not care much about the new car, large screen TVs etc, and these things are left gathering dust, while we end up paying the interest and other charges for it on our credit cards for a long period of time.

In order to live a debt-free life, I believe that one has to be willing to postpone instant gratification and be willing to commit to living within one's means. True, for certain things such as education, house and cars, we often have to take out loans but for many of the other things we include under "necessities", we do not have to take out any loans if we either don't buy that stuff or buy it only we can pay it off immediately. As usual, it goes back to one of the prerequisites for a good life - you have to be willing to sacrifice certain things in order to get other things.

posted by Ruby @ 5:25 AM

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