How Debt Hurts Your Family

Borrowing money can seem like a good idea, but it’s not. Here are five ways it’s doing you more harm than good.

A bigger house, a safer car, a better school — there are hundreds of ways you could spend money to benefit your family. But if you buy those things with borrowed money you’re actually doing more harm than good. Because contrary to what many people believe, debt hurts your family.

If you’re like most people, you spend the majority of your incomes taking care of your family’s needs. And because you care about them so much, you strive to provide anything they could need or want, no matter what the cost. When those needs and wants outpace your earning ability, you may be tempted to use debt to make up the difference. And debt hurts your family.

Borrowing money turns good intentions into bad ideas. All debt is financial slavery. And while it can seem attractive at first, debt always pulls you down in the long run.

Noble aspirations don’t turn bad financial strategies into good ones. You may think borrowing money will help you meet your family’s financial needs, but the reverse is true. Debt is financially harmful to your family.

Here are five ways debt hurts your family:

1) Debt dominates your budget.

Whenever you borrow money, you make a promise to pay that money back (with interest) in regular installments over a period of time. Once you’ve made that commitment, you have to spend a certain amount of your monthly budget to paying the debt back. If you stop paying, you’ll end up with huge fees, bad credit and legal trouble.

Debt is dangerous because it ties up portions of your monthly budget that could be better used for other things.

Most of us are pretty bad at predicting the future. So the monthly payment that seems affordable now may be too much later on if you have some other financial setback.

Borrowing money ties up parts of your cash flow that you could spend on more important things. And the interest you pay can add up to substantial amounts, drastically reducing your buying power over time.

In the end, debt hurts your family because it leaves you with less money to buy the things they need.

2) Debt creates a false sense of safety.

The majority of people don’t have enough money saved to pay for a small financial emergency. So when difficulties arise, they count on credit cards and borrowed money to get them out of trouble.

The availability of credit can seem like a safety net. But it’s a myth: Credit is no safety net. In fact, borrowing money compounds financial problems.

Debt always adds risk to life. When you borrow money, you actually make your family’s financial circumstances more dangerous. And if you don’t have a real safety net (made up of insurance policies and emergency savings), you’re doubling down on a losing bet.

3) Debt hinders your long-term goals.

Another way debt hurts your family is by leaving you unprepared for some of the most important events in life.

The more money you spend on debt payments, the less money you have available to do other things. So if you have a habit of borrowing money and paying it back over time, you’re limiting the amount of cash you have to prepare for the future. Debt will get in the way of your emergency savings, college savings, retirement investing and giving.

Achieving major financial goals like buying a home or paying for a wedding requires saving money diligently for a long time. But if you have to make monthly debt and interest payments, you won’t make much progress toward those goals.

When you consider the long-term costs of lost opportunity, the true danger of debt becomes clear. The money you spend paying interest on credit cards throughout your lifetime could have been worth a million dollars or more if you had invested it instead.

4) Debt ruins legacies.

Our society doesn’t talk about inheritance enough. That’s  a shame, because building an inheritance  for the next generation is a significant part of what God wants you to do with your money.

Most parents want to leave the best inheritance possible to their children when they die. But if you live a lifestyle of debt, you’ll leave very little in the way of a financial legacy.

The money you spend paying off debt throughout your lifetime isn’t growing your net worth. Borrowing and paying limits your ability to save and invest,  limiting the size of your estate when you die.

Debt can even take a bite out of your estate. If you owe anybody any money when you die, those creditors will collect that debt out of the money and assets that you own. Your children will only inherit whatever is leftover after your debts air paid. If you’ve borrowed a lot of money, your children may end up with nothing at all.

5) Debt establishes bad patterns.

Even more important than what you leave your children after you’re gone is what you teach them while you’re alive. If you live in debt, your kids will likely grow up to do the same.

The things you do during your lifetime can impact many generations that come after you. Establishing a habit of debt can start your family into a pattern of bondage and poverty long after you’re gone.

If you make a point of living in financial freedom, however, you’ll set the stage for your family to enjoy an abundant future.