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Debt > Definition (1)
If you procrastinate in treating the problem of debt it may cause long-term pain
and discomfort that eventually escalates into a more severe illness, which requires a more drastic cure.
If the illness progresses too far, it could turn into a chronic condition. Similarly, failure to acknowledge
financial problems can escalate into more severe problems that are costly to recover from and require drastic
solutions that may damage credit worthiness.
To effectively reduce debt, it is important that you understand how you got into debt.
This book will assist you to analyze your budget and spending habits, but it is equally important to understand how credit
works and analyze the way of thinking that lead to the irrational spending. To understand why you overspend, you
must understand your desires and the impulses that drive them. In our credit society, we are often driven by the
illusion that our social status and success are measured by the amount of goods or services that we can consume (buy).
Buying discretionary goods allows us to live up to a certain image but often detracts from our "true" wealth.
We should measure our success based on the amount of "true" wealth (monetary assets) that we accumulate.
"True" wealth is made up of things that we own that can appreciate in value. In other words, if handled correctly,
"true" wealth can be used to earn more wealth and provide long-term happiness, security, and prosperity.
Irrational spending allows us to portray a wealthy image but detracts from our "true" wealth.
Buying discretionary (non-essential) items gives us short-term happiness, but the goods normally
depreciate fast and if we do not handle our finances appropriately, their long-term costs may leave us
with no "true" wealth to support our image. Eventually, our image may come crashing down.
Due to the nature of credit cards and the relative ease of acquiring unsecured debt
(Debt that does not involve collateral), we often do not realize there is a problem until we have fallen behind on our accounts.
Instead of taking preventative measures to avoid debt problems, consumers often wait too long and react to a problem after it has
gotten out of control.
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