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Your Standard of Living Bubble

Jul 08

No matter who you are, no matter what you do, no matter how much income you earn each year, if your debt is growing, even just a little bit, your lifestyle is not sustainable.

Why? Because eventually, that debt will start eroding your lifestyle. Even before you get to that point, you will probably feel stress, or other unpleasant emotions. At the end though, we reach a point where the debt gets so big that we can’t pay it back without apparent consequence to our lifestyle.

We stay on trajectories like this one, however, because we believe we have two ways out at our disposal: The first is to earn more money. This doesn’t work. I’ll explain why in a minute. The second false belief is that we can consolidate and simply start over.

It’s relatively easy to see how consolidation efforts don’t work in practice. Virtually everyone knows someone, or has firsthand experience with the cycle where debts are consolidated, and even sometimes paid down, while our lifestyle spending carries on unchecked, and the debt begins to creep higher once again.

In the long run, multiple consolidations can lead to an accumulation of large debts, that force us to take drastic measures to remedy the recurring predicament. Selling your home is not at all out of the realm of possibility.

Earning more money is not the answer either. Even if income increases mean you’re no longer “house poor,” your discretionary spending will undoubtedly increase – it always does. Think about your early earning years. It’s common to think things will get better as you earn more. Now that you do, though, you still have the same financial problems.

If you’re in a lifestyle where your debt isn’t going down, things are not sustainable. Consciously or not, people generally know when this is happening. At some point too, your debt will become difficult to ignore: Service payments will eventually cut into your discretionary spending, or years of consolidation will mean you risk carrying a mortgage into your retirement.

(One of the most fiscally dangerous things you can do is enter retirement with a mortgage – interest rate hikes can do substantial harm when you’re on a fixed income.)

How can a Personal Financial Trainer help?

To make real change, it’s necessary to overcome the mindset that created this problem in the first place. Changing your mindset is incredibly difficult to do without outside help – a fresh pair of eyes to help you look at your circumstances objectively.

The worst thing you can do is ignore the problem. A financial trainer will help you deal with it, provide you with a clearer view of your circumstances, a straight forward plan of action to help navigate your way out – for real and for good – and will give you the support you need to stay on track. With help, the effort might even be easier than you ever thought possible.

About The Author

Hi, I'm Avraham (pronounced Av-Rum.) I'm a reformed spender, financial coach, and the founder of Avraham Byers Financial (I'm better with money than coming up with company names.) In a funny and non-preachy way, I teach people how to take control of their finances without giving up their smoked butterscotch lattes.
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