During the month of February when I am trying to shake free a little extra cash by doing a pantry challenge, I thought it would be a good time to blog about some ideas for spending extra cash.

One of the best ways to use extra money is to pay off debt.  

A long time ago, I shared Grandpa’s Best Financial Advice here on My Grandma Knows.  That nugget of wisdom was life-changing for us, and it has to do with debt.  For the past thirty years, Grandpa and I worked hard to avoid debt.  We have avoided debt like a deer avoids a hunter.  Like a germaphobe avoids touching the door handle of a public restroom.  Like a seventh grader avoids homework.  You get the idea.


But why all of this avoidance of debt on our part?  What’s so bad about a little debt?

1.  Debt forces you to pay higher prices in the long run. 

When you use a credit card to pay for something, the only way to keep from incurring debt and paying interest on that purchase is to pay off the entire credit card balance when you get the bill each month.  If you carry a balance on a credit card for more than a month, you begin paying interest on the balance due.  A lot of interest.  The average interest rate for credit cards in January 2013 is just over 15%.

I’m not much of a math whiz, but even I can figure out that if I carry a $100 balance on my credit card for one month, I’m going to owe $115 to the credit card company.  Maybe that doesn’t sound so bad, but that interest adds up fast and never stops adding up until the balance is completely paid off.

Suppose you want to go on vacation for $5000, so you charge that amount on a credit card. If you pay off the vacation in one year (that’s a monthly payment of more than $400), then you will pay $421 interest.  So that $5000 vacation really cost you $5421.

Are you going to make monthly payments of more than $400?  Most people can’t do that.  If you stretch out the payments for that vacation over the next six years, that $5000 vacation will end up costing you $7633.

2.  Debt keeps you from taking advantage of today’s opportunities. 

So many times people have to pass up opportunities today because their money is all tied up paying for stuff that they bought months or years ago.

If you have a friend or family member in need, can you help, or is your money tied up in debt?  Could you go on a missions trip, relocate for a better job, donate to your favorite charity, sponsor a child in a third world country, start a new business, or replace your refrigerator?

Debt narrows our choices and holds us prisoner.

3.  Debt is depressing. 

Working all week for a paycheck that is already promised to creditors is enough to drag anyone down.  Where is the joy in working to pay for stuff that you’ve already used and perhaps can’t even remember?  Debt and the money problems associated with it are often a source of marital discord.

So there you go ….three reasons why Grandpa and I avoid going into debt by buying things we can’t pay for right away.  If you are in debt, don’t lose heart.  With diligent attention to finances, you can get out of debt and stay that way.  If you’d like advice on getting out of debt, I’d recommend Mary Hunt’s book Debt Proof Your Life.  Your library may have this book or others with easy to understand advice for paying off debt and being financially free.




Digital photo Salvatore Vuono/freedigitalphotos.net