Being in debt can create an element of fear if you are worried that you will not be able to meet your monthly payments.
I understand. I was once asked what my biggest fear was. My immediate response – not being able to repay my debt.
This fear was one of my many blocks of money and it was not rational. I was super vigilant about paying my credit cards in advance. I loved the dopamine shot I got by transferring any amount from my checking account to my credit card. Sometimes I did it daily!
When I bought my first car at 20, I needed a loan to pay it off. I was determined to pay as soon as possible. I was constantly playing with a loan repayment calculator, running scenarios on the effect that additional payments would have on interest and the term of the loan. I vividly remember the feeling of relief and accomplishment I felt when I paid it off earlier.
I was obsessed with knowing exactly what I owed at all times, what my payments were, and figuring out when I thought I could be debt free.
I had a stable, reliable and relatively well-paid job and could easily afford the installments. Yet having this loan held me back in so many ways that every extra penny available went toward paying it off.
How did I erase this particular block of money? Being aware of its existence and its negative impact on my mental and financial health was key.
I looked back to find out why I felt this way about debt. I’m sure it’s no surprise to hear that this was rooted in childhood experiences.
But awareness was not enough to move me forward. The partner of consciousness is clarity. Without clarity, we make uninformed decisions.
I find our brains tend to either have rosy financial situations or only see them through pessimistic and worst-case scenarios. Both views often result in a lack of action.
Clarifying your financial situation is the best way to eliminate any prejudices you may have had about your situation so that you can finally begin to reach your financial goals.
I recently worked with two people who were fed up with taking on debt. They wanted help breaking out of the debt cycle and living paycheck to paycheck because of it.
A client told me that her debt was 115,000 Dh. According to her online bank statements, she had various credit cards and a personal loan. Unfortunately, that was not the whole story of his situation.
When I looked at his finances, I found buy-now and pay-later agreements and several credit card conversion loans. When we added the balances on these lines of credit, his debt was closer to Dh 220,000.
It was a big leap and a real shock for her. She knew these things existed, but since balances aren’t listed anywhere on her banking portals, she didn’t consider them to be part of her outstanding debt.
She admitted that she didn’t understand them, how they worked or how much she paid them. She does not receive the loan statements. It’s as if they don’t exist. She is not alone in this case.
Already this month, I spoke to two people in a similar situation. And they weren’t the first two either.
They both recalled a sales rep strongly advising them to take out credit card conversion loans. They were told that the loans were a financial blow to them. The agents convinced them that it would help them financially.
Neither person was made aware of interest rates, administration fees, default penalties, or even the basic mechanics of how they work. There was no paper trail or signed documents to review.
They are similar to ghost loans, hiding out of our sight to show up on your credit card every month to give you financial fear and keep you confused as to why you are unaware of the situation financially.
This type of line of credit helps keep your head in the sand. It allows people to spend beyond their means, often even encouraging it. Interest rates are high. I saw one with an annual percentage of 92%!
Payments are charged to your credit card, so the bank often doubles the fees by charging interest on the loan, while also earning interest on the payout amount if you don’t pay your credit card balance in full. credit every month.
It’s a vicious trap for uninformed and confident customers.
It’s important to remember that financial clarity is your superpower. We measure what we can see. Or to put it another way, what gets measured gets done.
How can you plan to pay off a debt that lurks in the shadows and yet never seems to go away? Bring it out of the shadows and into the light, that’s it.
Do you know the total amount of your debt?
Carol Glynn is the founder of Conscious Finance Coaching
Updated: November 19, 2021 5:00 a.m.