Survival Debt


Paying for day-to-day expenses with credit because you don’t have cash for food or shelter is like trying to outrun an avalanche. Eventually, you're going to get buried.

For years I’ve been telling my readers about two kinds of debt: safe debt and toxic debt.

Safe debt is secured debt―it has collateral connected to it. Your home mortgage is a safe debt. You had to qualify for it, so at least one person somewhere looked at your financial situation determined that you can afford it.

If things change and you can’t or you change your mind and want out of the debt, there’s a way out. You can sell the collateral or just hand it over to the lender and call it even. Safe debt gives you a way out. You have the equivalent of a safety net so you don’t ruin your life.

Toxic debt, on the other hand, is stupid debt you get on your signature alone without qualifying, without anyone caring about whether or not you can afford it.

Toxic, poisonous debt comes from allowing credit purchases to revolve on a credit-card account, opting to pay only the minimum monthly payment. It’s the terrible reality of spending sprees and frivolous decisions.

Now we learn there is a third kind of debt—survival debt. It’s not safe and it’s more than stupid. It’s downright scary because it’s the result of paying for the groceries with credit and allowing that balance to roll from month to month gathering with it large amounts of high-rate interest.

Survival debt can be the result of putting the rent on a credit card because the bonus didn’t come through or the rent money went to repair the car or pay the utility bills or to buy clothes and diapers for the kids.

Safe debt is manageable. Toxic debt is reversible because you can stop being stupid. But Survival debt? Once you start paying for day-to-day expenses with credit because you don’t have the cash for food or shelter you’ve crossed a serious threshold. Now you’re caught in a vicious cycle.

You may believe you have no other choice but to keep adding to the gathering debt. But that’s not true. You do have a choice. But you may need some major intervention to stop the out-of-control downward spiral.

If you are trying to manage survival debt, wise up. You will not be able to do that for long. You are trying to outrun an avalanche and you cannot run fast enough. Soon it will bury you.

My best advice is to immediately get in touch with Consumer Credit Counseling Services (CCCS).

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