The Double-Trouble Impacts of Debt

While many of us recognize that debt is painful and work to pay down expensive loans, you may not be as familiar with the double hits that it brings to your bottom line and maybe even your health.   The complexities of debt can seem overwhelming, however I believe that with a little bit of knowledge you can empower yourself to take even baby steps towards a financial future with less debt, more savings and most importantly happiness.

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Double trouble debt examples:

You Can’t Save & You Pay More in Taxes

While working with a new client named Jane, we reviewed her expenses and it was eye opening to her to see that taxes are her biggest expense, even though she thought it was her high debt.  Many of us don’t look at what we pay in taxes in proportion to what we pay for other expenses. Jane was horrified. Want to reduce your taxes? One of the best ways to do that is to contribute more to your employer retirement plan. The problem: Jane makes a nice salary, but finds that she can’t put more away for retirement because of her high debt payments. In essence, higher debt has caused her higher taxes, not to mention less saved for her own retirement. High interest payments mean that she is paying the credit card companies and the IRS more than she can pay herself.

Your Credit Rating Goes Down & Your Payments Go Up

too much debtWant to save less? Of course you don’t. But, not paying off that debt is keeping you from stashing that all-important emergency fund. Debt affects your credit rating and your credit rating directly influences the interest rates you receive on everything from student loan refinancing to car loans,  mortgages and of course credit card rates.  Did you know it can also raise your car insurance premiums? Paying higher interest rates means less for you in savings for the future.

Financial Fitness & Physical Fitness

Jane shared with me that her growing debt was causing not only financial problems but anxiety, stress, feelings of depression and causing her to lose focus at work. The impact of financial stress caused by debt can take a serious hit on your overall health and wellness, maybe even impacting your work productivity. In fact research from The Society for Human Resource Management 2016 Employee Benefits survey report and PricewaterhouseCooper’s 2016 Employee Financial Wellness Survey both point to a strong correlation between financial health and stress in employees.

Fixing your debt problem

“The first step towards getting somewhere is to decide that you are not going to stay where you are.”  J.P. Morgan

Of course, don’t get yourself in this position in the first place is the rule of thumb.  But as Jane said, “I got here, I can’t undo it but I can start to get back on track and work towards a long term solution so I am never in this situation again.”

Make a plan:

Take a breath, decide to make a change and pay down your expensive debt. Take the first step by laying out a plan that begins to chip away at your financial problems.  Tackle immediate issues, like overdue bills or high credit rates by contacting all your debt holders.  Even if you are behind, reach out to them and see if they can help put you on a repayment plan.  If you can stop hits from your credit score from incurring, that will be a double help to your long term recovery.

Create a cash Freedom Fund:

Jane told me that when she was drowning in debt and living paycheck to paycheck, the advice of building up a cash Freedom Fund seemed unattainable and overwhelming.  However, by making a plan and starting with small amounts of money she began to feel like she could accomplish this goal and work towards having cash on hand. Now she does not need to rely on credit (especially the high interest bad kind) for emergencies or big ticket expenses in the future.

Hold yourself accountable:

be accountable for your debtJane absolutely loved my advice about making an appointment on her calendar to hold herself accountable for handling bills and budget tracking.  Jane also plans to use an online budgeting tracker to help with spending and sticking to her financial goals.  The important thing is to be realistic with yourself and find a method that you will actually use, whether that is an online app, an Excel sheet or pen and paper.


Finally, whether you are just beginning to make your plans for financial freedom or you need a positive reminder to stay the course, it is important to think about these double trouble impacts of debt.  Just remember that while you can’t fix everything overnight you can make a commitment to little steps that will lead to real, lasting financial improvements.  The best time to start is now.


If it’s time to get your portfolio on-track for financial success, schedule a call with me to start the discussion.

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