Moneywise24 Personal Finance

I stumbled upon an article the other day, unfortunately I only quickly browsed the site and completely failed to write down the URL. Nevertheless, the article was an interesting one; it described how a woman from Latin America paid back her 25,000 USD loan within a couple of years, by taking on two jobs, letting her children live with her parents, and moving into a 100 USD per month apartment.

Although when I read the article, I felt great empathy and respect for the woman paying off a huge debt within such a short time, I felt somewhat confused when I started thinking it over. The article implied, that the woman had achieved something amazing, which she did in a sense. But:

• I live in Western Europe, it is impossible for me to find a place which would cost me only 100 USD per month.
• If I had children, would I really give them to live with my parents for as long as a couple of years?
• Would my parents approve of me giving them my kids to take care of?
• What is the use of paying off a debt, if it means living in absolute poverty for a few years?

Especially the last bullet point, whether I would sacrifice my life in order to pay off debt quickly, set me to think. Yes, living on the verge of poverty would let me pay off my debts much sooner. However, at the same time my life would come at a full stop; I would not be able to develop myself in any sense, since I would not have the financial means.

Usually, it is recommended (and many banks and land lords apply this rule also) to spend about one-third of one’s net income on rent or mortgage; in the more expensive metropoles, it could also be as much as half of one’s net income. This does not mean, that exepenses can not be reduced. Many people spend only 25% of 20% of their net salary on rent, meaning they are theoretically spending less than average on rent. The money that is saved could be spent on paying off the debt in addition to what is spent on paying off debt already. This way, debt can be repaid more quickly while a certain living standard is maintained.

I am big fan of finding the right balance between living standards, personal development, income and expenses. Sure, some people simply do not have this choice. But sometimes, people do have a choice and still they opt for the hard way. In many cases, this applies to income the same way; people choose a job or a profession which will reduce their social lives to virtually zero, yet offering them a great salary with a company car and bonuses. Five years later, some get a burn out… was it really worth it?