[Daniel Costello on Finance] The long shadow of debt

[Daniel Costello on Finance] The long shadow of debt

Ever consider dating an international business lecturer? Here's a tip: After being asked what we do, dryly responding "I'm not interested in business" is a sure way to kill any chance of a second date.

That's too bad, ladies. You should be. After all, who doesn't like money? And in personal finance, the first step in making money is paying off those old debts first.

The other half of full-time work abroad is developing the knack of knowing what to do with your money at the end of every month. Every individual is responsible for his or her financial success. It is not waiting for you in the window of a luxury goods store or at some dive in Itaewon. To live the dream, to travel to exotic lands, and to some day live it up, means the development of financial self-management is somewhat essential.

Dennis Prager once said, "One of the great mind destroyers of college education is the belief that if it's very complex, it's very profound." Quite simply, the cost of a university education extends beyond the amount of debt you carry forward into your working career.

It captures a large portion of your monthly income in interest or loan payments, which for many people, carries on for decades. Before you consider your investment options, you need to evaluate the debts you are carrying today. Focusing on paying off those debts, rather than creating new ones, is a difficult but necessary step towards the financial independence required to become a competent investor (and to get to a second date with Dano). You need your money going towards what benefits you the most. This includes not only seeking out the best credit terms, or financing of new purchases like that new laptop or multi-function cell phone. You need to funnel that income into debt payments that eliminate the need to divert earnings away from personal investments.

The best investment decision you can make first is to focus your earnings on eliminating any or all debt.

It is that simple. Before you begin thinking about making investments, first, bury that old debt. In not having any debt, you fade from the crowds of mortgage owners, student loans consignees, credit card co-signatories, car lease holders (or women who wondered why Dan never called back).

You buy back your financial independence through paying off your debts. In paying off your debts, you join the few who (like my grandmother) claim honestly, "If you can pay your debts, you are rich." However, it is your own spending habits and mindset which could require adjusting to succeed in eliminating your debts.

Being debt-free is a happy occasion, perhaps unlike any other which takes some self-discipline and sacrifice to achieve, but once experienced is like no other form of monetary accomplishment.

Knowing that you can defer a temporary and immediate purchase intention for the sake of a long-term benefit like saved earned income is more likely to help you appreciate the opportunities for investment available to you here in Korea and globally.

Many people choose to pursue other pleasures, engaging in escapism from the reality of a significant debt load -- which unless action is taken, never lessens through further languish in the luxury.

If you follow their lead you will never escape your own debt. Surrounding yourself with the latest plasma screens and surround-sound technology on credit card interest rates is not always the best use of your income, though it is what the salespeople want.

Does the desire to spend at some point ever become outstripped by a desire to reduce an outstanding account to the number zero? If it has not yet been your experience to do so should you not risk the uncertainty of being debt-free more than any other goal? Bacchus would not be pleased. Nibble, sip, and bury that debt. It is the death of your present wealth and the blossom of future accrued assets.

To contact Daniel, visit his website at http://crossculturalreviews.blogspot.com -- Ed.