hidden costs

I like finding the hidden costs in personal finances. Hidden costs are those costs that are not readily apparent when you are looking at your finances and usually when you leave out the hidden costs, the true cost is nowhere near what you assumed. The problem is that hidden costs are hidden because they are often difficult to detect, but if you don’t take them into account you end up with a skewed view of your true costs and where your finances really are.

A good example of this is the cost of smoking. Most smokers add up how many packs of cigarettes they smoke a day and the cost of the pack to determine how much smoking costs them. In reality, they need to also factor in higher insurance costs, decreased asset worth (car, house, etc), higher medical costs and increased cleaning expenses to name just a few of the costs that smokers rarely add into their cost calculations.

When you see a credit card with $6000 that hasn’t been paid and you’re not sure how you will pay it, you’ll probably assume that you are $6000 in debt. The truth is that it is costing you much more. Not only do most people conveniently ignore the interest that they are going to have to pay until that $6000 is paid off, they probably don’t even consider other hidden costs.

I came across another hidden cost this weekend while talking with a friend. We were talking about his debt problems and working on a plan to address them when he mentioned that his wife was in the hospital from mental exhaustion. The stress of the debt had so overwhelmed her that she became physically sick. While most people don’t have debt that pushes their health to that degree where it can be seen by all, almost all people that have debt have physical ailments to some degree associated with it. These physical ailments have costs (both monetary and physical) that are rarely addressed when talking about the cost of debt.

Anyone who has ever been in debt knows that it increases stress levels and stress can do great harm to the body. Stress-related illnesses include headaches, lack of sleep, weight loss or weight gain, worsening heart disease, high blood pressure and diabetes to name a few. All these illnesses need to be treated and that treatment costs money.

Furthermore, when you are stressed and your body is not in optimal shape, it affects the way you work and your relationship with others. This can have a direct effect on your pay in the form of promotions and how you are viewed within the company. most people would assume that they were passed over for a promotion because they had not performed well enough, but that poor performance might be directly related to the stress of the debt.

When people say that debt is just money, they are fooling themselves by failing to see the hidden costs…and there are many.

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