On Monday, I talked about how to stay motivated while you pay off debt. It is one of the more unfortunate ironies that it’s very easy to accumulate debt, but it’s much harder to get rid of it. It’s why it’s so important to find ways to keep yourself motivated and your resolve strong. Otherwise, a life with debt may seem like an acceptable alternative when compared to the years of hard work and effort it takes to eliminate it.
One common complaint I hear is that it took so long to wake-up and recognize that debt wasn’t your friend. That you let debt get such a stranglehold over your life and how you wished that you started your journey to financial freedom much earlier. Often times, this happens because we get stuck in old habits and beliefs.
Today we’re going to take a look at some common myths or false beliefs that often keep people stuck in a debt cycle.
This is a biggie. Almost everyone has heard this at least once, twice or a dozen times in their life. This is a complicated myth because there is also some truth to it too. Most people need a mortgage to buy a home or a student loan to attend college. So yes, most people do have debt. I won’t pretend otherwise.
But that’s not the debt we’re focused on today. We’re looking squarely at consumer debt. Debt you create with a slide of your credit card to pay for vacations, big screen televisions, dining out and so on. The things you want, but don’t need. And apparently cannot afford if you are not paying your credit card bills in full every month.
You convince yourself that it’s okay because everyone you talk to complains about their credit card debt. It’s normal! Why worry over it? Just because people have debt doesn’t mean it’s okay or safe. Far from it in fact. You have to look past the slick marketing campaigns and peer pressure that make debt enticing and really take a hard look at how debt affects you. You may be surprised by how fragile your financial foundation is.
Add up all your credit card debt, mortgage, student loans, car loans and any other debt you may have. You may be surprised by the amount. Do not let your debt control you. Now is the time to take control back and it begins by understanding your current reality.
It is something they will hear too, most likely when they go to college. You want to prepare them as best you can to handle credit cards and the pressure to live beyond their means. Do not just scare them or tell them credit cards are bad. They will see friends using them without anything “bad” happening, so they will assume you lied or were making a mountain out of a molehill, diminishing your credibility and influence over them for a period of time.
Some people like to blame credit card companies for their debt. While there is no question that they certainly make it easy for us to create debt, they don’t force us to live beyond our means either. We do it to ourselves, which isn’t always an easy pill to swallow.
What we must remember is that credit cards companies are a for-profit business. They make money because they can charge us interest when we don’t pay our bills in full. And they love charging us interest. Undoubtedly their preferred customer is someone who punctually pays the minimum amount every month and continues to carry a balance.
Do not be flattered by that 10K, 20K or 100K credit limit you have. It’s not a gift and it’s certainly not free money. It can be a very, very expensive loan when used unwisely.
Many people subconsciously think this and it prevents them from saying sayanora to their debt. It’s very easy to grow accustomed to living beyond our means. Let’s face it: it’s far more fun to tell ourselves “yes” than it is to say “no”. Credit cards give us the ability to say “yes” to the things we want and it feels so good. The problem is that it’s an illusion. Eventually, you can no longer afford to say “yes” and when that time comes (and it will), you may be in a pretty precarious place financially.
I won’t lie: you will have to make changes. Some of those changes will be difficult, especially initially. You may face peer pressure to say “yes” from friends, family and your kids. You may have to make unpopular decisions, like cutting cable, canceling vacations, etc. For these various reasons, many people elect to stay in debt, hoping an easier answer presents itself.
But there is no easy answer. You have to find the courage and willpower to change. Those changes do not mean your life is ruined nor do those changes even need to be awful to be effective. One thing I hear repeatedly is how much happier people are once they take control of their money and make value-based or mindful choices with how they use it.
Feeling in control of your financial lives and truly using your money on the things that bring you joy feels incredibly good. You may not always be able to say “yes” to everything but you can say “yes” to the things that truly matter.
From ad campaigns to the exaggerated lives we see on TV and in the movies, it’s easy to fall into debt, believing we need all those things to be happy. We believe their life is the ideal and don’t stop to think whether it’s truly the life we desire. Don’t let these popular myths keep you in debt. No matter what they say, a good life doesn’t require consumer debt.
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SHANNON RYAN, CFP®
Now that I'm older and wiser, I realize that everyone doesn't have debt at all. And a ton of people don't have car payments because they hate them.