Debt Check – Stop Being in Denial

denial of being in debtDenial is an evil thing.

“I can afford that <fill in the blank>.  Adding a bit more to my credit cards won’t kill me”.

Maybe not literally, but pretending you don’t have a problem charging up your cards is a recipe for disaster.

Here’s an example of a couple that I met with a few years ago approaching retirement that were in denial with a capital “D”.

They still had about 10 years out until retirement, so it was good that they were coming in earlier rather than later.

They at least had that going for them.

Unfortunately, that was about it….

The Meeting Begins

I started meeting with them and started asking the usual questions. Along the way the topic of debt came up, “What are your liabilities?” And, they both responded with,

“Oh, we don’t have that much debt. Our house is paid off. We don’t have that many consumer loans.”

I thought, “Wow! This is really impressive.”

A couple who is 10 years out from retirement, and their house is already paid off is incredible to hear.  Not having much debt was just icing on the cake.

We looked at their savings, and they could probably have done a little better job.  But after hearing “house paid off” and “not much consumer debt or credit card debt,  I was thinking, “Nice! This is great!”

The Truth Begins to Comes Out

I asked them how much debt they had. They responded with. “Oh, we have 2 car loans, a total of about $15,000.”

“Well, OK, that is debt. Is there any other credit card debt?”

“Oh yeah, we have some credit card debt.”  Hmmm…..for not having much debt, it seems like it keeps adding up.

I then asked if they knew exactly how much credit card debt they hand and after searching each others faces for an answer, they both acknowledged that they didn’t know.

We adjourned the meeting with them having a homework assignment to figure out how much debt they had.  They would need to figure out the amount of interest that they were paying on their debt, so they could both see it in person.  Then we would all know how much debt we were working with.

Not Much Debt, Really?

It was about a week or so later that I got the email.

The email I opened just floored me. As you recall, they told me that they didn’t have “that much debt”.

What I learned was not only did they have the $15,000 loans on the vehicles, they also had a camper that was just under $10,000, and that they had over $25,000 of credit card debt – $25,000!!!

This couple who comes to me and makes this bold claim that they don’t have that much debt. Really?!?!

You have $50,000 of consumer debt!

The worst part was that they had some department store cards that they were paying closer to 18% to 19%. This couple was kidding themselves, telling themselves that they didn’t have much debt.

I think it was a really good eye opener. It was for me because it once again makes me think how many people out there are disillusioned with the thought that their debt situation isn’t that bad.

Having Debt is Not the Standard

I go back to my younger days when I was in college and talking about student loans with a lot of soon to be graduates. I would always hear students saying, “Oh, I only have $15,000 in debt.” “I only have $10,000 in debt.” “I only have $30,000 in debt in student loans.”

Only $10,000!

Only $30,000!

It is not just only. That is a lot of debt!

If you can avoid it at all costs, do it. If it takes working an extra job, if it takes applying for scholarships, if it takes applying for assistantships, do whatever you can because debt will just consume you.

I started down that path, and luckily I saw the light of day and was able to rectify that situation. Do not be one of those who just assumes that debt is OK.