Why Being in Debt is the Standard and How to Change Your Mindset

In my grandparent’s day, debt was a four letter word.

If you wanted something and you didn’t have the money, it wasn’t purchased.

After surviving the 1920’s as children, they remembered what it was like to have nothing and knew how to save for a rainy day.

The one exception was the mortgage which made the American dream of home-ownership possible, however, it took a large down payment and had to be well within what was affordable.

Sometime during my lifetime, the concept of debt has changed. Perhaps it happened when credit cards became readily available in  the 1980’s. Maybe with the great depression so far removed from memory, people just forgot what it was like to go through hard times. Whatever the reason, popular culture has accepted debt as the standard.

Why is it Assumed that Everyone has Debt?

If you think about it, debt assaults us daily. Almost every establishment offers a discount or something free if we apply for a store credit card.

Need new furniture, appliances, home repairs, LASIK surgery, breast implants? Why pay now when you can get 0% financing for the next twelve months?

Every spring, the auto dealerships take out full page ads offering special credit to new college graduates. Isn’t running out to buy a new car the first thing new grads are supposed to do?

Average Americans carry a credit card balance of just over $7000. That is the new normal. We’ve become a society of payment makers instead of outright owners.

What is the problem with this type of lifestyle?

If we can afford the payments, why shouldn’t we be able to have the things we want? From personal experience, I can tell you it’s a road you don’t want to travel.

If you are lucky enough to finish school without being in debt, I commend you. Most of us come out carrying student loans. I’ve been told by many a  lender over the years that student loans don’t really impact your ability to obtain credit.

Apparently not, because I’ve never been turned down for a loan or credit card. What happens is that we get used to always having payments. Everyone does.

It makes us look successful to have a shiny, new car and live in a McMansion, but those payments eat away at our ability to build wealth and live in financial independence.

When the focus is on if you can afford the payment instead of what is the actual cost of ownership, you’re setting yourself up for a life of always running but going nowhere, the proverbial hamster on a wheel.

Even if you are able to pay off 0% debt before the promotional period, you miss out on putting that payment money to work for you in saving for goals like paying off student loans,  travel or retirement.

The Sky is Falling

Alright, if I haven’t convinced you yet, I have one last argument. I saw a worst case scenario happen right before my eyes when I watched my in-laws lose their house to foreclosure.

They lost a house they had lived in for almost 30 years because they bought too much and then rolled all their debt into a large mortgage refinance to lower the payments.

This also happened to be right before the recession hit. Jobs disappear. People get sick. Accidents happen.

Even if you can make all of your payments, would you be able to if your income suddenly dried up? While I am not grateful for their troubles, this was my wake up call to get out of debt once and for all.

Don’t Strive for Normal

Are in the debt cycle that has become the norm? If yes, ask yourself a few more questions.

  • Do live in fear that you might be one paycheck away from losing it all?
  • Do you lose sleep over your debt?
  • Do you feel like you spend the majority of your time working with nothing to show for it?
  • Have you forgotten the last ten items you purchased on credit?

If you answered yes to any or all of those questions, do you want to change? I don’t have all of life’s answers but I’ll share what worked for my husband and I that changed our path and allowed us to pay off over $30,000 in credit card debt.

1)Write it all Down - Write down all of your debts from tiny revolving accounts all the way up to a mortgage or student loan. It was horrible, but so much better when it was done. Putting everything on the table was the hardest part of the whole payoff effort.

2)Stop Spending – You have to make a vow to spend money only on necessities with an occasional planned splurge when you reach a milestone.

3)Put your Efforts into Paying off the Debt – You might feel deprived at first, but once you pay off that first balance, that becomes your new reward. There are many ways to attack debt, and you’ll have to find your own, but it all comes down to spending less than you earn.

I would advocate for keeping some money in savings for emergencies, and put the rest toward your debt. If you are truly strapped, this might take some real courage to admit that you need to make major changes like finding less expensive housing or selling a car.

4)Reward Yourself – When you reach a milestone, celebrate. When we paid off half of our credit card debt, we took a vacation.  It is easy to burn out when debt payoff is your main objective. You can’t put your splurge back on credit, though. Pay for it outright or don’t buy it.

When the debt is paid off, you can be free, knowing that the repo man or collections won’t be calling you. You can have the life you want and work because you choose, not because you have to make a payment.

The masses will tempt you with debt. Instant gratification can be fun, but I prefer a debt free life.

I’m not there yet, but I plan to be, and I will never take on another debt that doesn’t reflect my values or make money for my family in some way. Debt is normal, but normal really isn’t that exciting. I’ll take extraordinary any day.

 

About the author:

Kim is an optometrist who blogs about her journey toward achieving 20/20 financial vision at Eyes on the Dollar.

You can find her on Twitter @EyesontheDollar.

  • http://www.facebook.com/jplynn Jarim Person Lynn

    Great article!

    • http://twitter.com/Eyesonthedollar Kim

      Thanks!