Are people who say they’re debt free lying?

erase debtI think the answer is yes.  We may not all have a ton of credit card debt – which you may remember I did – but in some form or another we all have debt, don’t we?  It seems like everywhere we turn someone is preaching about living debt free and every time I hear it I can’t help but wonder if they honestly and truly don’t have any debt.

As a financial planner every single day I see people who have a lot of debt, some more than they can afford, and I can’t help but ask myself why?  I guess I know why because not too long ago I was sitting in a bankruptcy office weighing my options for $50k of debt.

At that time my one and only goal in life was to become debt free and I would have done anything – short of robbing a bank – to get there.  I didn’t really care about having debt I just didn’t want to have something hanging over my head and I didn’t like giving my paycheck to someone else.  It was honestly a control thing.

Now that I survived my debt I can tell you that I no longer have debt, but I’m not debt free.  Just think about that for a minute and now let me ask you a question, are you really debt free?

If you said yes I think you’re lying.

We all have debt, yes you do too

Debt isn’t a bad thing.  In fact having money on loan to you a.k.a. being indebted to someone helps build your credit score as long as you make payments on time and don’t let balances linger too long.  If you have a mortgage you’re in debt.  If you have a car loan or lease then you’re in debt too.

I think it’s O.K. to be in debt for a reason such as buying a home or paying for an education.  I don’t think it’s O.K. to get into debt for non tangible or materialistic reasons such as taking a vacation or buying a new wardrobe.

Why living debt free is a myth

There are very few people in the world who truly live debt free, meaning they pay for everything with cash.  Think about your purchases last week, did you pay for something with your credit card.  Anything at all from your morning Starbucks to your weekly groceries.  Did you swipe your card to earn travel rewards or cash back?  I bet the answer is yes.

Using credit cards to accumulate perks is a great reason to be in debt, even if it’s only temporary and you intend to pay off your balance in full at the end of every month; for at small amount of time you are in debt.  That’s why being debt free is a total myth.

Why you shouldn’t be ashamed

Don’t hate on your debt.  I didn’t – and I don’t.  Having a credit card and using it wisely makes me feel like the financial-powers-at-be have given me a second chance to turn my life around.  Mind you, my habits have significantly changed over the years, but I still use credit cards and I still (sometimes) carry a balance.  The key to success is not to let balances stay longer than three months.  That’s a reasonable amount of time to pay off affordable debt – but only if you spend within a limit.

So let me ask you again, do you have debt?

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22 thoughts on “Are people who say they’re debt free lying?

    • Thanks for sharing Brian. I feel like having a mortgage is worth the debt, and the interest rate is lower than credit cards – so that’s always nice.

  • I think it’s a combination of things. Some people truly don’t think having of a car loan, a student loan, and a mortgage as being “in debt”. So I’ve found that you get different answers to questions like “Do you have a student loan?” vs “Do you have debt?”.

    Also, it depends how technical you want to be. Technically if you get things like heat, AC, cable, phone, and Internet service and get a bill for it at the end of the month, you’re “in debt” to those providers until you pay the bill. You know, since you owe them. I don’t know anyone who would consider that kind of stuff debt though.

    I do use credit cards for reward points, but I absolutely pay them in full before they’re due every time. And I don’t charge a dime on them unless I have the money sitting in my bank account first.

    I no longer have student loans, car loans, mortgages, etc. (And I do own a car, degrees, houses, etc.) So I am debt free.

    • That’s a good point Jackie, even if we don’t have debt in the form of credit we still have debt. I love redeeming my credit card rewards points for Starbucks gift cards. Although Starbucks is changing their rewards program and it’s not in favor of the customer so we’ll see how long I keep buying Frappuccinos.

  • What an interesting perspective!

    I DO have a mortgage so I am not debt free but I know several people who rent their homes and consider themselves debt free simply because they have no open loans/credit card balances on their credit. I think this falls in that myth category too. Renting is a fine choice for some people but you are definitely still indebted to someone in order to live there. When my mortgage is paid off, I still get to live in my house. If they stop paying after 30 years, they will be evicted. And with leases, they can’t just walk away either. They are on the hook for the time they committed to live there whether it be a month long lease or a two year lease.

  • I am consumer debt free. No credit cards, no car loans, no personal loans, no student loans.

    I am not mortgage debt free. Give me another ten years or less and I’ll be able to say I am completely debt free.

    Loving a cash/debit card life feels so peaceful.

    • Oh wow that’s so true Rachel. I rent and I never considered it debt, but I guess I am. Keep us posted on the mortgage repayments.

    • They’re not in debt because rent is paid in advance. There is nothing wrong with renting and if they don’t have any other payments for credit, you can bet they’re investing in their retirement so I’m sure they don’t have to worrying about buying a house in 30yrs x

  • Jackie, I see the point you’re trying to make —

    but I feel certain there ARE people out there who are truly debt-free. And aren’t ‘lying,’ which certainly implies they’re doing it on purpose. To make themselves feel like bigshots?


    We don’t have a home mortgage. (We own it, free and clear.) We don’t owe money on either of our cars. (Ditto.) No payments for medical bills or loans, thank God. (Paid off, finally.) No student loans. (Paid off, except for one we co-signed on…and Daughter has neglected to pay off. Until she retires it, we get to make a payment. But it’s in her name.)

    Yes, we use charge cards, because you can get cash back for doing so — but we pay them off. Every single month. Without fail.
    Are we considered liars, in your opinion? Because I’m definitely telling you the truth.
    And to get to this point, without making big salaries, we made some sacrifices. But we’ve also had a chance to travel (Husband is a GENIUS at finding low prices), wear good-quality clothes, have more than our share of STUFF, and in general live a very good life.
    Would you like a post on this, explaining?

    • You have amazing money habits Cindy, I want to be you when I grow up. Did you make other financial sacrifices to pay off your mortgage?

  • I am not currently debt free at this exact moment but I can genuinely say the only reason I have ever been in debt is because of my partner (due to underemployment/unemployment on his part). If I was single I would probably never have taken on any debt.

    • Sometimes that’s just the price for love NZ Muse. You’re a great partner, I’m sure he appreciates it. Being paid less than you’re worth really sucks, but it’s the reality for so many industries.

  • I think a lot of people think they are living debt free because they pay off their balance(s) in full each month. While I don’t think this is a problem or that they are lying, they aren’t really living “debt free” because they are in debt from the time they swipe their credit card until they make the monthly payment.

  • Awesome post! While I don’t have any more credit card debt (recurring), I do have a mortgage. Technically, I have debt every month while I charge everything on my credit card for the month and then pay it off. I don’t think I’m lying to anyone when I say I’m credit card debt free, as I don’t pay any interest to anyone for that debt. But, it’s still debt!

    • Thanks Grayson, that’s always nice to hear. Yes living in debt when you spend and becoming debt free every month when you pay it off is nice. I guess from the time you make the payment until the time of your next purchase you are debt free. Some people do consider being debt free not having rolling balances every month, so I guess it’s all perspective.

  • The only debt I have are my student loans. I’ve never missed a payment, but I wanted to pay them off as quickly as possible. I decided a few weeks ago to stop stressing out about paying them off quickly. I’m going to work as hard as I can to be wealthy enough to pay them off in one lump sum in the future.

  • I just paid off my entire CC balance (not just the statement balance but the whole balance) a few days ago and haven’t put anything back on the card yet. Actually yes, I really am debt free (though I do pay rent.)

  • I live in the Netherlands, where most people use debit cards rather than credit cards. Debit cards have better protection here than in the US. So yes, I’m completely debtfree, because I also don’t have other debts or a mortgage. I would say it is a position to really strive for. Don’t feel complacent when you do have debt, pay it off. Maybe, maybe the only exception being credit card debt if you live in the US, buy useful stuff that you budgeted for, pay off the balance in full every month and get some rewards.

  • It’s really silly to say that people who use their credit card but pay in full every month are in debt. If you have a budget and have money set aside to pay that out of your checking, you are not “in debt”. We have no car loan, no mortgage, no student loans, no outstanding bills, budgeted in full for the month, plus emergency fund. We are debt free and no technicality of phrasing will take that away from us. Good luck to everyone on their debt journey!

    • Kelsey – agreed. It’s not a binary function, just yes/no. And I am with you 100%, card users should be judged (or rather consider their own position, who am I to judge anyone?) based on their monthly or annual habits. If your credit card bill is $xxx every month but you are a pay-in-full card user, the snapshot of “Kelsey always has a $xxx-$yyy card balance” tells a different story than the more accurate “Kelsey pays in full each month, never pays a dime in interest, and racks up the rewards.” It’s an interesting talking point, but obfuscates the issue that many have, the $4000 balance that never gets lower, but costs nearly $1000/yr in interest.

      Mortgages are another story. They are at different levels of people’s concern. Against the popular opinion of “Don’t retire with an outstanding mortgage,” we did just that. We were in the 25% or 28% bracket while working, and now pay 15% as a top rate. So we are using cheaper money to pay the loan. To illustrate, the $2000 deposited to the 401(k) cost us $1500 net. But $2000 out is $1700 after tax. And the market has added to this. The last decade included a crash, yet the 10 yr cagr of the S&P is 6.93% vs the mortgage at 3.5%. In the end, finance is very personal, and there are those who would pay off that 3.5% mortgage, vs investing for the long run at a likely 10% return. What’s important, in my opinion, is to be mindful, to make choices based on your own risk tolerance.

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