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?