We all know that paying off debt is 90% mindset and 10% numbers. Or something like that.
Before I started this blog and became serious about aggressively paying off my debt I had 2 big misconceptions about debt that I’m sure many people have as well. Today I am here to “debunk” these 2 common debt myths, GMD style.
EVERYONE HAS DEBT SO IT MUST BE “NORMAL”
This is true in the sense that most people you know will have some kind of debt (mortgage/credit cards/student loans/car loans etc.) and it’s true that some debts are not as “bad” as others (i.e. mortgage vs credit cards) but it doesn’t mean that debt is normal! Because it isn’t. Except maybe for the mortgage…but that’s another blog post topic. While there are many people you know who may have debt, there are just as many people out there who have zero debt. Misery loves company so dare to be different, dare to be to be debt-free, dare to be in control of your finances.
I took on a student loan when I was 18 years old and I also received my first credit card that same year. Knowing that I was going to be over $45k in student loan debt by the time I graduated made a “little” $500 limit student credit card debt seem “harmless” to me. All my friends also had student loans and although I had no proof, judging by how recklessly they were spending their money (just like I was!), I’m willing to bet some of them must have had credit card debt as well. Of course we never talked about it since debt and finances in general was a “taboo” topic.
Long time GMD readers will know that I eventually accumulated almost $12k in credit card debt by the time I started this debt repayment journey back in December 2012. Getting adult braces, mindless shopping, and in general just trying to survive in a big expensive City were some of the main reasons behind my huge balance. I was also a bank teller for 2 years so I “knew” it was “normal” for people to carry a credit card balance so I didn’t feel so bad about myself.
MAKING MONTHLY MINIMUM PAYMENTS MEANS MY DEBT WILL BE PAID OFF ONE DAY
Your debt will be paid off one day if you only make the monthly minimum payments but you could also be paying double the amount of what you originally owed in just interest alone by the time your balance is zero! I used to be a credit card company’s ideal candidate. I made slightly more than the minimum payment each month and in the 12 years I have had credit cards, I have never missed a single payment. Ever. No one with as much consumer debt that I had should ever have her credit limit increased but I guess the greedy credit card companies couldn’t resist someone as irresponsibly responsible as me.
I’ve been out of consumer debt for 4 months now, and while I believe credit cards can be a beneficial financial tool if used correctly, it can also do more harm than good if not used properly. You just have to know yourself and I know that the thought of ever having to pay anymore interest to the credit card companies literally makes me want to vomit. And because I don’t like to vomit, I always make sure I have enough money in my bank account to pay off my balance in full every month.
I still have massive student loan debt that thank my lucky stars have been on interest relief for over 5 years and counting but that doesn’t mean I’m going to take my sweet time in paying it off. I have dreams of being financially independent and living the good life in (earlyish) retirement so I’m not going to spend another day longer than necessary living in financial denial. You shouldn’t either friends.
It’s a new year, which also means a new attitude towards our debt! What are some other common debt myths that you used to have?