2 Common Debt Myths Debunked

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?

52 Comments on 2 Common Debt Myths Debunked

  1. Nell @ The Million Dollar DivaNo Gravatar
    January 2, 2014 at 6:55 pm (3 months ago)

    Ooh boy that ‘everyone’s got debt’ thing can be a killer. Thankfully that was a short-lived phase for me and now I just focus on my own goals. But there was a time I thought nothing of dropping $700 in a single shopping trip. Argh!

    Reply
    • GMDNo Gravatar
      January 2, 2014 at 8:26 pm (3 months ago)

      Thankfully it was only short-lived for you Nell! Wish I could have said the same for me. :P

      Reply
  2. Adam KamererNo Gravatar
    January 2, 2014 at 7:33 pm (3 months ago)

    The “everyone has debt” thing is such an insidious one. My wife and I only have a relatively small amount of student loan debt. Still thousands of dollars, but we don’t have a car payment, house payment, we don’t owe any personal loans, and we pay off our credit card every month.

    We also don’t have much income right now, so our expenditures have to be kept in check. It’s troubling when we see friends who are in similar income brackets as us who own nice houses and take trips overseas and drive fancy new cars. It’s hard not to feel jealous of all the neat stuff they have and get to do, but then I remind myself that they’re racking up tons of debt in order to have that nice house and that new car.

    Reply
    • GMDNo Gravatar
      January 2, 2014 at 8:30 pm (3 months ago)

      Financing a lifestyle in order to keep up with the Jones is a costly habit to develop. I should know. :P It sounds like you and your wife are being very smart with your financial present and future. Awesome!

      Reply
  3. Tonya@Budget and the BeachNo Gravatar
    January 2, 2014 at 7:49 pm (3 months ago)

    I regret so much not only racking up consumer debt, but only making minimum payments and sometimes getting late fees. I think about where that money could have gone towards…vomit.

    Reply
    • GMDNo Gravatar
      January 2, 2014 at 8:33 pm (3 months ago)

      The credit card interest I have paid over 12 years could have bought me a fancy BMW. It’s so ridiculous, it’s almost funny. Well that’s what I tell myself anyway so I don’t cry my eyes out. :P

      Reply
  4. DebbyNo Gravatar
    January 2, 2014 at 7:51 pm (3 months ago)

    Great post! Sounds about right! I agree with Adam, too: I used to try to live up to what other people did, but ever since I started tackling my debt, I realize that it’s actually the easiest thing to wear the latest fashion, eat out every day, take trips to wherever: I used to do that, too… and it got me into debt. Debunking the myths and the excuses you make for yourself actually is quite liberating, and you learn to value what you have much, much more.

    Reply
    • GMDNo Gravatar
      January 2, 2014 at 8:36 pm (3 months ago)

      The myths really are easy excuses in disguise to spend! Like you, I really have learned to appreciate what’s truly valuable in my life last year.

      Reply
  5. Dear DebtNo Gravatar
    January 2, 2014 at 8:01 pm (3 months ago)

    I used to think everyone had debt, then when I met all these people that didn’t have student loans, I was like, wow, really? I just thought that’s what everyone did. I think the good debt vs bad debt is a myth. Even though I have “good” debt, it still sucks! Yes, no one can take my degree away from me, whereas you can have your home, car, etc taken from you, but I wouldn’t classify it as good.

    Reply
    • GMDNo Gravatar
      January 2, 2014 at 8:38 pm (3 months ago)

      To be honest, I’m kinda wary about the whole good vs. bad debt debate as well. Student loans just suck. All debt sucks. Period.

      Reply
  6. Angela WiebeNo Gravatar
    January 2, 2014 at 8:14 pm (3 months ago)

    Great post. I have a question for you. My boyfriend is in school by the time he is done we will have 70000 in debt. We have no credit card debt. But I am freaking out about all this student loan crap. He can’t work while in school, so we are living off my wage. What would you suggest? There’s no guarantee for a job and if he does get one we would probably end up have to make a major move (Vancouver, Seattle or San Deigo). Did the government forgiven any of your loan? How did you go about getting that?
    Thanks for your time. You’ve helped motivate me to keep on track.

    Reply
    • GMDNo Gravatar
      January 2, 2014 at 8:46 pm (3 months ago)

      I suggest throwing any extra money you can squeeze from your current budget towards his student loans. $70,000 is a lot of money but as long as you both recognize that it’s debt that should be taken care of ASAP then I don’t think it’s worth freaking out about. The Canadian government will usually forgive some student loans to graduates who to move to and work in “remote” small towns but they usually won’t for big metro cities. My student loans aren’t forgiven but I am on interest relief. It’s an on-line application that you fill out every 6 months and if your income is low-enough or shows that you need assistance, the government will pay your interest but the full balance is still your responsibility. Good luck Angela!

      Reply
  7. GinaNo Gravatar
    January 2, 2014 at 9:55 pm (3 months ago)

    I’m very guilty of falling for these myths! Nowadays, debt is so common that for a long time, I didn’t feel bad about my debt and didn’t have any motivation to get it paid off right away. And don’t even get me started on how much interest I’ve paid in the last 10 years…

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 9:16 am (3 months ago)

      I wasn’t concern about my debt either. I wasted (literally) all my 20s thinking YOLO and I will worry about paying off my debt “one day.” I just turned 30 last year and don’t want to waste a single day longer than necessary in debt.

      Reply
  8. AliciaNo Gravatar
    January 3, 2014 at 3:29 am (3 months ago)

    I never thought “everyone had debt” until I had debt. My parents were financially independent (I know that now, but didn’t until recently) so they didn’t have debt. I only started thinking debt was normal when I needed to rationalize my debt load to myself.

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 9:17 am (3 months ago)

      It’s funny (or not so) what our brains will do to rationalize anything we want it to eh?

      Reply
  9. Laurie @thefrugalfarmerNo Gravatar
    January 3, 2014 at 5:12 am (3 months ago)

    Oh my gosh, welcome to our world pre-January 2013! We lived by the “if we can afford the payment, it’s okay” mantra. What an evil, dangerous lie!! Great post, GMD. May this wisdom spread to the world!

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 9:58 am (3 months ago)

      Even if the message just gets through to one person then I will be a happy Girl!

      Reply
  10. JordannNo Gravatar
    January 3, 2014 at 5:46 am (3 months ago)

    I definitely fell into the “everyone’s got debt” trap in University. I totally thought it was normal to incur a giant student loan to finish school. It might have been normal, but that doesn’t make it ok.

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 9:59 am (3 months ago)

      “It might have been normal, but that doesn’t make it ok.” Couldn’t have said it better myself Jordann!

      Reply
  11. Rebecca @ Stapler ConfessionsNo Gravatar
    January 3, 2014 at 6:17 am (3 months ago)

    Myth #2 is true for us with our student loans. But 30 years is a long time to pay for your education, especially when your own children will be out of college by then! :(

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 10:01 am (3 months ago)

      If I continued paying only the minimum payments on my student loans, it would have taken me 15 years to pay it all off! Crazy I tell ya!

      Reply
  12. Michelle @fitisthenewpoorNo Gravatar
    January 3, 2014 at 7:17 am (3 months ago)

    I was certainly guilty of feeling all of these were true. I took out student loan debt thinking it was “ok” because everyone else was. NO. WRONG. I think student loan debt is a good debt in the long wrong, but it’s not good to just hold on to it!

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 10:41 am (3 months ago)

      I “held on” to my student loan debt for so long because for over 5 years I didn’t have interest accruing. Foolish I was.

      Reply
  13. LNo Gravatar
    January 3, 2014 at 7:27 am (3 months ago)

    Great post!! I wish that high schools and universities provided some financial literacy education to students. I know when I was a student it seemed completely normal to charge things to my credit card since I was a student and I was suppose to have debt. A culture shift needs to happen, sooner rather then later!! Happy New Year btw :)

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 10:44 am (3 months ago)

      I agree 110% with your comment L! Happy New Year to you too! :)

      Reply
  14. Done by FortyNo Gravatar
    January 3, 2014 at 7:31 am (3 months ago)

    Breaking the habit of just paying the minimums has got to be the most important step to getting out of debt. Get to debt freedom on your schedule, not the lender’s.

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 10:47 am (3 months ago)

      “Get to debt freedom on your schedule, not the lender’s” – BRILLANT!

      Reply
  15. Blair@LifeDollarsandSenseNo Gravatar
    January 3, 2014 at 9:10 am (3 months ago)

    These are great! Thinking that everyone has debt and its ok is the biggest obstacle I see others struggle with….if debt is normal….I want to be special/different :)

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 10:47 am (3 months ago)

      I guess you and I are both very different…errr I mean special. ;)

      Reply
  16. Shannon @ The Heavy PurseNo Gravatar
    January 3, 2014 at 9:34 am (3 months ago)

    Looking back and seeing how we’ve come to accept debt as normal is something I wish had never happened. Not that I want to ostracize people with debt, I don’t. But the prevalence of this myth has caused a lot of damage. The good news is people can change and take back control of their finances, like you did!

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 10:49 am (3 months ago)

      Taking back control of my finances is the most liberating feeling. I can’t quite explain it but I love it! :)

      Reply
  17. Kasey @ Debt PerceptionNo Gravatar
    January 3, 2014 at 10:27 am (3 months ago)

    Student loans are supposed to be “good debt.” But there is no good debt. Also, people seem to think that once you get married, your debts automatically merge. While I’m not sure how it works in Canada, it doesn’t happen like that here in the states.

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 10:53 am (3 months ago)

      All debt sucks. Period. To be honest, I’m not too sure about how debt “merges” or not when people get married…J and I just have a mutual agreement that any debt that happens before marriage is our own responsibility. My debt is all my own to pay off.

      Reply
    • GMDNo Gravatar
      January 3, 2014 at 2:19 pm (3 months ago)

      Thank you Charlotte! Good luck with your new blogging journey – It’s one helluva ride!

      Reply
  18. E.M.No Gravatar
    January 3, 2014 at 2:22 pm (3 months ago)

    Yes, yes, yes. I definitely fell into the trap of thinking both of these things, especially with my parents being in debt. They appeared to think it was “normal” and were in no rush to pay it off, either. When I started accumulating a balance on my credit card, I paid it exactly as you did. One day I realized I don’t want to be paying my student loans back in 10 years, and I decided to pay as much above the minimum as possible.

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 2:37 pm (3 months ago)

      Paying as much as possible above the minimum is the best we can do. Great job E.M. :)

      Reply
  19. annaNo Gravatar
    January 3, 2014 at 2:50 pm (3 months ago)

    It definitely puts a big knot in my stomach about how much interest I’ve paid through the years, since I was paying consistently but only the monthly – that’s a huge no-no (well, and getting into debt in the first place). I agree that it seemed commonplace that debt exists, too, and I’m just glad to wake up and realize it doesn’t have to be that way! Great learning lessons, GMD!

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 3:53 pm (3 months ago)

      A big knot is better than vomit! :P So happy that you are debt-free now Anna!

      Reply
  20. AshleyNo Gravatar
    January 3, 2014 at 3:02 pm (3 months ago)

    I totally agree with you that there really is no difference between “good” debt and “bad” debt, but I also have a hard time not justifying student loans.

    I’m currently in the process of going back to graduate school, and the only way I can do it is through loans. I HATE the idea of taking on new debt, but realistically, it would be years of saving before I would be able to save enough cash to go back on my own. I can’t keep putting it off, because otherwise I’ll never go! Obviously, I will prioritize paying that debt off ASAP after graduating, but I just don’t see myself being able to do it otherwise. So, yes, I do believe that investing in myself and my education is worthy of debt, although I’d much prefer not to have to go that route if I saw any other alternative.

    If only I were independently wealthy…:)

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 3:57 pm (3 months ago)

      The only way for me to go to university right after high school was to take out student loans and then take out more student loans for my post-bachelor. I don’t regret a single thing. Sometimes you just gotta do what you gotta do. Good luck with your studies Ashley!

      Reply
  21. Dee @ Color Me FrugalNo Gravatar
    January 3, 2014 at 4:46 pm (3 months ago)

    I think the “everyone has debt so it must be normal” one is HUGE. Especially among college students who have never had to pay off debt and just don’t have much experience with it. It’s sad- again it makes me wish schools focused more on financial education.

    Reply
    • GMDNo Gravatar
      January 3, 2014 at 6:19 pm (3 months ago)

      I second that wish. Financial literacy is a “real world” skill/knowledge kids could actually use.

      Reply
  22. dojoNo Gravatar
    January 4, 2014 at 3:22 am (3 months ago)

    It’s sad that it became the norm to have debt nowadays. We got rid of ours and really enjoy not being ‘normal’ anymore. Making the smallest payments is not a great idea either, make efforts to pay off debt and you’ll do way better.

    Reply
    • GMDNo Gravatar
      January 4, 2014 at 9:57 am (3 months ago)

      I can’t wait to wake up one morning knowing I am debt-free. I wonder if I will feel different?

      Reply
  23. save. spend. splurge.No Gravatar
    January 4, 2014 at 6:40 am (3 months ago)

    Before I cleared my credit card last month (around $2000), it told me that it would take me 9 years at the current minimum payments to clear it.

    I was flabbergasted but since I clear my cards each month I don’t have to worry about that. I just can’t imagine people paying the minimums and thinking it’ll disppear

    Yeah.. one day.. in 30 years!!!

    Reply
    • GMDNo Gravatar
      January 4, 2014 at 10:02 am (3 months ago)

      I was one of those people who paid slightly above the minimum for over a decade thinking it would all be paid off one day. I was so wrong.

      Reply
  24. Kay @ Green Money StreamNo Gravatar
    January 4, 2014 at 12:29 pm (3 months ago)

    These are definitely the two biggest myths here. Especially the mindset that having debt is “normal”. This is harmful to so many people and I think some feel a sense of comfort in the thought that others are in debt as well. Even when it comes to a mortgage, which is a common form of debt and considered a “good” type of debt, my husband and I are challenging the idea that having a mortgage is just what everyone does. We are going to be mortgage free.

    Reply
    • GMDNo Gravatar
      January 4, 2014 at 12:44 pm (3 months ago)

      There is definitely some “comfort” in knowing that I’m not the only Girl out there in debt…

      Reply
  25. Lisa E. @ Lisa Vs. The LoansNo Gravatar
    January 7, 2014 at 10:24 am (3 months ago)

    These two myths are so common in people’s reasoning! I know it was for me. Now I know that even though a lot of people are in debt, that doesn’t mean that it’s okay for me to be. I’m fighting to be different!

    Reply
    • GMDNo Gravatar
      January 7, 2014 at 10:44 am (3 months ago)

      I’m fighting to be really different too. ;)

      Reply

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