Episode 5 – 10 Reasons People Stay in Debt
In our last podcast we talked about 10 budgeting Myths and setting goals. Today let’s talk about another budgeting myth poor people believe, “Debt’s Not So Bad, Right?”
If you are like me I’m sure you heard folks say, “If everyone stopped borrowing money, the economy would fail.” Of course that’s not true.
A) Everyone’s not going to stop borrowing and
B) the massive amount of debt this society carries could actually BE the cause of an economic meltdown.
I’ve also heard folks say, “I must be able to afford it if I was approved for the loan.” Folks, all the credit card companies and other lenders care is that you are paying them that high interest payment. And yes even a 5 or 6% interest payment is high when you consider how little these same institutions pay you for your savings, if you even have a savings account.
And my favorite is, “I need a house payment for tax purposes.” You’re paying way more in interest than you are ever saving in tax deductions.
Have you decided to get out of debt? Are you drowning in last year’s expenses and tired of paying for the past instead of planning for the future?
You’re probably sick and tired of being sick and tired. You might even be angry at being in debt. Eventually, the stress of too many bills and the burden of debt piling up pushed you to your breaking point. Something inside “clicks,” and you decided it’s time to make a fresh start.
But what keeps people from getting out of debt? Why would someone want to stay in debt instead of living in freedom? Sadly, there are all sorts of reasons people choose that shiny credit card instead of being debt-free. Don’t fall for any of these!
Let’s talk about some Reasons People Stay in Debt
1. They want to keep up appearances.
This is the dreaded “keeping up with the Joneses” mentality. But little do you know, the Joneses have a leased BMW, an underwater mortgage, and an unwelcome visitor named Sallie Mae living in their basement. The Joneses are the most broke people in your neighborhood! And if you’re not careful, you’ll be following them into bankruptcy by trying to keep up with them.
If you have trouble with constantly falling into the comparison trap, consider some sound advice from best-selling author Rachel Cruze. In her book Love Your Life, Not Theirs, she shows you how to quit playing the comparison game, how to think before you actually spend money, and how to start saving like you truly mean it. Pretty soon you’ll be so caught up in your own life you’ll find yourself saying, “The Joneses who?”
2. Reason People Stay in Debt: They don’t think they make enough money.
Most of the time, it’s not someone’s salary that’s the problem—it’s their behavior. Spending more money than you make will cause you to stay in debt. That’s why we say it’s so important to budget.
Budgeting can help you see where your money is going every month and where you can cut back. Simply making a budget and being intentional with your money will make you feel like you got a raise!
That’s not to say income doesn’t play a large role in why people stay in debt. Sometimes it really is an income issue. If that’s the case for you, start doing things to bring in extra cash! Get a part-time job on nights or weekends and sell everything that’s been collecting dust in your garage. Or maybe it’s time to get bold enough to ask for a raise or put your resume out there and start looking for a higher paying job.
I can show you how to start your own business to get out of debt with no up-front investment, no pyramid that requires a monthly auto shipment costing you money instead of creating money, and no selling of lotions, or potions or pills, or quick magic diet aids that melt away inches in minutes or other such scam promotions. Stay tuned to the end and I will share with you how to learn more.
3. Reason People Stay in Debt: They are Unwilling to Sacrifice.
How could you possibly give up eating out three nights a week? Or what would your life look like without cable? You’ll never know until you’re willing to give something up in order to build a legacy for your future. If you’re in a lot of debt, something in your lifestyle has to change. Here’s a question to ask yourself: What am I willing to temporarily give up?
4. Reason People Stay in Debt: They have No Hope.
When you’re buried under thousands of dollars of debt, it’s easy to feel like there’s no way out. After making minimum payments month after month and seeing little or no headway, sometimes you feel like you’ll never see the light at the end of the tunnel. If you can’t find a reason to keep up the fight, sooner or later you’ll probably just throw in the towel.
Some people stay in debt because they’re too afraid to make a move. Debt can be comfortable, kind of like slowly cooking in a pot of boiling water. If you’ve always used a credit card and you’ve always had a car payment, I remember thinking years ago, “I’m always going to have a car payment, I might as well get a new car every year or so.” Boy does it feel so much better today to have a paid for car and not have that payment over my head every month.
Sometimes it’s hard to make that change. Sure, trying to pay off all of what looks like a mountain of debt can be scary and overwhelming. But remember this: Millions of people have gotten out of debt and changed their lives by following Dave Ramsey’s 7 Baby Steps like we did. You can do this!
5. Reason People Stay in Debt: They’re addicted to stuff. They suffer from Stuffitis
In other words, they’ve bought into the myth that you are what you own—and they simply can’t get enough. The more they have, the more powerful and confident they feel. But it’s all fake. They can’t afford that stuff and it’s going to weigh them down. At some point their addiction to debt will cause a financial heart attack.
Our culture has twisted what it means to actually be able to afford something. Society echoes, “If you can ‘afford’ the minimum payment, then go ahead and buy it!” That’s just ridiculous, and it’s a sure ticket to financial regret. You’ll end up spending more on monthly payments to pay it off than if you would have just bought it outright! Instead, don’t buy things you can’t pay for in cash.
6. Reason People Stay in Debt: They don’t make it a priority.
They keep putting it off thinking, I’ll start a budget next month. But each month passes by and guess what? Still no budget. Paying off debt isn’t exactly a fun pastime. It takes a lot of work! We know changing your lifestyle is uncomfortable, but the end result is, it is 100% worth it. Make it a priority!
7. Reason People Stay in Debt: Their spouse isn’t on the same page.
Money and relationships can be tricky territory, especially when a couple isn’t seeing eye to eye. Maybe one of you is fully committed to becoming debt-free and the other isn’t quite convinced that debt is all that bad anyway. If you really want to get out of debt, you and your spouse have to be on the same page with the same vision for your future.
And remember, it’s not “my” money or “their” money—it’s our money. Once you get married, your vocabulary needs to change. You’re on the same team, and it’s time to start acting like it.
The same goes for your debt. It’s not “his credit card debt” or “her student loans,” it’s your collective debt together. And if you want to get rid of it, you need to tackle it as a united front.
8. Reason People Stay in Debt: They aren’t managing their money.
According to a survey by U.S. Bank, only 41% of Americans follow a budget.(1)
No wonder so many people feel like they’re spinning their wheels getting out of debt! If you don’t have a monthly budget, you don’t really have a plan for your money. You aren’t telling your money where to go, so it’s going out the window!
Managing your money means more than just tracking your expenses after they’ve already happened. You have to prepare ahead. There is a free budgeting app, EveryDollar, from the Lampo Group that you can find in your smartphone app store that makes it super easy to create a budget. You’ll finally wave goodbye to stressing out about your money once you actually take control of it.
9. Reason People Stay in Debt: They haven’t cut up their credit cards.
Getting out of debt is amazing. But if you keep those credit cards around for a rainy day or “emergency,” you’ll likely land yourself back in debt again. Just don’t do it. Cut them up, close the accounts, and be done with them forever. If you follow our plan, your emergency fund is your safety net—not credit cards.
10. Reason People Stay in Debt: They don’t know how.
These people have good intentions—they want to kick debt to the curb—but they don’t know how. They’ve been in debt so long that getting out from under $50,000 in credit card bills seems impossible. But it isn’t. People call The Dave Ramsey Show every day to tell about their debt-free victories.
Getting out of debt isn’t easy. It takes a lot of hard work and discipline. But it is not impossible. All you need is a plan.
In Dave Ramsey’s book, Financial Peace he introduces the debt snowball method as a simple plan for helping you get out of debt. Start by listing out all your debts from smallest to largest. Keep paying the minimum payments on everything except the lowest debt—we want you to attack that one with a vengeance! Once it’s gone and out of your life forever, take the amount you were paying on it and roll that over to your next debt on the list. It might not seem logical to start with the smallest debt and work your way up. It might seem more logical to start with the highest interest rate first. Trust me! By starting with the lowest debt first, when you pay off that smaller debt the feeling of victory and accomplishment motivates you to keep going. So what if it might on paper take a couple extra months. When doing it the other way, most people never finish, they give up, the feeling of hopelessness squashes all the motivation they had in the beginning when they started.
People are making the decision to get out of debt and change their lives every day. They’re making sacrifices so they can live like no one else! Are you next? Take control of your finances—and your life—by deciding to get out of debt for good!
Now is the best time to start taking control of your money! I’ll be covering many topics to teach and encourage saving and debt freedom. Be sure to subscribe to this podcast and my blog at ProsperityRx.com to learn how to save money, make a budget, pay off your debt, reduce your taxes and invest for your future.
Also if you want to learn more about how to create extra income by starting a home business that requires no startup capital, no pyramid that requires a monthly auto shipment that cost you money every month instead of creating money, and no selling of lotions, or potions or pills, or quick magic diet aids that melts away inches in minutes or other such scam promotions that you see all over social media visit http://AIMHighForSuccess.com.
I’ll see you on the next podcast