adopt these four mindsets to break free from debt

May 6th, 2009

Adopt These Four Mindsets To Break Free From Debt

Part of how I got to the point where I’ve really internalized the idea that debt does not have to be a part of our lives (even while it still is) is changing my assumptions and attitudes about certain things.  Over the course of my life, I’ve built up beliefs and convictions and general assumptions that I’ve accepted to be true (such as the you’ll always have a car payment example).  Realizing that they were just assumptions and not absolute truths helped me be able to let go of them.

Some of the changes I’ve made in my own way of thinking and put into action to break free from the assumption of endless debt include:

Debt is not an option

This seems like a simple idea, and it is.  Why it is so tricky to embrace though is because if you pay attention, you’ll find that in the vast majority of cases, debt is given as an option.  From the use of credit cards to adopting a payment plan, debt is everywhere.  I honestly used to not understand when someone said they couldn’t afford something that seemed necessary (like a car repair or home repair).  If I had available credit (and I always did) I could “pay” for it.  But really, I wasn’t paying for it – I was letting someone else pay and paying them back even more than it started as.  Adopting the attitude that debt is not an option gave my entire financial life a whole new set of rules.  Harder rules, but ultimately better ones.

Actions speak louder than words

I can say until I am blue in the face that I don’t believe in debt and that debt is not an option, but unless I put that into action it’ll never become internalized. From not using credit in any form, to designing an action plan (and putting it into practice) of how to eliminate current debt, those actions cemented for me my newfound creed.  Taking those steps to make my plan a reality has made all the difference.

Look for the catch (before accepting the message)

No money down!  12 easy payments!  No interest financing!  All those messages sound attractive, but in most cases, there is a catch (or two).  Make sure you understand all the terms (including late penalties, prepayment penalties, basically anything involving a penalty) and that you have a solid, unshakeable plan to take advantage that can’t be derailed by life before you accept terms.  In our personal world, life still derails things quite often, so we eschew payment plans no matter how nice the terms.

The easy way out is usually the most dangerous

All those commercials that claim to settle your debt for pennies on the dollar – most are scams.  Just like the free laptop that only 1 out of 100000 people manage to make happen, debt consolidation is often a scam.  if you can’t do it yourself, get help, but make sure that help is not for profit and not out to get you.  Sadly, most are preying on vulnerable individuals.

Debt doesn’t have to be an automatic part of life. But breaking free requires more than desire, it requires commitment, planning, and perseverance. We’re not there yet, but every day brings us just a little bit closer.

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13 Responses to “Adopt These Four Mindsets To Break Free From Debt”

  1. I don’t go into debt anymore. I still use my credit cards occasionally and I’m currently paying for something that is on a 12 month same as cash deal, but I don’t go into debt. I always have enough in savings to cover anything I borrow and I never pay interest.

    I said I don’t go into debt anymore. That doesn’t mean I’m not *in* debt. I have a mortgage and school loans. It’s easy for me to say that debt is no longer an option now that I’ve already financed my home and my education. I don’t know if I could tell an 18 year kid that debt is not an option though – that would be somewhat hypocritical of me… I can avoid debt now that I have an education that earns me a decent living and that’s the catch – I HAD to go in debt in order to avoid future debt.

    I think whether or not debt is option depends on a lot more than just your mindset – it depends on where you are currently in your life.

  2. Very well said.. debt is mainly an issue of your attitude towards it and the mindset to deal with it effectively. Best way is to prevent yourslef form taking on debt which is not necessary and if you take some debt on your head, then get that off it with all your might.

  3. People say a lot of things, but like you mention, take action. Beginning a plan, writing something down is enough to make the difference between a lot of people when getting started or not.

  4. Agree with Kev–again! Debt for an education definitely has the upside of investing in a future of greater earnings, and hopefully well being.
    The hardest thing (I would think) IS being young and not knowing what future earnings and life crises will come your way. If I had any advice (I think about this a lot having two twenty-somethings), it’d be to develop that tightwad mentality or mindsets such as you talk about, ASAP. Live close to that first job, use public/cheap transportation until you can’t stand it. Start that car fund right away, make sure you have medical insurance and save up to $5000 just for medical expenses, then consider those funds sacrosanct; finally, live within your means: if you have credit cards to “establish credit” set up a bill or two to be auto-paid, then stick the card in a drawer and don’t use.
    If, when we were young and freshly minted, we all had followed your mindsets…. just think where we’d be!
    Thanks for the thoughtful post.

  5. I really like the “debt is not an option”. That is the mantra in our house now. If the cash isn’t there then we can’t afford it. The emergency fund is there for the real emergencies – everything else simply has to wait until the funds are there.
    The sad thing is I was brought up by parents who didn’t believe in debt – I wish I had taken more notice of that. If I had I wouldn’t be saddled with the credit card debt we have (that is slowly reducing but is hard work).

  6. In my case, I had no option but to take out an educational loan and thus, go into debt. It is my only debt and as Jay said…it has paid off in “well being”…a young person’s life was saved and that young person is now a remarkable 20 year old.

  7. I think there is something more to be said about taking out a student loan though as well. Even though I took out loans for school, I think I could have been better in planning my living expenses during college and possibly taken out smaller loans. I think a lot of kids just think someone is handing them money that they will have no problems paying back when they get a good job. College doesn’t absolutely provide a good job. In my case I wound up with a special needs child which staying home with cuts more cost than a paycheck could provide. We really never know what will happen in our lives.

  8. Well said!

    Though IMHO the term “good debt” is questionable, if the only way you can get a degree or two is to rack up some student debt, so be it. But adopting the mindset that you DON’T always have to owe on a car (or fill in the blank: house, credit card, equity loan…) is the best way to get out of student debt and the best way to avoid the many debt traps avoiding young people as they start their careers.

  9. Ooops! Just saw that typo, in an idle moment! I meant to type “debt traps awaiting young people…” If only they WOULD avoid young people!!!!

  10. I think that changing my mindset was probably the single most difficult thing I did but also the most effective. I went from a ‘how can I borrow the money for that?’mindset to a ‘how can I make/save more money to pay for that?’ mindset. It made everything in my financial life easier. Once I had made the decision that I would NOT borrow money, the rest of the decisions about whether I needed things or wanted things was easy. So often, our wants become needs because we really aren’t forced to choose between them. I have not borrowed any money for 2 years. I’m still working on paying off debts from my prior life but I’m getting there.

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