Now that I’m no longer semi-anonymous with my finance blogging, I tend to have a lot of friends and random people asking me finance questions.
I have people pouring what seems like their heart and soul to me because they really want to change and improve their situation.
This is something that I love about being a personal finance blogger – the fact that I can (hopefully) help someone change their life and teach them how to manage their money better.
Many of the questions I receive involve debt and what they can do to change their situation.
Someone told me they had over $200,000 in student loan debt, another person recently told me they had over $100,000 in credit card debt, some are hiding their finance problems from their families, some have told me that they are beyond house poor and they don’t know what to do.
The list goes on and on about the stories that I have heard.
I think the first thing a person needs to do when it comes to eliminating their debt is to realize WHY they are in debt in the first place (the next step is to actively reduce your debt – read How To Eliminate Your Debt). If you don’t know what your problem is, then it would be hard to make a positive change.
Yes, it is great to just start attacking your debt, but you also don’t want to fall into a vicious cycle of going into debt over and over again.
Here are some of the many reasons for why you may be in debt.
You think you have plenty of time to pay off your debt.
When I was in the middle of paying off my $40,000 worth of student loan debt, I remember being asked why I wanted to get rid of my student loan debt so quickly.
You know the saying about how there is no such thing as a stupid question?
Well, I thought that question was extremely stupid. I thought (and still think) it was probably the most stupid question I have ever been asked or heard.
I can’t remember the conversation exactly, but I remember them saying something about how I’m young and I should enjoy my money more and that I can worry about my student loans later.
UMM WHAT?!
Why not just pay off your debt more? Would you really rather have than 100th pair of jeans instead of putting more towards your debt? I know for a fact that I will probably completely forget about an article of clothing (even though I love clothes!) and I will appreciate my debt being paid off more.
I still enjoyed my life while I was paying off my debt, and I definitely do not think I was suffering at all.
It’s been around seven months since I completely paid off my student loans, and I couldn’t be happier!
You also never know what may happen. If you wait to pay off your debt and instead spend your money on things that you don’t need, you may fall into a bad situation. What would happen if you lost your job, came across high medical bills, or something else?
Wouldn’t you have wanted your debt to be gone?
You treat your credit card as income.
Your credit card is not a new income source. If you treat your credit card this way, then you should cancel your credit card.
Oh well if closing your account means that you will be lowering your credit score, you are probably doing worse damage anyways by racking up large credit card bills that you can’t pay.
If you are using a credit card, then you should be working to pay off your balance completely each month.
So-and-so has debt, so it’s fine if you do too.
Many people compare their debt amounts to others in hopes that they will feel more “normal” about their debt and not feel as bad. An example would be if you are 30 and the average 30-year-old has $10,000 worth of credit card debt (I completely just made that number up). You then use this number as a “guide” to yourself so that you can feel more comfortable about your debt.
However, WHO CARES about how much debt another person has? How exactly does knowing what the average amount of debt a random 30-year-old has affect you?
Is that person you?
NO!
So, why would another person’s amount of debt even matter to you? That makes no sense!
Just because someone else has $10,000 worth of credit card debt from buying too much clothing does not mean that you should too. You never know, this amount may be breaking them on the inside even if they aren’t showing it.
You believe you deserve the items you buy.
Yes, you may be awesome and think you deserve it, but should you really be buying it? Just because someone else just bought a 100 inch 3D TV (or a mansion, nice car, gadgets, a crazy-expensive wedding, etc.) doesn’t mean that you should as well.
You might think “oh well they have a comparable job to mine, so, if they can afford, then I can too.”
However, you have no idea how this person is paying for it. Maybe they saved for years, or maybe they are just putting everything on their credit card.
I recently talked to someone who has over $100,000 in credit card debt and I could tell they were in panic mode. They bought way too much house, way too much car, way too much everything. They thought they deserved it all since others were buying something similar.
You don’t need to keep up with the Joneses!
There are many ways to cut down your spending. Below is a quick list:
- ATM fees. Why do people do this to themselves?
- TV. Cut your cable, satellite, etc. Even go as far to go without Netflix or Hulu. Buy a digital antenna (this is the one we have) and enjoy free TV.
- Sign up for a website like Ebates where you can earn CASH BACK for just spending like how you normally would online. The service is free too! Plus, when you sign up through my link, you also receive a free $10 gift card bonus to Macys, Walmart, Target, or Kohls!
- Pay bills on time. This way you can avoid late fees.
- Shop around for insurance. This includes health insurance, car insurance, life insurance, home insurance and so on. Insurance pricing can vary significantly from one company to the next. When we were shopping for car insurance last, we found that our old company wanted something like $205 to insure one car for one month, whereas the new company we have now charges $50 a month for the same exact coverage. INSANE!
- Save money on food. I recently joined $5 Meal Plan in order to help me eat at home more and cut my food spending. It’s only $5 a month (the first four weeks are free too) and you get meal plans sent straight to you along with the exact shopping list you need in order to create the meals. Each meal costs around $2 per person or less. This allows you to save time because you won’t have to meal plan anymore, and it will save you money as well!
- Fuel savings. Combine your car trips, drive more efficiently, get a fuel efficient car, etc.
- Trade in your car for a cheaper one. For us, we are car people. Cars are one of our splurges. However, if you only have a nice car to keep up with the Joneses, then you might want to get rid of it and get something that makes more sense.
- Live in a cheaper home. I’m not saying you need to go live in a box, but if you live in a McMansion then you may want to think about a smaller home. This way you can save money on utility bills and your mortgage payment.
- Use a programmable thermostat so that you can heat and cool your home efficiently and more affordably.
- Learn to have more frugal fun. We don’t spend anywhere near the same amount of money on entertainment as we used to. There are plenty of ways to have frugal fun.
- Check out my recommendations page for a full list on money-saving websites.
Some ways to make extra money are below, but check out the related articles below to see many, many more:
- Start a blog. Blogging is how I make a living and just a few years ago I never thought it would be possible. I made over $320,000 last year by blogging. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $3.49 per month plus you get a free domain if you sign-up through my tutorial.
- Sell your stuff. There are many things you can do to make money by selling items. We all have extra things laying around that can be sold, or you can even search for items that can be bought and resold for a profit.
- Rent an extra room in your home. If you have extra space in your home, then you may want to rent it out. Read A Complete Guide To Renting A Room For Extra Money.
- Answer surveys. Survey companies I recommend include American Consumer Opinion, ProOpinion, Pinecone Research, Opinion Outpost, Survey Spot, and Harris Poll Online. They’re free to join and free to use! You get paid to answer surveys and to test products. It’s best to sign up for as many as you can as that way you can receive the most surveys and make the most money.
- Use Swagbucks for your online searches. Swagbucks is something I don’t use as much, but I do occasionally earn Amazon gift cards with very little work. Swagbucks is just like using Google to do your online searches, except you get rewarded “Swagbucks” for the things you do through their website. Then, when you have enough Swagbucks, you can redeem them for cash, gift cards, and more. You’ll receive a free $5 bonus just for signing up today!
- Try InboxDollars. InboxDollars is an online rewards website I recommend. You can earn cash by taking surveys, playing games, shopping online, searching the web, redeeming grocery coupons, and more. Also, by signing up through my link, you will receive $5.00 for free just for signing up!
- Find a part-time job. There are many part-time jobs that you may be able to find. You can find a job on sites such as Snagajob, Craigslist (yes, I’ve found a legitimate job through there before), Monster, and so on.
Related articles:
- 75+ Ways To Make Extra Money
- 10 Ways To Make Money Online From The Comfort of Your Home
- 10 Things I’ve Done To Make Extra Money
- Ways To Make An Extra $1,000 A Month
Why are you in debt? What reasons have you caught yourself using?
If you’re feeling extra brave, please share how much debt you have (house, car, student loans, credit cards, etc.).
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I have student loans, and I have 43k left out of a total of 81k. I got into debt to get my education and I thought “everyone” had student loans. Not so! I did my best to lessen the burden, but have definitely made choices that have made the debt payoff process longer. I am lucky that I never really got into credit cards. I think knowing WHY you got into debt and WHY you want to get out of debt is even more important than the how of getting out. The mental motivation from the why, will get you to the how.
Student loan debt is a good example of that. People tend to compare themselves to the averages so that they feel better.
And congrats on paying off almost half!
Same here, “everyone” had student loans. In all honesty though, I couldn’t have gone through school without them. I just haven’t done a great job in paying them down.
I don’t think I could have either. A little less of them would have been possible for me though.
Love this. I agree that people don’t realize how risky debt is, or how feeing it is not to have any!
Thanks Allison! 🙂
Irresponsibility and instant gratification in my early twenties led to credit card debt. The cc debt will be paid of by end of March/April this year. We also have a car debt but the interest is 0% so while we do make larger repayments then necessary, we are focusing on increasing our savings and asset base.
March/April is soon. Congrats!
“You know the saying about how there is no such thing as a stupid question? Well, I thought that question was extremely stupid.” Lol, I love it! I’ve seen the same thing as well and it just drives me nuts. We saw it this past week with our family in town – some of them it’s like they’re comfortable being in debt. I think a lot of it, though maybe not all of it, comes down to wanting stuff and prioritizing it over their future or being free from debt. Thankfully the only debt we have is our mortgage and are working on knocking that out.
Haha it was a stupid question! 🙂
It seems like everyone around us wants to change their financial situation and I think a lot of it has to do with my blog. I’m glad I’m having such a positive impact by educating people!
I’m in debt from student loans and our house. I have definitely used the “I deserve this” or “I deserve that” excuse to justify purchases, but I feel like I’m doing everything to build my income and in turn savings and ultimately pay down my student loans and then, at least on paper, my mortgage.
You are doing great DC, so I wouldn’t be too worried 🙂
Michelle, every one of these reasons used to describe me to a “T”. I had all the reasons in the world why it was okay to have credit card debt. But once I dissected how much interest we were paying each month, and once I realized that retirement was closer than we thought, I woke up. I’d take our super strict budget that allows us to pay off our debt any day now over the above excuses. Financial peace and freedom is SO worth it!
I agree, it is so worth it! I’m so happy for you Laurie 🙂
I’ll admit I fell for the “everyone has debt, so it’s no big deal – it’s just normal” line. I think that line works “sort of “okay” if we’re talking mortgage debt, and even to an extent car financing… but the rest of it, like my pure consumer-based debt… NOPE!
Now I’m actively trying to get far away from that because I can’t imagine that any more. The lies we tell ourselves to rationalize things, eh?
Haha yes, the lies we tell to convince ourselves that we can have debt! 🙂
I think a lot of it is related to our consumer-driven culture. Many people feel the need to keep up and always have the newest “things.” They think that because they were able to get a loan on something, that must mean they can afford it. Its an easy trap to fall into. This happened to me a few years ago when I spent too much on a new car. Its been nice, but I’ve paid too much in interest for a depreciating asset. I’ll think twice next time.
You said something very important – Just because you can get a loan for it, it does not mean you can afford it!
My major reasons for being in debt are:
1.) Taking too much school and funding it 100% with loans (currently owe over $49,000) – “I have plenty of time to pay off this debt” thinking
2.) Buying a new car too soon/not having enough of a down-payment saved (currently owe over $10,000) – definitely the “I deserve this” thinking
3.) Working 4 years at a job that did not pay me what I was worth and had no hope of a promotion/raise – “too scared of change” thinking
I can’t change the first two, but since I did change jobs, I’ve noticed a HUGE improvement in my finances (but still plenty of room for improvement). The car loan is almost paid off, and I’ve finally started making reasonable monthly dents in the student loan.
That is awesome that you are noticing an improvement because you changed jobs. Good for you Amanda!
The reason we used for years was that we had good income, regular salary increases, and eventually our income would outpace our spending and we’d catchup. yeah, that never happened. 🙂
A lot of people use that as a reason. No good! 🙂
Thanks for sharing your post about us again Michelle! 🙂 I’ve gotten so much traffic from your site! <3
I just got below 89K in student loan debt, personally. Right now since we aren't married we are focusing on personal debts separately. Thankfully I have always hated the idea and use of credit cards and only have one with a Max limit of $200. That way I'm never digging my hole deeper. I use my credit card to the max on things I get 5% cash back and pay it off every paycheck.
I recently posted about my poverty mentality. I constantly have to catch myself because I have habit's/mentalities that are really against me and my financial goals. Deep down sometimes I feel like I have to buy things that I "need" but in reality I don't need them. Some of this I think is attributed to growing up in poverty and now that I can afford nice things I feel entitled to it. I'm sure there is a lot more to it but I'm working on it! 😀
Your post was a great one, thanks again for sharing your story.
That is good that you are using your credit card responsibly, that’s always smart!
I’m not in debt but I use the opposite reasoning; the reasons that I am not in debt are tied to my goals for the future. I have set a net worth for the next five and ten years, and goals for each year of savings that I have to reach in my mind. I also try to eliminate ANYTHING that will seduce me into going into debt or spending money that I don’t need to. When I buy certain things that I like, I buy them because they have some kind of return for me (ROI), so I’m buying them either as an investment (like a book, software, etc). Even food can have ROI technically; if I eat ‘junk’ it doesn’t fill me so the ROI is low, and I have a long, packed day/schedule, so I only buy food that will nourish me. Everything else goes into savings/ investments.
Good job Kammi! Sounds like you are very smart 🙂
I had a revelation last year and realized that I get into debt every 5 years or so. The reason for which is lifestyle inflation. With a fluctuating income, one year might be great which leads me to believe I can increase my basic costs. Not so much. Now that I realize this, I know I need to keep my costs low or the same as they are now.
Good job on realizing what your problem is. 🙂
Using credit cards as income is a big issue for a lot of people. Just because you have it (the credit), does not mean you should spend it. I also see people treat their credit cards as their emergency fund, which is another poor use for credit.
I agree. Both are not the best choices!
I have credit card debt because I went over budget on my home renovations. We wanted all the major renovations done before moving in. Plus being first time homeowners we had no idea how expensive it would be. We should have done more research. It had been about 7 years since we had been free of credit card debt so it was painful to get back into that situation. Thankfully, we realize that we need to get rid of it quickly and we know what we need to do because we did it before.
How much did you spend on your home renovations?
$60k, we bought a fixer upper, but only $9k of that is on the credit cards. What really took us over budget was the labor cost because we didn’t know how to do any of it ourselves. We should be done paying that off by the end of this year.
Yeah, labor can definitely add up quickly. Glad it’ll be gone soon 🙂