Have you seen those funny AT&T commercials with the kids? There is one adult sitting around with a group of kids and he asks a simple question comparing two options.

For example: “which is better, slow or fast?” or “which is better doing one thing at once or 2 things at once?”

The point is to hammer down that choosing AT&T over any other mobility provider is not complicated. As I watch that commercial it reminds of our general attitudes about debt.

Which is better, having tons of debt or being completely debt free? It’s not complicated right?Debt free is the best way to go. Which begs the question, why do we stay in debt?

As of January 2013, the average household consumer debt stood around $23,000. Why do we continue to carry debt on our credit cards? Why do we continue to sign-up for car loans or car leases? Why do we assume that the only way to get a college degree is to sign-up for thousands of dollars in student loans?

I have written before about why we go into debt. Today I want to give you the 3 main reasons we stay in debt:  

1. We buy into the Culture of Debt

In this day and age we are focused so much more on what we think we need and what we want. We live in a day and age where waiting for something good to happen is almost completely foreign to us. We want it and we want it now.

So the culture says that it is perfectly ok to stay in debt as long as “you can manage it”. Don’t carry 9 or 10 credit cards, but 1 or 2 is ok (you know, because you can get those rewards). You can’t afford to pay for cash for a car? No problem, just “rent” (i.e. lease) one. It’s like getting a brand new car every 2 years. After all, old cars breakdown all the time and you “need to be safe on the road”.

Want to buy a home but don’t have enough saved for a down payment? No problem, borrow from your 401K plan. Need an emergency fund? Sure, get a home equity line of credit (HELOC) so you can access it in case of an emergency (which sometimes is defined as doing that home renovation we desperately “need”).

Do you want a college degree? The culture has defined that a student loan can be classified as financial aid. They never put too much emphasis on the fact that they expect you to pay for the loan. In some corners of the financial world, they call student loans “good debt” because it’s an investment in your future. Don’t get me wrong, I think education is a great investment. But there has to be a better way to obtain a great education than going deeply in debt.

You see? Our culture today says is ok to be in debt and stay in debt as long as you get what you want now.

2. We are not Willing to Sacrifice

If I asked 10 people on the street or did a Facebook poll, 9 out of 10 would most likely tell me that they would like to be completely debt free. Again, it’s not complicated. Debt free is the best way to live.

But you will never get out of debt until you are willing to do something differently. There is no victory without sacrifice.

But a lot of people that are in debt will not get on a budget, will not get a second job, will not cut back on expenses, and will not sell stuff to generate more income.

When you are not willing to sacrifice, you will find every possible objection of why it does not apply to you.

3. We have lost all Hope

This is probably the most dangerous reason of them all for staying in debt. You may think that this is the way it will be for you between now and the end of your days. You have lost your hope that it can be better.

You may think that it is impossible in your current situation to live a debt free life. You may have convinced yourself that you will always have a car payment, that you will always need a credit card for emergencies, and that it will be impossible for your child to go to college without student loans.

You may have convinced yourself that you will never make enough money to deal with everything that you have to do. So you stay in debt, because “that’s the only way” and “everyone else“ is in the same boat.

Do you want to know a secret? It does not have to be that way. You don’t have to buy into the debt culture, you can sacrifice, and yes you can hope for a better tomorrow. I know this the case because I used to be in debt and deep financial distress.

But I am no longer there. I know it can be better and I know you don’t have to stay in debt. I can help you, just say the word!

What are some of your reasons for staying in debt? 

 

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America is a blessed country

I look around at all the great things to see, do, or have. There is a working horse ranch in Cody, Wyoming with amazing trails and views to see. We could jump on a plane and be in Disney World tomorrow. Have you seen the new iPhone 5?

All of our basic needs have been met with a plethora of food choices, cheap energy, and access to clean water. America is the wealthiest nation in the history of the world, and we are blessed as citizens with the freedom to do whatever we want.

And have anything we want

We have developed a financial industry that can put anything we want within our reach:

  • Lavish vacations
  • Luxury vehicles
  • Houses with 3 car garages

The credit industry is able to find ways to make our wishes come true as if money were no object.

But at a cost

If you want a big screen TV for every room in the house, the financial industry will have a program that will help that dream come true. Some offer "convenient financing options", some label it as having "easy payments", few call it what it really is. Borrowing money from a financial institution with a promise to repay is equivalent to someone selling you money, and the cost of such a transaction is burying us in debt!

When we realized we were broke

Have you ever done a Net Worth Statement? It's a relatively easy process: List the current value of anything you own on the left side of a sheet of paper and list the balances of everything you owe on the other side. Tally the columns and then subtract the two. How did you come out? I hope the number came out to be a positive amount, otherwise you have a negative net worth. You are as broke as we were.

How did this happen?

When we come into this world we owned nothing. We also didn't owe anybody anything, so we couldn't have had a negative net worth. When we graduate High School we come out of it without any debt, unless your parents were stupid enough to give you a credit card or you were stupid enough to buy a car with payments (yeah, me too). Somewhere along the way we started taking financial advice from people and companies that had their own agenda for our money. And we bought it (pun intended)!

  • The car salesman said he could put us in this car for only $$$ a month
  • The financial aid officer said student loans are a great investment in our future
  • The bank manager pre-approved us for a $$$ house because of our credit score

These are all lies! The car salesmen doesn't do a full financial analysis on your checkbook, the financial aid officer's job is to get you into their school, and the bank manager approving you because of a credit score has nothing to do with how much of a payment you can really afford. Your wealth is of no concern to them, they are here to sell you what you want.

The wrong priorities

We've taken our eye off the ball because of shiny new gadgets. Today's pleasures became our priorities. "I want" and "everyone else is" cause us to mortgage our futures for bigger, faster, and cooler. This has got to stop!

You work too hard to be this broke. What we need is to be focused on wealth. Not in a Scrooge McDuck sort of way but in a mature adult kind of way. I think we can all agree that a financial plan full of "low interest rates" isn't working so we need to make some serious changes.

Eliminate your debt

As a Financial Coach that has helped hundreds of people create budgets and get control of their finances, I can tell you that it isn't your latte' or your cable that is destroying your finances. It's the day-to-day choices we make that do not reflect our true values. Follow these steps to improve your net worth in the next year or two:

  • Decide what you really want: This might include things like traveling, improving your health, or staying at home with the kids
  • Stay current on all your bills: Make only the minimum payments on all your bills this month
  • Save $1,000: You need to have some money put aside for unexpected events like flat tires
  • Create a budget: List all your expenses and the purchases you need to make this month. Don't spend one penny more! Make sure the purchases are for things that reflect your values and what you really want (see #1)
  • Pay off your smallest debt: Get a quick win by paying something off with whatever money is left over and then move on to the next smallest balance

Financial workout

Continue Step #5 until all your non-mortgage debts are gone. Of course there is a lot more to being financially fit, but eliminating the dead weight from the "owed" side of your statement will automatically cause your net worth to increase. It will also:

  • Foster hope
  • Increase confidence
  • Make you feel like you got a raise

Try it for 90 days

Eliminating debt won't make you rich, but being debt free is the basis of becoming wealthy. If you find that you prefer low interest rate loans and credit card payments then the financial industry will be glad to have you back.