In a NutshellWhile paying off debt depends on your financial situation, it's also about your mindset. The first step to getting out of debt is changing how you think about debt.
Debt can accumulate for a variety of reasons. Maybe you took out money for college or covered some bills with a credit card when finances were tight. But there may also be beliefs you’re holding onto that are keeping you in debt.
Our minds, and the things we believe, are powerful tools that can help us eliminate or keep us in debt. Here are 10 beliefs that may be keeping you from paying off debt.
1. Student loans are good debt.
Student loan debt is often considered “good debt” because these loans generally have relatively low interest rates and can be considered an investment in your future.
However, thinking of student loans as “good debt” can make it easy to justify their existence and deter you from making a plan of action to pay them off.
How to overcome this belief: Figure out how much money is going toward interest. This can be a huge wake-up call — I used to think student loans were “good debt” until I did this exercise and found out I was paying roughly $10 per day in interest. Here’s a formula for calculating your daily interest: Interest rate x current principal balance ÷ number of days in the year = daily interest.
2. I deserve this.
Life can be tough, and after a hard day’s work, you might feel like treating yourself.
However, while it’s OK to treat yourself here and there when you’ve budgeted for it, spontaneous purchases can keep you in debt — and may even lead you further into debt.
How to overcome this belief: Think about giving yourself a small budget for treating yourself each month, and stick to it. Find other ways to treat yourself that don’t cost money, such as going for a walk or reading a book.
3. You only live once.
Adopting the “YOLO” (you only live once) mindset is the perfect excuse to spend money on what you want and not really care. You can’t take money with you when you die, so why not enjoy life now?
However, this kind of thinking can be short-sighted and harmful. In order to get out of debt, you need to have a plan in place, which may mean cutting back on some expenses.
How to overcome this belief: Instead of spending on anything and everything you want, try practicing delayed gratification and focus on putting more toward debt while also saving for the future.
4. I can pay for this later.
Credit cards make it easy to buy now and pay later, which can lead to overspending and buying whatever you want in the moment. You may think “I can pay for this later,” but when your credit card bill arrives, something else could come up.
How to overcome this belief: Try to only buy things if you have the money to pay for them. If you’re in credit card debt, consider going on a cash diet, where you only use cash for a certain amount of time. By putting away the credit cards for a while and only using cash, you can avoid further debt and spend only what you have.
5. A sale is an excuse to spend.
Sales are a good thing, right? Not always.
You may be tempted to spend money when you see something like “50 percent off! Limited time only!” However, a sale is not a good excuse to spend. In fact, it can keep you in debt if it causes you to spend more than you originally planned. If you didn’t budget for that item or weren’t already planning to purchase it, then you’re likely spending unnecessarily.
How to overcome this belief: Consider unsubscribing from promotional emails that can tempt you with sales. Only buy what you need and what you’ve budgeted for.
6. I don’t have time to figure this out right now.
Getting into debt is easy, but getting out of debt is a different story. It often requires hard work, sacrifice and time you may not think you have.
Paying off debt may require you to look at the hard numbers, including your income, expenses, total outstanding balance and interest rates. Life is busy, so it’s easy to sweep debt under the rug and delay taking control of your debt. But postponing your debt repayment could mean paying more interest over time and delaying other financial goals.
How to overcome this belief: Try starting small and taking five minutes per day to look over your checking account balance, which can help you understand what is coming in and what is going out. Look at your schedule and see when you can spend 30 minutes to look over your balances and interest rates, and figure out a payment plan. Setting aside time each week can help you focus on your progress and your finances.
7. Everyone has debt.
According to The Pew Charitable Trusts, a full 80 percent of Americans have some form of debt. Statistics like this make it easy to believe that everyone owes money to someone, so it’s no big deal to carry debt.
However, the reality is that not everyone is in debt, and you should strive to get out of debt — and stay debt-free if possible.
“We have to be clear about our own life and priorities and make decisions based on that,” says Amanda Clayman, a financial therapist in New York City.
How to overcome this belief: Try telling yourself that you want to live a debt-free life, and take actionable steps each day to get there. This could mean paying more than the minimum on your student loan or credit card bills. Visualize how you’ll feel and what you’ll be able to accomplish once you’re debt-free.
8. Next month will be better.
According to Clayman, another common belief that can keep us in debt is that “This month wasn’t good, but NEXT month I will totally get on this.” Once you blow your budget one month, it’s easy to continue to spend because you’ve already “messed up” and swear next month will be better.
“When we’re in our 20s and 30s, there’s often a sense that we have plenty of time to build good financial habits and reach life goals,” says Clayman.
But if you don’t change your behavior or your actions, you can end up in the same trap, continuing to overspend and being stuck in debt.
How to overcome this belief: If you overspent this month, don’t wait until next month to fix it. Try putting your spending on pause and review what’s coming in and out on a weekly basis.
9. I need to keep up with others.
Are you trying to keep up with the Joneses — always buying the latest and greatest gadgets and clothes? Lacey Langford, an Accredited Financial Counselor®, says that trying to keep up with others can lead to overspending and keep you in debt.
“Many people feel the need to keep up and fit in by spending like everyone else. The problem is, not everyone can afford the latest iPhone or a new car,” Langford says. “Believing that it’s acceptable to spend money as others do often keeps people in debt.”
How to overcome this belief: Consider assessing your needs versus wants, and take an inventory of stuff you already have. You may not need new clothes or that new gadget. Figure out how much you can save by not keeping up with the Joneses, and commit to putting that amount toward debt.
10. It’s not that bad.
When it comes to managing money, it’s often much more about your mindset than it is money. It’s easy to justify spending money on certain purchases because “it isn’t that bad” … compared to something else.
According to a 2016 blog post on Lifehacker, having an “anchoring bias” can get you in trouble. This is when “you rely too heavily on the first piece of information you’re exposed to, and you let that information rule subsequent decisions. You see a $19 cheeseburger featured on the restaurant menu, and you think ‘$19 for a cheeseburger? Hell no!’ but then a $14 cheeseburger suddenly seems reasonable,” writes Kristin Wong.
How to overcome this belief: Try doing research ahead of time on costs and don’t succumb to emotional purchases that you can justify through the anchoring bias.
While paying off debt depends heavily on your financial situation, it’s also about your mindset, and there are beliefs that could be keeping you in debt. It’s tough to break patterns and do things differently, but it is possible to change your behavior over time and make better financial decisions.