Bad debt can be notoriously hard to get out from under. Debt can bury you 6 feet under and it’s 100% legal after you signed on that dotted line.
Getting out of debt can be a struggle. Unexpected expenses arise, temptation persisted by examples of others, and having to delay gratification over an extended period.
The seeming complexity of personal finance can be a difficult subject to navigate. Paying back debt requires you to sacrifice things that you wouldn’t have had to otherwise.
Oftentimes, debt is just the resulting simplicity of not knowing what was done. It’s common to hear people talk about debt like waking up from a nightmare – except it’s totally real and the baggage you’re holding is only getting heavier by the minute. Joy.
Here are 9 nails in the debt coffin that every living person should avoid on their journey to debt-free living.
1st Nail: Financial Ignorance & Personal Irresponsibility
The first nail in the coffin is the lack of personal responsibility and the unwillingness to learn how money works.
There was a sob story published a few years ago back when Big Media started reporting on the severity of the student loans crisis.
The sob story featured was a 45-year-old woman who received her Nursing degree in 1991 along with $9,000 in student loans debt. Adjusting that $9,000 from 1991 to present 2017 dollars, she owed the equivalent of $16,000 today.
Not bad. Not bad at all compared to the average college graduates today with almost double that figure!
Her lament was that 20-something years later, despite making her payments, she now owed almost $22,000 in student loan debt from the original balance of $9,000!
She cried foul because her $9,000 turned into $22,000.
I would feel sympathetic towards her BUT the first thing I thought was…how in the world did you go 22 years without learning how interest and inflation works?
She claimed it was a scam because her principal never seemed to go down.
Um, LADY, the principal didn’t go down because you paid the minimum on 7% interest for the last 22 years.
An extra $1,000 a year could be made pretty easily with some creative side hustling or picking up an extra shift as a nurse. She could have also refinanced or made larger, more frequent payments to snowball the debt.
But I guess if you pay the minimum, closed your eyes, then it does feel scammy?
But really it’s just the taxpayers who let you borrow that money to go to college. There’s no such thing as a free lunch here, sister. You can’t cry foul on the system when there are real student loan sufferers with much worst debt loads.
It was your responsibility to pay back the debt. 22 year is ample time. Don’t go on TV to seek pity when financial ignorance was your nail in the coffin!
2nd Nail: Mixing in Children
This nail has an 18-year guarantee and then you have to send it to college.
Little humanoids are very very very expensive. Considering there are over 7 billion people in the world – I’m going to take a gander that my rant will likely fall on deaf ears.
If you have debt, avoid bringing children into the mix.
Kids are one of the most expensive hobbies out there. From toys to education to clothing – tots are a trillion-dollar industry.
Children take resources from all avenues of life from housing, food, transportation and government resources as well.
Naturally, I try to advocate solid financial standing before becoming a parent but it’s normal to have financial awakenings after having children.
(Totally adorable, by the way, since that’s driven out of pure love.)
For those in debt with children, it’s easy to see that it would be a lot easier to kill the debt if the tots didn’t take up so many resources.
3rd Nail: Confusing Purchases For Assets
My husband and I were at a café with a couple of friends. I was trying to put up a good defense on why Jared and I choose to live car-free. I pulled out Mr. Money Mustache’s epic rant about the nuisance of car ownership and decimated my friend’s argument. Cars are a liability, or at best, cars are a rapidly depreciating asset.
The rest of material ownership goes down from there. You can’t count 99% of consumer goods as assets or net worth. Buying a flat screen TV on Black Friday for $200 off retail does not mean you added $200 to your net worth.
Learn the difference between a liability and an asset and never borrow money for a liability that depreciates in value.
4th Nail: Student Loan Trap
The current student loan interest rates are higher than auto & home mortgages. The monstrous national student debt average is logically what happens when you push a bunch of know-nothing 18-year old into signing on the dotted line without so much as a basic personal finance / financial literacy course.
I’m actually surprised the student loan situation…isn’t worst.
Student debt can be good because financial aid provides prospective students who couldn’t afford to attend university otherwise and it teaches young adults about money along with responsibilities early.
The bad part is that student loans cannot be discharged and the education is grossly overpriced in the first place.
Student loan debt cannot be discharged in bankruptcy or given up with your citizenship. Occasionally student debt can be discharged with a qualifying disability but that’s not a guaranteed either.
The only way to dodge student loans proof of your death. Death is only applicable IF you do not have a co-signer. A large percentage of those in the debt coffin have a big fat student loan nail right in the center of their casket box.
5th Nail: Credit Card Debt
Credit cards are notorious for hefty interest rates. Paying with plastic is addictive. Since we live in the modern world, almost everyone carries and uses credit cards as a convenience. The envelope system may be practical for controlling spending but plastic is much easier. Plastic can be practical because you eventually need a good credit score to facilitate trust and make larger purchases at a better interest rate.
6th Nail: Health Issues
Sometimes being and staying in debt is not a choice we get to choose. Persistent issues of health are nails in the coffin because it not only causes a decline in income potential, add-on possible health related costs but it also has the disadvantages of opportunity cost. Health issues are particularly tragic because no one wants to be sick but illness is beyond our control.
7th Nail: High Cost of Living
Nothing erodes wealth faster than paying $6 for a carton of eggs at Whole Foods. That was one of my friend’s first complaints when she relocated from Washington to the Bay Area for work. Her rent jumped from $1,500 in Seattle to $4,500 per month for a small apartment in Pacific Heights in San Francisco.
Building wealth may be easier in a wealthy metropolitan city but getting out of debt in a place where everything is more expensive is an uphill struggle.
My husband and I discuss this all the time. I want to move to a city with cheaper housing and lower cost of living. The almighty dollar isn’t as mighty in an area with a high cost of living. But his counter argument is that there’s going to be bigger fish to fry and more money to pinch in a more expensive city.
8th Nail: State Level Taxation
When our friend relocated to the Bay Area for work, she received a 20% salary increase to make up for the higher cost of living.
However, living in California also means a state and sale tax of 10% in each category. Her 20% salary increase did not go towards her 300% jump in rent; it all went to the Golden State.
Each state has their own set of rules for getting their dues out of their citizens. In Washington, we do not have state income tax. However, we have a 10% sales tax and high property taxes that are calculated by county annually. That means finding an affordable place to rent, living car-free and curbing consumer purchases are extra excellent money moves to play in the state of Washington.
9th Nail: Low Income
Are you making less than $40,000 a year before taxes? In situation like this, cutting expenses is no longer effective for dent pay off. There’s little money to be saved without living on cans of beans. The only one solution left is to increase your income or find ways to supplement income.
Are you currently carrying non-mortgage debt? Do you have any of these nails? Which nail do you think is (critically) the worst one to have?