9 Money Mistakes To Avoid For Debt Free Living

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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

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.


Related: Do You Think Financial Illiteracy Is An Excuse? (Poll) and Poll Results

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: Having Children Before Being Ready

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 dedications 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: Too Much Student Loan Debt

Bad car ad
Geez…that’s classless.

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.

Related: 4 Effective But Naughty & Semi-Illegal Ways To Pay Off Student Loans

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: Too Much 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.

Related: How To Effectively Overcome Credit Card Addiction

6th Nail: Past 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.

Related: Top Reasons Why Some People Don’t Save Money

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: High Tax Location

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: Having Low Income

Are you making less than $40,000 a year before taxes? In a situation like this, cutting expenses is no longer effective for debt 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.

Related: 3 Signs When Frugality Isn’t Worth It & What To Do

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?




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24 thoughts on “9 Money Mistakes To Avoid For Debt Free Living”

  • No debt other than the $385k or whatever we have left on the mortgage!

    Also interesting note about CA: it gets a bad rap about it’s taxes, but it might not be as bad as it looks. When I moved from MN to CA, my state income tax liability actually went DOWN because I was paying more of my income at a lower rate. It’s true that my MARGINAL rate was higher, but my overall tax liability was more favorable. So that map is great, but it doesn’t pain the full picture because of how tax brackets work (and that seems to only take into account the highest marginal tax bracket).

    I think CC debt is one of the worst, not only because of how expensive it is, but because it often points to a bigger underlying behavioral issue. 🙁
    Dave @ Married with Money recently posted…Ditch Budgeting and Conduct a Spending Review Instead

  • Great points and a very original title! I seem to have #3 and #7: having kids and living in a high cost of area.

    We sometimes joke that we can’t return Baby FAF for a refund, but we sure hope to move to a cheaper area on the future.

    I get Jared’s point about having bigger fish to fry though. There is definitely more opportunity, but being able to buy a huge house for less than $300k just sounds so appealing!
    Ms. Frugal Asian Finance recently posted…How We Celebrate A Frugal Christmas

    • Is Mr. FAF still keen on moving to the Bay Area? Ughhh omg, I browse real estate in random cities and drool at the mansion you can get for $300k!! It’s like double the price for half the size here!

    • Not even joking. I think if a person is blind to it, they can do anything. My friend woke up with $80k of debt and suddenly realized that she’s in a lot of trouble.

  • I’m so happy that I didn’t have to take on student loan debt for university (huge shout out to mom and dad) because so often huge student loan repayments are what trigger a continuous debt cycle.

    I have had to deal with some credit card debt when I was young and foolish but that feels like nothing compared to what seem people are facing. I so wish that there was more financial education to teach younger kids about the impact taking on debt can have when you’re an adult.
    Sarah (Smile & Conquer) recently posted…Family Travel: 6 ways to Save $$ and Have Fun

  • It is ever so important to contribute to kids college fund if not fully funding at least some, compounding will be on our side if we start early.

  • Having children has a monumental effect on your net worth. We have 3 and it costs so much for everything from food and clothes to sports and activities. We have friends who don’t have children and it really is a completely different lifestyle. They’re able to sock away lots of extra money for retirement because they don’t have all the expenses that kids bring. Not that I’d want to change places with them, I love my family beyond words and I’d never give that up.
    Mike – Budget Kitty recently posted…7 Signs Your Debt Is Out Of Control

  • Yikes! They are all pretty bad, but #1 is the worst of the lot. If you don’t take it upon yourself to learn about personal finance, you’re screwing yourself. Even if things are going well, it would be better if you know how to save, budget, and invest.
    I’m sick and tired of Oregon state tax. Florida and Nevada are looking better and better.
    Joe recently posted…Am I Too Cheap for Doing Yard Work?

    • Oregon has no sales tax! (But I guess that’s better if you actually shop a lot of consumer goods, which I’m sure you don’t!) Florida is pretty sweet for retired folks!!

  • It will be interesting to see how the tax plan shakes out. Eliminating the deduction for student loans is on the table. I would think that would make it more stressful for those carrying student loans. Plus the elimination of deductions for high-tax states. All eyes on Washington this week!

  • I’m in the high cost of living along with high savings rates camp, although I have pretty much no independent life experience living somewhere low cost of living so what do I know 😛 I wonder what it would be like? In my mind if you make less money but can’t significantly increase savings compared to when you lived in a high cost of living city, it doesn’t add much except psychological relief that you aren’t paying as much dollar wise.

    I’m surprised by the first student loan example since those loans are usually simple interest…how did the balance grow unless that was just the accumulated total of the interest or she didn’t even pay the minimum?
    Jing recently posted…Money Diaries: Boyfriend Edition!

  • Great post. Interestingly enough leverage (debt) has been the source of 60% of my wealth. I bought several properties early on. Took a big risk as if one of them was tenant free for a month we were done! But now have 2 paid off apartments worth north of $1.5m and another 4 on their way to being paid off.
    Debt is scary but used well and within your means and only to buy real appreciating assets can be a significant creator of wealth.
    The CFO recently posted…Why spending $1.000 on a telephone is a terrible idea and could mean you’ll work until you’re 82

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