Why You Can’t Get Out Of Debt
Escape the debt trap in four easy steps
People have different opinions on debt. Some will tell you how healthy it is while others will tell you how dangerous it is.
Not so long ago, I was caught in a perpetual web of consumer debt. I was earning enough to cater to my needs but somehow I was still digging myself deeper and deeper into debt. I was paying ridiculous amounts in interest because I was taking on expensive consumer debt despite knowing that it is bad for my financial health. In recent months, I decided to look over this habit and understand why it was so hard to get out of the debt trap. I distinguished good debt which is purposeful, healthy, low-interest, and not burdensome from bad debt which is often consumer debt used for purchases and easily avoidable. Good debt is often used in investments while bad debt (consumer debt) is used in indulgences.
Consumer debts are fun when you are acquiring them, but none are fun when you are paying them back.
In my long, anguishing, and expensive journey with debt, I found out the following about debt:
1. Debt is extremely addictive
This is the main reason why I was always in debt. It is also the case for many other people. According to Experian, the average American carries $92,727 in consumer debt. Consumer debt includes a variety of personal credit accounts, such as credit cards, auto loans, mortgages, personal loans, and student loans. Many people take on consumer debt because they think that we can always pay it. This continues until they reach a certain point where debt addiction is a burden and an impediment to financial and personal growth. To overcome this, start by accepting that consumer debt is not good for you and find ways to pay off your debt. While doing this, it is vital to learn how to live within your means; this will avoid further debt accumulation.
“Debt is like any other trap, easy to get into, but hard to get out of.” — Henry Wheeler Shaw
2. Debt comes from living beyond your means
I cannot emphasize this enough. The simplest and the most underrated way to achieve financial freedom is to live below your means. In 2022, Americans paid over $8 billion in overdraft fees. Overdrafts are a big earner for lenders and this happens across the world, especially in areas where predatory lending is the norm. Personally, I have overdrawn my accounts numerous times and on most of these occasions, it was for impulsive and non-urgent products and services. This included shopping for expensive products I did not need and paying for recurring entertainment bills to accommodate “friends”. I later regretted these purchases and saw myself sink down the rabbit hole. To avoid these never-ending debt traps, I enforced the rule of living within my means. I started by creating a budget and tracking every cent I spent using a simple and free app called Money Manager (Get it here). To date, I always review my expenditure on a weekly basis. The process is not easy but it is worth it.
While paying off debt, living below your means is an underrated superpower.
3. Increasing your income is the best way out of debt
While one can argue that even people earning $500k+ per year are also in debt; I believe that making more money is vital in paying off debt but it does not help you stay out of debt. With increased income comes more disposable income which can be used to pay off debt. However, you need to be wary of lifestyle inflation. I faced this problem after I managed to add two income streams to my consultation income. I felt a deep sudden urge to upgrade my lifestyle and it only increased after I paid off my debt. I managed to combat this urge by embracing proper financial knowledge and insisting on living below my means.
Like many other people, making more money helped me clear my debt, but to stay out I needed to embrace financial discipline.
4. Financial discipline and staying out of debt
Once you have understood and accepted the first 3 steps above, you can now recreate your financial life and adopt a financially disciplined way of life. Financial discipline is accumulated over time and it is one of the key pillars of attaining financial freedom. Once you adopt this new path you will find that you now have more disposable income that you can use to invest and even generate passive income. As a result of financial discipline, you will avoid lifestyle inflation, have an emergency fund and optimize your cost of living to better suit your financial goals.
“Debt is the slavery of the free.” — Publilius Syrus
Conclusion
I have come to learn that money is a tool. I’ve heard this many times but never really understood it until I was in debt and the debt was so huge that it drained my emotional and mental energy to a level of being overly anxious and in critical depression. I slowly streamlined my finances using the four steps outlined above and I have never been happier. Budgeting and tracking my expenditure enable me to consistently review my spending habits and avoid a relapse. I am a product of financial discipline and today I am moving toward my goals. The biggest joy of all is being debt-free. The above steps worked for me, and they can also work for you. You need the urge and willingness to adopt these practices and avoid any temptations that you might face along the way.
Once you embrace the above principles and discipline yourself, you will become more financially independent, wealthier, and even happier.
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Until later, au revoir, bis spater!
