My Debt Free Journey Part III: Lies I believed about debt (and what turned out to be true!)

 I'm currently training for my third marathon. To be honest, I don't enjoy the long training runs, especially in the summer heat.  But, I'm looking forward to the moment when I finally cross that finish line in October. And, I've had to sort through a lot of bad information along the way..."Run the full 26.2 miles regularly in the days coming up to the actual race." (No, bad.  Bad idea.)  "Just drink water, not sports drinks."  (Ever hear of electrolytes?). "This training plan worked for me, so it should work for you- never mind that I'm a guy/collegiate athlete/a sprinter..."

It's been a lot like my debt-free journey.

It's easy for me to remember the day that I realized how much debt I was in: July 11, 2015.  I was in my hotel room getting dressed for my brother's wedding when I saw the notification from Mint on my phone, saying my net-worth was NEGATIVE 75,000. 

I knew when I finished graduate school that I had a lot of debt- but I had never realized the number was so high.  It was comprised of student loans and one credit card, and it had accumulated a lot of interest over the years.  On one hand, I know that my debt free journey and every part of it took place in God's timing.  But, on the other, I know I could have finished it much sooner if I hadn't believed lies about debt.  I wanted to write my final entry about my debt-free journey (not the final entry in this blog, though!) sharing some of the lies I believed and what turned out to be true in the long run. 

1.) "If I put extra money on my debt, the money won't be there when I need it for other things." 

My first year teaching, I was so incredibly blessed to have a couple open their home to me, only charging me free-will rent.  They were literally a Godsend- there's no way I could have made rent on a first-year teacher's salary in the Twin Cities metro (rent is ridiculously high compared to the general cost of living here).  I tried to pay some sort of rent faithfully every month, but I was terrified of some unexpected expense coming up and not having the funds to cover it.  Granted, with it being my first year "adulting" outside of school or living with my parents, so it was hard to comprehend all the things that could possibly happen.  Confession: sometimes I would charge things on my credit card instead of using money I had because I was afraid I would need that money in an emergency- but having money sitting in my checking account while I was charging on my credit card just gave me a false sense of security. 

The truth: An emergency fund is enough.

I've mentioned in previous entries that Baby Step 1 is to save $1,000 in case of an emergency.  No, that's not a fully funded emergency fund- but the idea is to have a baseline while you get out of debt.  If I had just set aside that $1,000 and stuck to a budget, I could have dumped so much on my debt while my rent was low.  Without a budget, it was easy to convince myself that things like new clothes and makeup, meals out, or other "fun" things were "necessities" because I had no plan for my money. 

2. "I don't have enough money right now to make any progress on my debt, but someday I will."

Yes, public school teachers work their way up a pay scale as they gain more experience and education- but it's not a dramatic increase from year to year, and, historically, teacher pay has not kept up with inflation and the rising costs of living- and the same is true for many other professions.  Plus, if you don't know how to budget and manage your money, it doesn't matter if you're making $28k or $100k a year- you will never have "enough" and will always be living paycheck to paycheck. 

The truth: any progress is progress.

Many of my debt payments where under $25 or even under $10 early in my journey.  And, while $10 isn't much when you look at $75k in debt, it becomes a different story when it's applied entirely to your smallest debt, especially if that debt is only a few hundred or even a few thousand dollars.  I could easily earn $10 in a few minutes by doing mystery shopping gigs or selling things on eBay or Facebook Marketplace- those few dollars in a few minutes could add up quickly to make a difference.  

3. "I could use debt now to earn more money later and eventually get out of debt."

This is a trap that so many people fall into because we hear about it working for major investors or CEOs of huge corporations.  Newsflash...those CEOs probably had a strong business drive and access to resources when they started, and they are the exception to the norm.  I've known of so many people who put multi-level marketing kits on credit cards, take out a car loan so they can drive for Uber (or just "stop putting so much money into my car"), or buy a house because it's cheaper than renting and you can potentially rent out rooms.  Some people even convince themselves that things like designer clothes, fancy gym memberships and health supplements, or flashy office decor are "investments" that will help them get ahead financially and in life in general. 

(Aaaaaand...if I'm honest, I've done some of these things myself.

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These moves will almost always drive us deeper into a financial nightmare. 

The truth: the only way to get out of debt is to stop taking out more debt

One of the commitments every Financial Peace University student is urged to make is, "No more new debts."  If you want to get out of debt, you have to stop going further into debt.  Yes, many financial "experts" will try to say that there is good debt and bad debt- but you can convince yourself that anything you want in the moment is "good debt" because it's some sort of "investment."  

I stopped using my credit card.  For anything.  When my car was totaled in an accident, my car-shopping budget was the amount my insurance company gave me for the car- no more.  If I messed up my budget, I needed to donate plasma or mystery shop until I had enough to cover the essentials for the month.  And...my debt started decreasing instead of yo-yoing. 

4. "My debt will be forgiven eventually so I won't waste money on it now."

Being a public school teacher, I've repeatedly been told, "You only need to make minimum payments on your loans; they go away after ten years!"  Add to that the recent rumors that President Biden is going to forgive all student loan debt, and lots of people look at you strange when they see you working to pay it off. 

The truth: debt just accumulates interest if you sit around waiting for it to be gone.

Most debts, whether they be credit cards, car payments, student loans, etc are intentionally set up so that your minimum payment barely touches the balance- most of it goes towards interest (this is how creditors make a profit!).  If I had made minimum payments on my student loans for ten years, that would have been almost as much as the principle balance- but ridiculous amounts of interest would have accumulated during that time, too.  And, when I declared an education major in college, no one handed me a binding contract saying my debt would be forgiven after ten years of teaching.  I know plenty of teachers who have been denied loan forgiveness for the strangest of reasons (there is LOTS of fine print involved) and then are stuck with the ten years' worth of interest.  Sometimes, I feel like the promised "loan forgiveness" is actually a way to take advantage of teachers and others in public service- to lure us into filling a need AND profit off our student loans in the process.

As for the rumors of loan forgiveness from Washington D.C.- have you ever waited around for the government to save you from anything?  It rarely happens (regardless of which party is in office!).  I would rather just be done with my loans- and have the pride in saying I did it myself- than put any faith in the politicians. 

5. "I don't have time to work a side hustle."

Now, to be honest, this might be true for some people in certain seasons of life.  I would never recommend a first-year teacher or anyone else trying to get their bearings in a new career, a new parent, etc take on a second job or a side-hustle that doesn't allow you to set your own hours.  

The truth: time is money

But, once I had an idea of what to expect in my day-to-day schedule, taking on a second job became time well spent.  I was blessed to find a desk job at first, where my boss didn't mind if I did schoolwork as long as my duties where complete. It meant giving up a few evenings and a few hours on weekends, but it was well worth it to see my debt decreasing and to know I had another paycheck in case of an emergency.  Unfortunately, that business did not survive the pandemic and I took a retail job instead- which meant I couldn't get paid to grade papers and plan lessons after school anymore, but it was worth one year of craziness to pay off the remainder of my debt.  In reality, somewhere in my life I would have had to sacrifice major amounts of time to get out of debt- whether that was working a second job now, working full-time past the time I wanted to retire, or having to sub or work an entry-level job after retiring.  

Debt needs to be paid off.  Interest accumulates fast.  It's like running a marathon- there's no easy way to do it, some miles might be faster or smoother than others, but you can't just stand there and wait for the finish line to come to you.  Every step counts, and as long as you don't turn around and run backwards, you're doing something right.