We’re capable of convincing ourselves of pretty much anything, especially concerning our personal spending habits and debt levels.
When we start spending beyond our means, there are many short-term things we can do that will help put a band-aid on our debt situations, but you’ll never get your finances where they need to be if you’re in denial about the behaviour that put you into debt in the first place!
Myth #1 – Higher income will get you out of debt
Nothing could be further from the truth. In fact, statistics show that a higher income often correlates with a higher debt level. It’s not how much money you make that’s important but, rather, how much money you save. Regardless of your income level, a budget is what helps keep people financially on track.
Myth #2 – Small debt is no big deal
People who believe that small debt isn’t a problem are usually those who actually hold larger amounts of debt. The key to getting out of debt is to stop incurring more debt. You need to make a conscious effort to stop spending and start paying down debt. Paying down debt while continuing to spend will not help you achieve the desired results.
Myth #3 – If the interest rate is low, the debt is okay
Even if the loan has 0% interest, you’re still taking on debt. This sales gimmick often fools people. If you can’t afford to buy something outright, you still can’t afford it at a lower interest rate. (The exception here, of course, is for major purchases such as homes and vehicles, since most people can’t afford to pay in full. Lower interest rates make a huge difference in these circumstances. But it’s always important to make affordable decisions based on your specific financial situation.)
Myth #4 – My debt level doesn’t matter because inflation is on my side
Let’s say you purchase a home that stretches you to the edge of your financial comfort zone. You justify the purchase by thinking you’ll earn the money back because the bigger house will be worth more in the future. In the meantime, however, you struggle just to make your mortgage payments. This is not a fun way to live. Life can change pretty quickly – nothing has proven this greater than COVID-19. What happens if you lose your job or become ill? No one likes to think about things like this, but life happens so we need to be prepared.
Myth #5 – You deserve to make a purchase
Many people disregard a particular debt or expense because they feel a sense of entitlement. If you’re trying to get yourself out of debt, spending more money – especially on items you don’t need – is always counterproductive to the desired end results.
Have questions about budgeting, or concerning your mortgage in general? Answers are a call or email away!