Reject the “Everyone Has Debt” Mentality

Recently, Ben — a nice-looking fellow who works on an oil rig in the Gulf of Mexico — wrote a detailed story about how he and his wife repaid $90,000 in debt. Their debt didn’t include a mortgage: it consisted of car loans, credit card balances, student loans, and a $10,000 bank loan to pay for their wedding.

Ben’s story included a powerful sentence, which he uttered the day he tallied his debts:

I knew we owed some money, but I assumed this was a normal part of living in the “real world”!

He goes on:

Everybody has car loans, everyone has credit card debt, everyone has student loans, but it wasn’t until I added all these balances up that I knew we had a problem.

Not to harp on Ben — he’s done a great job cleaning up his finances! — but I hear his premise repeated enough that it’s time to put an end to it. Let me be clear:

This mentality — the “everyone has debt” mentality — is dangerous.

There’s an idea that it’s okay to carry debt because everyone else is doing the same. I call this the “normalization” of debt.

Trent Hamm, author of The Simple Dollar, describes this same experience when he spiraled into $20,000 of debt:

We had a gorgeous dining table, but it was stacked full of credit card bills.

Like Ben, he also made a respectable income but spent more than he earned because he believed it was “normal” to do so.

The Normalization of Debt

I’d love to be able to tell you that this normalization is a myth; carrying debt is abnormal. Unfortunately, the statistics say otherwise: the average American household carries $10,700 in credit card debt, according to CNN Money.

This actual figure is in question: WIS-TV in South Carolina says the average household credit-card debt is around $15,000, while television personality Clark Howard cites the average personal debt as $24,775 for residents of the 20 largest U.S. cities.

On the other hand, 46 percent of Americans say they’re suffering from debt-related stress, according to USA Today — which means the majority, 53 percent, are not. (That doesn’t mean they’re not in debt, however: it just means they’re not stressed about it, either because they have a plan in place for dealing with it or because they’re not paying attention!)

The Cost of Missed Opportunity

But just because everyone seems to have personal debt doesn’t make it any less atrocious.

Imagine that you have a credit-card balance of $10,000 (by all accounts, less than the average U.S. household) and an interest rate of a meager 10 percent (good luck finding that rate on a credit card!)

With payments of $200 per month, you’ll need 65 months — almost 5 and a half years — to pay it away. Worse yet, you’ll cough up over $2,990 in interest.

Now, let’s imagine you have $0 debt. You save that same $200 per month in a Roth IRA retirement account, which you invest in a mix of 70 percent stocks and 30 percent bonds. After 5 years, if the market performs on average, you’ll have $16,000.

The debt in the first scenario costs you more than a mere $12,990 (the balance plus interest). Your $10,000 debt costs you $16,000 in lost opportunity.

Look at it another way: for every dollar you spend, you pay $1.60 in missed opportunity. For every $10 you spend, you’re really spending $16.

Who Cares If It’s Normal? Is it Good?

The question people should be asking themselves isn’t “Is it normal to have this debt” but rather, “Is it good to have this debt?”

Sometimes the answer is yes. If you have no way of going to college other than carrying student loans, there’s a chance that those loans will be good debt for you to carry. The average college graduate earns $1 million more than the average person with a high school diploma over the span of his/her lifetime.

That statistic, of course, is skewed upwards by college grads in high-paying professions like neurosurgeons and chemical engineers.

Let’s use some conservative assumptions: you earn half of the average that most college grads get. This means you earn an extra $500,000 over the span of your lifetime as compared to a high-school grad.

Over the span of a 45-year career, that means you earn an extra $11,111 per year, as compared to a high-school grad. That’s like the high-school grad making $30,000 while you make $41,111. It’s reasonable.

Let’s also assume you paid $50,000 in student loans and interest. For every $1 you borrow and invest in your college education, you’ll earn $10. In this case, debt can be a good thing.

But when buying consumer items — like a car or a wedding — the answer to “Is it good?” is almost universally a resounding “no!”

You and your soulmate will be together forever regardless of whether or not you have a gorgeous wedding. You can just as safely leave the house in an 8-year-old car or a brand-new car.

Unfortunately, most people haven’t figured this out, which is why you should stop listening to most people.

Reject the normalization of debt: focus on making good choices, not common ones.


  1. says

    Nice one! I especially agree with the statement, “Who cares if it’s normal! Is it good?” Um…nope! I’m ok if you want to finance a car or if you get a mortgage for your house, but still…it should be a car and a house you can afford. :)

  2. says

    I live in Atlanta! lol I actually had this conversation with a classmate from Germany. She was surprised at how normal it is to carry debt in America. She pays for everything with cash and her mom (stil in Germany) actually scolded her when she found out that she had gotten a credit card.
    But it is part of being part of the system. Credit checks are becoming a prerequisite to everything and unless you have the wealth and connections to pay everything cash and create your own jobs, unfortunately, everyone will need some type of credit history.

    • says

      @FYSA — How funny, I was just having this same conversation (about building a credit history) with friends at dinner last night. My advice to everyone is the same: open a few credit cards, with as high of a credit limit as you can get. If you don’t want to use the cards, cut them up immediately or freeze them in a block of ice. Just having those lines of credit open will build your credit history. To keep the cards active, put a tiny recurring monthly payment on them — like a $2-per-month magazine subscription — and auto-pay it from your bank account so you never have to think about it.

    • says

      @ Super Frugalette — Congratulations on having a car that’s been fully paid for nearly a decade!! Car payments carry such high interest that I’m glad you’ve wiped your hands clean of the loan! Hooray!

  3. says

    Nicely written, Paula.
    I visualize sometimes that fat-cat bankers and credit card CEOs (in requisite top hat and cape) are gleefully rubbing their hands and cackling over this trend, the normalization of debt, as you write.

  4. says

    Everybody will have a car loan. I have heard that one and thought it was normal. Then, I saw everyone else (you know, normal folks) so I had a few credit cards, dept store cards, consumer debt…I didn’t know a debt I didn’t like…until it about broke up our marriage and destroyed my quality of life for years.
    Now, we drive nice but older paid for cars…we dont have the biggest tv in the neighborhood, we have to save for items and can’t experience “immediate gratification” on expensive items because we dont have credit.

    Never been happier. It’s freedom- not everyone has debt, I dont. I lived a life with debt and without…I’ll take without every single day. Stuff isn’t worth the stress and anxiety that goes along with the buy now pay later mentality.

  5. says

    Normal = common, but common doesn’t always equal good! It can be better to be the “weird” one without debt, for sure.

    That said, debt itself isn’t evil; it’s how we use it and what role it plays in our lives. I do have mortgage debt but no other debt at least. I am saving a decent chunk of money away that for now is not going directly on the mortgage as interest rates are low, but I’ll be ready to pay it off at an accelerated rate if it makes sense to do so.

    • says

      @Invest It Wisely — There’s a debate in the personal finance community on whether it’s better to pay off your mortgage debt as fast as you can vs. invest that money instead. While there’s pros and cons to both, I fall on the “use extra money for investment” side of the fence in most situations; I think you can make better returns this way. In this case, mortgage debt is more like a business loan — money you borrow in order to free up more money that you can invest. And that’s “good” debt to have. :-) If you get a chance, check out my post If I Had a Million Dollars, I’d Go into Debt … I go into a fair bit of detail in that one about why I’m pro-mortgage debt.

  6. says

    Great work paula – some of this I cant believe either, but I used to have the same mindset – I was taught that debt was something you “managed” and not lived without. I know different now, and have changed my spending patterns accordingly! I’m looking forward to being debt free soon.

  7. says

    I absolutely, absolutely agree! Having sort of the worst case financial scenario (being in consumer debt) presumed to be the default and acceptable behavior is completely ridiculous. What does it say about our society that it’s safer to assume that people have racked up credit card debt from clothing, restaurant bills, etc than it is to assume that they have several DRIP investments, fully fund their IRAs etc? Also, if you only use the lowest common denominator as your benchmark I doubt you will ever actually be as successful with your finances as you dream about.

    Great points!

  8. says

    When the cost of debt is cheap, then it’s hard to avoid like $50 for $1000 borrowed over a year. These 0% balance transfers and 0.99% interest charges are hard to refuse

  9. says

    People don’t realize that it is impossible for the masses (as a whole) not to be in debt, because debt is the only way money comes into existence. In other words this article is literally impossible for most human beings to apply. The masses cannot get money into their hands to use for transactions except by borrowing it from a bank, which creates the money out of thin air by typing numbers into a computer at the moment of the loan. When we pay back the loan, the principal disappears into thin air where it came from (is cancelled out in a computer) and the bank pockets the interest. Bankers create money and make it disappear again and rent it to us while it is in existence. This is the epitome of a scam. The government should create the money and get it into our hands so it can stay there, without charging us for it.

    Central banking creates some money out of thin air (that the bankers, the Fed, create out of thin air and loan to the government, which the gov’t never repays and we the people must pay taxes/interest-on-the-nat’l-debt on forever. Most of this money is spent by bought-and-paid-for politicians on contracts for their banking and multi-nat’l corporation buddies’ companies, and most of it ends up in elite hands. Some trickles down to the masses but most stays in the hands of the owners & executives of the companies. In this way (through Central Banking) the elite create $ out of nothing and charge us for it. Another scam. (This is why both Central & Fractional Reserve Banking and the federal income tax were passed into law the same year – 1913, pushed through Congress by the same Congressman who had married into a banking family.)

    The gov’t could eliminate virtually all debt (including most of the nat’l debt), inflation, taxes, and booms/busts by simply creating money in proportion with population growth each year and spending it into the economy where it can stay in the hands of the people instead of us having to pay them for the money they create (taxes/interest). Why would the elite need to collect money from us when they are creating billions (now trillions) out of thin air for themselves regularly through central banking? The answer is simple…to make us debt/interest/tax slaves (so they can live high off the hog off the fruit of our labor without giving anything of value to society in return).

    The American people are debt slaves by design, and most of them don’t even realize it (and thus they fall for logically flawed articles like this).

    Marc Speed

  10. says

    I should also say, however, that I appreciate the message of the article for the individual. It’s just that because of the way the system for bringing money into existence (as debt) is rigged, most individuals in the system will never be able to follow this (other wise excellent) advice.

    • says

      @Marc Speed — My feeling has always been: there’s very little that we can do about “the system,” but there’s a lot we can do about ourselves and our individual actions. I have a pretty strong personal-responsibility ethos to money management (and to life in general).

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