122 | The Fear of Debt

There is a widespread fear of debt in our society.

People are internalizing negative beliefs about debt and about themselves for having debt, and it’s causing a lot of unnecessary pain and unpleasant experiences.

In this episode, let’s talk about some commonly held beliefs about debt (including the good debt vs. bad debt distinction), the negative consequences that can come from being afraid of debt, and two alternative perspectives of debt to consider as you move through your financial journey.

Topics Discussed

• common beliefs about debt
• good debt vs. bad debt
• my personal experience with having “good debt”
• shifting my view and my experience of my debt
• how being afraid of debt can lead to ill-advised decisions
• two alternative perspectives of debt
• getting comfortable with having debt

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Resources mentioned

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Email: hello@rhothomas.com

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Lightly Edited Transcript

You’re listening to Wealthyesque. We are a community of lawyers who believe that true wealth is having control of our time. I’m Rho Thomas, and as a busy wife, mom and former Biglaw associate, I know all too well the tension between the culture of the legal profession and pretty much everything else you want to do in life. That’s why each week, I’m bringing you the information and tools you need to improve your money mindset and manage your money to create true wealth. Because ultimately, it’s not about the money. It’s about the freedom and flexibility the money affords.

Hey friend. Welcome back to the show. I hope you’re doing well and having an amazing day so far. Today we are talking about the fear of debt. There is this widespread fear of debt in our society and we always hear about how debt is so bad. And if you have debt, you need to get rid of it as quickly as possible. I even heard someone in the personal finance space referred to having that as an emergency. Right. And I think a lot of that is well intentioned because it’s true that sometimes people get into financial trouble using debt and things like that. But we’re in this place now, where people have internalized the belief that debt is inherently bad that there is good debt and bad debt, that they’re a bad person for having debt or that they’re stupid for paying interest on debt. It’s all of these really negative feeling beliefs, and I think it colors the way that people experienced it and the things that they do in relation to their debt. None of those things is objectively true. So let’s take the good debt versus bad debt distinction. For example, where did that even come from, like somewhat arbitrarily decided that these types of debt are good and these types of debt are bad and you just run with it, but there is no bright line rule like that. That isn’t good or bad. It just is what it is. And we can have different opinions about it, which again, will color our experience with it. So there are people who have great outcomes with so called bad debt like credit cards, and there are people who have not so great outcomes with so called good debt like student loans or mortgages. For instance, if you take on credit card debt to invest in a program to learn how to market yourself better, and it ultimately helps you build a book of business that makes you more valuable at your firm, is that still bad debt? If someone takes on student loan debt, and they can’t get a job making enough to actually pay off the loan, then they can discharge them in bankruptcy, and they’re basically stuck with them until they die or become disabled. Is that still good debt? right to say that one type of debt is good, another is bad. It’s not an objective fact, even though so many people treat it like it is, but it’s literally something someone made up and when you’re believing things like you have bad debt or that you’re a bad person because you have debt, or you’re stupid. If you pay interest on debt, none of that is gonna feel good. It feels heavy, it feels overwhelming. You may feel desperate to get out of debt. You may feel hopeless, but I know from experience that all of that is caused by the way you’re thinking about your debt, because I remember thinking the same kinds of things when we first realized we had over $670,000 of debt years ago. Most of it was called good debt. Right? All but $10,000 or so of it was good debt. We had about 200,000 on a mortgage and about 500,000 Little under 500,000 on our student loans. 10,000 was a car loan, but all of that being so called good that didn’t make me feel good about it. I felt like we should have known better because we’re so educated. I thought we shouldn’t have this much debt. I thought we needed to pay it off as quickly as possible. I thought we shouldn’t do anything extra like taking trips or buying things that weren’t necessities. And you know what, all that did was make me feel bad. It didn’t change how much debt we had. It didn’t make it go away. It just sucked. So we had a plan and I was beating myself up about where we were financially and that wasn’t gonna make that plan go any faster. So when I just accepted that we had this debt and live my life and stop obsessing about it, it all felt so much lighter. My life wasn’t focused on our debt. We were still doing our plan and paying off but I was not like I stopped worrying about all the other stuff, right? I wasn’t thinking that we were bad or stupid for not making different choices in the past and beating myself up in the process. I stopped spending about how we pay it off faster. When I let all of that go and was like, okay, it’s fine for us to have debt and go on vacation. It’s okay for us to have debt and go out to eat sometimes. It’s okay for us to have debt and do some of these other things we want to do because we have a plan and we’re intentionally using our money to do these things and achieve this goal we set for ourselves. So when I did that it made the process run so much more smoothly, and things felt lighter over the years as we paid off student loans. We may think that being afraid of debt and believing that it’s bad, and all of that is helpful, but I know that when those kinds of beliefs are influencing you and driving your actions, it can lead you to do things that aren’t necessarily in your best interest when it comes to managing your finances. I was working with a client once who had a balance on her credit card that was only a little bit lower than the amount of money she had in her bank account. And she wasn’t making more money anytime soon. Because she had this fear of carrying debt and incurring an interest charge. She cleaned out her account to pay the credit card off in full. She was more afraid of being charged interest than having a relatively small amount of money in her checking account for an extended period of time. I’ve also seen people put off paying for something they need or put off getting help with a problem they want to solve because they’re afraid to put it on their credit card and not be able to pay it off right away. But again, you’re basically saying I’d rather go without this thing I need or keep struggling with this problem. I want help with them possibly put something on a credit card and be charged interest. I was saying like I took pride in the fact that we always have credit cards off in full and for the most part we still do right we have our joint card which is our main card bills and stuff for the house and stuff for the kids goes on. We still pay that in full every month. But we each have a personal card as well and I’ve made strategic decisions to invest in myself with different programs over the last few years. And in the instances I didn’t have the full amount for a program, I put it on my credit card and I paid it off over time. I’ve helped some of my clients do the same where they wanted to work with me. They didn’t have the money so they put it on a credit card and working together, they paid it off along with other debt they had from before deciding to work with me. So they got the help they wanted and now they know how to manage their money for the rest of their lives. And to be clear, I’m not suggesting that you should just go to the opposite end of the spectrum and just be like I love debt, like when you get all the debt because you know that I’ll never worry about paying it off yolo, right? That’s not it. I’m saying I want you to be mindful of the way you think about your debt and the experience you create for yourself and not default to the negative thoughts and fear. You get to decide how you think and feel about your debt that will call your experience with it. And as we talked about earlier, that is not inherently good or bad. It’s not right or wrong or any of that stuff. You can choose how you want to think about your debt. And I’m going to share two perspectives here that you might consider that can help you to shift the way you think about it. The first one that I love because it takes all the emotion and negativity out of it as my coach views the debt as buying money. So I don’t have the money I need to buy this thing. I’m gonna go buy some money at x interest rate so I can buy the thing, right so the money you pay in interest, it’s just the price you pay for the amount of money that you need. And don’t feel bad when you buy other things that we need. Even if you ultimately think we made the wrong purchase or we don’t need the thing anymore. We don’t typically beat ourselves up about that. We just return it. Paying off the credit card or the loan is like you returning the money that you bought. So looking at it in a more transactional way like this will feel so much different from the more emotional way that we tend to think about it. Another perspective is looking at how this debt has helped you. For example, I didn’t have the money to go to college in law school. I didn’t have the money to buy a car I didn’t have the money to buy a house right. So debt allowed me to pay for the things that I wanted and needed when I didn’t have the money to do so. And maybe for you that included things like vacations or new clothes, right some of those things that we tend to pass judgment on when it comes to debt. The debt still allows you to get these things that you want it or have the experience that you want it even if knowing what you know now you would have made a different choice. There’s no need to shame the past version. of yourself or passing judgment on the past version of yourself because you did the best you could at that time with the information and tools you had. The main thing here is if you can get comfortable with the fact that you have debt, then you will have a much better experience in your financial journey as you pay it off. You’ll make more deliberate choices for yourself that aren’t driven from fear and shame. The only fact here is the debt itself the actual balance you owe everything else is your opinion about it and you get to choose that it doesn’t mean that you’re going to be complacent and just rock with it and never pay it off. Right You’re gonna still create a plan you’re gonna still execute that plan but you’re gonna do so taking care of yourself in the process and not beating yourself up and living your life and not making your considered decisions simply because you’re so afraid of having the debt or paying interest. The way you’re feeling now doesn’t have to be your experience. You don’t have to live in fear or feel like you’re trapped or overwhelmed or whatever it is because you have debt. So if you’d like help with shifting your view of debt to feel better while still creating and executing a plan to pay it off. Let’s talk about how we can work together. You can head to rho thomas.com/call to get started all right. That’s it for this week’s episode connect with me over on social media I am most often on LinkedIn, rho Thomas and on Instagram, I am rho Thomas. Subscribe to the show and leave a review both of which help more people to find it. And please take a second to think of a friend or two who you think would benefit from this information and share it with them. As we close out friend I pray that you take the information you learned here, apply it in your life and open up to the realization that wealth is available to you. As you do that consistently week after week. You’ll continue to take steps to regain control of your time, build wealth and live a life of freedom and choice you deserve. Talk to you later.