Debt Free Mindset
In the US people seem to have a debt mentality. They make purchases based on the payment instead of the cost. This of course leads to buying many unnecessary items. If you think something is only $50 (per month), it is much easier to purchase something than if you think of it as costing $6,000 over the next 5 years.
I think this is partially due to poor math skills and partially due to a consumption mentality. People like to buy things to make themselves feel good. The problem is, this type of mindset contributes to debt and it also contributes to a great deal of conflict and unrest people have in their lives.
On the flip side of things, someone who approaches everything with a debt free mentality tends to think of purchases in terms of total cost compared to the value received. Someone who thinks debt free is going to see a cell phone as a $600 per year expense and carefully weigh that $600 against the benefits of saving the money.
People who consistently think debt free tend to have much lower stress levels because the don’t have to worry as much about money. Since they do their best to put money aside in savings, they are prepared for little emergencies like an unexpected car repair. Also since they spend more time figuring out what they really want they have more money to spend on the areas that are important to them. For example, someone who has a debt free mindset may easily decide that cable television isn’t worth the $700 per year that it costs. Instead they may put that money into signing up for a DVD rental club and investing in a sound system to better enjoy their movies. Their money goes further because it is focused on their personal preferences instead of spending it on other things (like cable TV), just because it is “normal”.
The debt free mindset is about knowing yourself and setting your priorities in a way that is customized specifically to you. The debt mindset is about following the crowd and spending money because that is what other people are doing.
- Buying Used to get out of debt-- As previously discussed the only real way to get out of debt is to spend less than you make. Most people have more control over their spending than their income, yet when they get into financial difficulties their focuse is all on their income instead of their spending. One area...
- Living Beneath your Means-- The average American mindset is to live beyond their means. If they make $20,000 per year, they will spend $24,000 per year. With this type of mindset, no amount of consolidation or debt reduction help will benefit them in the long term. No matter how much money they make, their...
- The Debt Mindset-- Many people just expect to be in debt. It is part of their world view. People who were raised in debt and much less likely to even think it is possible to live debt free. So much of what we believe is based on what we experienced growing up. Another...
- Avoid Recurring Expenses-- One common way that people get into financial trouble is by signing up for a bunch of small recurring financial commitments. Cell phones, internet service, Netflix, cable television, music and video clubs, and fitness centers are all examples of things that require recurring payment. I'm not saying that these things...
- Debt Free is way of thinking-- Getting out of debt isn't really something you start and finish. If you see becoming debt free as a simple transaction, you are unlikely to remain debt free for long. Debt consolidation and debt reduction are tools that can help you rearrange your finances once you've changed the way you...
- Debt Reduction through Frugality-- There is only one (ethical) way to get out of debt. You have to spend less than you make. This is not the mindset of many Americans. Just because a credit card company or store will allow you to buy something on credit does not mean you can afford it....
- Recurring Charges-- Have you ever wondered how cell phone companies can afford to give away "free" cell phones when you sign up for a service plan? They know that many people wouldn't sign up for a 1 to 2 year plan if they had to pay $150 for a cell phone. So...
- Reoccurring Expenses-- If you are serious about getting out of debt, you know that the more money you can free up to pay off principle, the faster you'll get out of debt. Most people think they need more money to do this, but often times people overlook their reoccuring expenses. Things like...
- Financial Education-- Most people have no financial education. The saying "the rich get richer and the poor get poorer" is basically a statement about this situation. Our education system is not setup to give people a good financial education. Those who get it, normally get it from their parents. Like any education,...
- Living Debt Free-- The average American does not think like a debt free individual. Their mindset is so tied up in the idea of requiring debt to fund their desires. If you want to live debt free, you have to change the way you think. One of the biggest differences between people with...