The Debt Mentality

The gross national debt has reached an unprecedented level of over $9 trillion. The average college student graduates with an average of $20,000 in student loan debt. Home foreclosures are at an all-time high. And the statistics go on and on. Yet, our society has conditioned itself to believe that debt is and always will be a normal and accepted way of living. The ability to delay instant gratification is one that is sorely lacking in today's culture and our future generations are paying for it as a result. Inadequate financial knowledge and a focus on the material possessions as a measure of success are contributing factors to the "debt" mentality that many Americans have developed.

Why is this mentality so dangerous? The reason lies in my belief that all habits and skills are transferable from generation to generation. The routines of managing our debt that we are developing today are ones that will be passed down to our children and grandchildren. Although habits and cycles can be broken, they are not done so easily without experiencing some form of "rock bottom" before the lesson is learned. So why even wait to get to that point? Why not take the time to educate yourself about the basics of how to get out of and ultimately stay out of debt. After educating yourself, immediately put the principles into practice. I am a strong believer that knowledge is not power, but rather, the application of learned knowledge is indeed the most powerful of all.

Good vs. Bad Debt?

In order to further examine this issue at its core lets take the dictionary definition of debt (courtesy of dictionary.com):

1. Something that is owed or that one is bound to pay to or perform for another.
2. A liability or obligation to pay or render something.
3. The condition of being under such an obligation.
4. An offense requiring reparation; a sin; a trespass

All of these definitions, to me are negative connotations of the word debt. Quite frankly, there isn't anything "good" about owing anything to anyone or committing a sin. In the financial sense, debt puts a stranglehold on your finances and overall ability to create wealth. Just take your own life experience as an example. Tell me how "good" that student loan debt (commonly considered good debt) is when you are unable to put an adequate down payment on your dream home because you are at the mercy of this monthly payment. Does having an excessive mortgage at the expense of your child being saddled with student loan debt after school make any sense? Yet mortgages often go on one's asset column despite not even being fully paid off.

My Definition of Financial Debt

With that being I offer you my personal financial definition of debt and you decide for yourself whether or not a "good" or "bad" label can be applied to it.

Financial debt is ANY monetary obligation or liability that inhibits one's cash flow and maximum potential for creating wealth.

Think about this definition for a second and again apply it to your own situation. Don't just focus on the "bad" credit card payment that you have but think about that "good" student loan and mortgage and whether or not this money could be working harder for you in other areas, such as in a retirement plan, education savings account, or real estate investment. When you examine the dictionary definition as well as my financial definition of debt logically and critically, you'll see that the words good and debt just don't go together no matter which way you look at it. Understanding this basic principle of financial debt is the first step towards ridding yourself of the vicious "debt" mentality cycle.