6 Reasons Why Debt Is The Least Of Your Financial Problems

Debt should be considered the least of your financial problems. Time, bad income to geographic area ratio, and spending habits are much worse.
The internet is full of debt pay-down stories and “How To” guides on getting out of debt. Debt is often characterized as the enemy or a ball and chain, but it’s not so bad compared to some broader and more significant financial variables.

When looking at the big picture of a personal financial situation, issues larger than debt affect a lot of us. Incomes are too low and stagnant, cost of living is too high, and borrowed money fed to the universities is not always well spent. Often, a person’s worst financial problem is their consumption habits.

Sure, it feels good to pay off all of your credit card and student loan debt. But once it’s gone, much more consequential money decisions lie ahead.

To those people struggling to pay off debt today, I’ve got some sobering news for you: debt is the least of your financial problems.

First, here are a few reasons why debt isn’t so bad

  • Using debt is your choice and under your control.
  • You can choose to stop borrowing money at any time.
  • You can pay off most debts early, without penalty.
  • Paying off debt is not an advanced financial concept; you simply pay it off with your income in lieu of spending.
  • When used responsibly, debt can help you buy an affordable home, an investment property, or grow a business.
  • You can always hustle your way out of debt.

If debt is not so bad, what are the financial problems?


When it comes to finance, the more time you have, the better your chances are to build wealth. Irresponsible debt usage can be reversed. Time cannot. Debt has a negative rate of return, whereas investing over the long-run has a positive return. If you are uncomfortably in debt, it’s time that’s hurting you, not the debt itself. Time spent servicing and paying down consumer debt instead of investing, is time wasted.

Time has a hidden downside too. Some people find it as a source of stress, as in, “I thought by age {insert age} I’d be closer to {insert desired life achievement} instead of being in debt and nowhere near {insert desired life achievement}.”

Solution: Take action today to set and achieve your goals.

Your Income Is Too Low For Where You Live

In many countries, $10 per hour is an excellent living wage. But in much of the US, a $10 per hour wage is below the poverty line. In smaller cities and rural areas, earning $10 per hour is more livable than a large metropolitan area like New York City or Washington D.C., where it won’t pay the bills. To get ahead financially in an expensive city, workers need the right education and skills that lead to well paying careers.

This balance between wages and cost of living in different locations can be estimated. Various wage calculators are out there to compare a salary in one city, to the equivalent salary needed to maintain the same standard of living in another. 

The takeaway is… if your ability to earn a higher salary is limited, you may need to move to a less expensive place in order to get ahead. That can be a big problem depending on your family situation and flexibility.

Solution: Or you can think about other ways to earn income. Starting a side business is one way to create new income. Online businesses have a very low cost to entry. Many online entrepreneurs learned the ropes by starting a blog. Bluehost makes it very easy to do so. You can be up and running in just 5 minutes. It costs about $50-$100 to host a blog a year. That’s how I started my side businesses and I’m making extra income every month through blogging.

The Education/Skills You Have Are Not Sufficient To Increase Your Income

If you’ve earned a college degree, but find yourself in a career that doesn’t pay well, you have two more problems that are bigger than debt. First, the time and money spent acquiring the degree or skill set were not spent wisely, especially if you borrowed money. You can’t go back and change that. Second, you may have to invest more time and money in education to acquire the degree or skills needed to get ahead in life. If you don’t, you may be stuck earning a low salary indefinitely, or forced to move to a lower cost area.

If there’s a lack of demand for your education and skill set where you live, you need to either acquire more skills or move in order to get ahead and build wealth. Both choices are time consuming, expensive and inconvenient.

Solution: Invest in yourself using online courses. Find courses on subjects that you love (so you don’t lose interest). Or supplement your previous education with courses that will grow your skill set. Read books! Another idea is to find a mentor, someone who is where you want to be in five years. Learn from them what you need to do to be successful.

Paying Off Debt Is Easy; Investing and Growing Wealth Is Much More Difficult

As mentioned above, from a strategy perspective, paying off debt is easy. Simply focus your income toward paying down debt instead of buying more stuff. The best way to do this is to automate it. Set up automatic payments through your checking account to pay down your debt the day after you receive your paycheck. Doing this will eliminate the temptation to spend.

You can play with the minutia of which debts to pay off first, but in the end, paying off debt is more about the mindset of choosing to get rid of it, not the pay down strategy. Debt settlement and consumer credit counseling services are unnecessary and for the naive. Debt consolidation loans from a bank or Lending Club can help lower the interest rate you are paying, but a dedication to debt elimination must come first.

Once the consumer and student debt is gone, you’re faced with a much more difficult task: investing. People with excess savings and cash flow have a wide range of investment options available to them such as real estate, stocks, bonds, managed mutual funds, ETFs and P2P lending. Or for entrepreneurs, putting money into a business can be a good use of excess cash. The problem arises if the investor doesn’t know what they are doing. They then must choose whether to spend the time to learn how to invest wisely, or pay someone to invest their hard earned money for them.

Hiring an investment adviser has two drawbacks. First, advisers take a chunk of your money by way of fees. In addition, many advisers promote frequent trades (charging a commission for each trade), or managed investments (mutual funds, ETFs etc) that charge even more fees. Fees eat away at your investment returns over time. Second, an adviser, fiduciary or not, does not have your best interests in mind. They are concerned about their earnings more than your investments. In other words, no one cares more about your money than you.

Some investors are turning to so-called robo-advisors such as M1 Finance for help. These kinds of investment services are growing in popularity.

Learning to invest takes time, a lot of time. Then there’s each investment decision, and the years it takes for investment returns to materialize and solidify. While eliminating debt feels good, once it’s gone there’s a long road to financial security that lies ahead.

Solution: Develop multiple streams to income to grow wealth. In my free eBook6 EASY Income Streams You Can Start Building TODAY!, I give you a few quick examples of investment income to help you get started. But the opportunities are plentiful.

Learn what strategy works for you, then stay at it.

The House You Purchased Is A Burden

A house is the largest purchase most Americans will ever make, far greater than a car or any fancy handbag. So a house purchased without careful thinking about the future can end up being a massive financial burden.

Many faced housing problems when the financial crisis of 2008-2009 was in full swing. While parts of the country have recovered, some folks are still underwater or stuck in a home they don’t like. Others make the mistake of overspending on a house, or lose money by moving too frequently.

Considering the size of the loan needed to secure a house, any misstep when buying a house is a heftier burden than any credit card or student loan debt.

Solution: A critical financial move our family has taken advantage of is mortgage refinance. We done this five times between our home and rental property! One way to find good interest rates is through a site called LendingTree. I’ve used them twice for my refinances. You’ll get up to four competitive rate offers. Highly recommended.

Inability To Change A Consumerism Mindset

Jealously is in us all. We see things that others have and we want them. Consumer debt allows us to have it today instead of saving up and paying cash for it. To combat those feelings and temptations, you can always utter “anyone can buy that”, but that attitude would put you in the minority.

If you have a strong desire for material things because that is normal to you, you feel like you deserve them, or you think you can’t live without them (even though they are wants, not needs), then breaking that consumerism mentality is a bigger problem than whatever debts it got you into. Because you won’t be able to progress in paying off debt until the bad spending habits are tamed.

Solution: I wish there was a product to help us with this. But it’s all about will power. Wanting less stuff is the path to being happier. When you want less, you because happy with what you have. You spend less and have money left over to grow your wealth.

Final Thoughts on Bigger Financial Problems

A common financial misconception is that when all the “bad” debt is paid off, it’s smooth sailing from there. Not true. Basic budgeting and debt elimination is only a prerequisite for starting the journey to wealth. While being in debt is a problem that can be challenging to circumvent, it’s not as big a concern in the grand context of a lifelong financial plan.

Debt can be symptomatic of larger concerns, like an income, housing or spending problem. If possible, these problems should be addressed before or while tackling debt. Addressing the greater concerns will lead to a more stable financial footing, upon which wealth can be built over time.

The best way to keep track of your debt and watch your net worth grow is to use Personal Capital. It’s like Mint, but for investing. Try it today for free… and it stays free, never pay a dime. 

Featured Photo by bplanet. Courtesy of FreeDigitalPhotos.net

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7 Responses to 6 Reasons Why Debt Is The Least Of Your Financial Problems

  1. Please note: Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
  2. J. Money November 12, 2014 at 9:12 am #

    Very good stuff to think about, man. Depressing, but fairly accurate 🙂

    • Retire Before Dad November 12, 2014 at 9:15 am #

      Not as depressing as that one you posted this morning… Whoa that was rough!

  3. Eli Inkrot November 13, 2014 at 9:06 am #

    Thanks for the shout out RBD, I like being “this guy” 🙂 – at least with respect to the currency of time.

  4. AssetGrinder (@AssetGrinder) November 14, 2014 at 5:45 pm #

    Great article man. I feel the same way. I am still kicking myself on overspending on my house lol!

  5. Special Agent Dividend November 15, 2014 at 7:38 pm #

    Very well written and informative RBD! It’s a tough balance with debt, as my wife and I struggle with investing vs. paying off student loans etc. Breaking bad habits is key to overall financial wealth!

  6. Get Rich Brothers November 16, 2014 at 12:41 am #


    Interesting take on debt. I think you hit the nail on the head right off the bat… it is really consumption habits that are the problem. People like to talk about how “debt” is ruining their life when really they’re criticizing the wrong thing. If they took a step back and realized that their consumer behaviours are what is really damaging, they could put themselves on the road to recovery and start taking advantage of the time value of money.

    – Ryan from GRB

  7. SavvyJames November 18, 2014 at 8:24 am #

    A great read. While I wouldn’t necessarily agree that debt is the “least” of most people’s financial problems, after all, once someone finds themselves servicing a level of debt that prevents them from investing and growing their wealth, it is absolutely a significant problem. With that said, I strongly agree with your overall premise that a person’s worst financial problem is often their consumption habits – which is typically a harbinger of debt – and using debt is an individual’s choice and when they make the commitment, they can get it under control.

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