The first step, and the most important factor in debt elimination, is a firm commitment to reject debt… This change in attitude is not subtle or gradual but rather resembles the flip of a switch—it’s a resolute determination to make a clean break from the culturally accepted addiction to debt.
–Luke V. Erickson
Recently in an article written by Luke V. Erickson, a Personal and Family Finance Educator, titled Getting Out of Debt—For Good (LDS.org), several reasons are discussed as to why we should live our lives free of debt, as well as some simple steps that will take us there. I believe the key to this article is found within the title of the article itself: Getting Out of Debt—For Good. How many of us have made the decision to get out of debt, or maybe at least made a goal to get ourselves out of debt? Possibly, many have even reached their goal of eliminating their debts. Good for you if this was the case in your life. But how many of us have paid down a significant amount of debt only to have it reappear several months or years later? The key to living a debt-free life is a strong commitment to eliminating ALL debts and avoiding it going forward; thus getting out of debt—FOR GOOD! The idea is to get out of debt and stay out of debt.

“I urge you to live within your means. One cannot spend more than one earns and remain solvent. I promise you that you will then be happier than you would be if you were constantly worrying about how to make the next payment on nonessential debt.”
-Thomas S. Monson
Going into debt has become a culturally accepted practice and is now considered a pretty normal (used loosely) part of everyday life. Almost anything can be purchased nowadays using some form of debt or on credit– cars, electronics, furniture, appliances, pets, and the list goes on. However, we must reject this culturally accepted norm and adjust our viewpoints and attitudes regarding debt. The get now, pay later idea is not working for you; neither is the 90-days same as cash plan or financing the family living-room set and kitchen appliances. These obscene, yet acceptable practices are draining your ability to save money, provide for your families, and build a significant amount of wealth. Every time we put some “on payments” we dip into the most powerful wealth building tool we have, our monthly income. You know how it works. It doesn’t take long before your entire monthly take-home pay is eaten up by all of your monthly payment obligations: mortgage payment, car payment, credit card payment, couch payment, bedroom set payment, etc. Turns out being broke is also become culturally acceptable.
I want to focus a little on the car payment. I believe it has become the standard when purchasing new and used vehicles. Rarely do you ever hear about anyone saving up money and paying cash for a car. That would be a very wise plan. Car companies and financial institutions together have done an excellent job marketing the low interest, no risk auto loan plans. Although the interest rate for financing the car may be low, you will most likely pay more for the car up front and you will still pay interest on the car loan. The car payment will eat away at your monthly disposable income and make it very difficult for you to get ahead financially.
According to Kiplinger’s Personal Finance Magazine, the average car payment in the US is $479 (an absurdity) financed over a 60 month period- nearly $29000. The average new car will lose over half of its value in 3-4 years, before the loan is ever repaid. It is unwise to invest so much of our money into items that go down in value. Do you realize what you could do with an extra $479 per month? Your car payments could be costing you millions of dollars over your lifetime. If you were to invest the $479 monthly in a quality mutual fund for a long term (30 years) it could grow into nearly $1.5 million! Get out of the car payment cycle. Drive a used car you can afford and that you pay for with cash by following a good cash-flow plan. Use your monthly income to build wealth, not to impress your family, friends, and neighbors.
Remember that car purchases are not permanent. The car you drive today does not define who you are now or who you will become later. Right now you might have to drive a used car you can afford, but eventually, as you continue to save money, get out of debt, and increase your income, you can move up in car. The truth is that most millionaires (according to The Millionaire Next Door by Thomas J. Stanley) drive used cars (2-4 years old) that they paid for with cash. There is a huge myth out there that the wealthy drive fancy new BMW or Mercedes, or even lease newer cars, but that is far from the truth. These types of vehicles are normally purchased by people who participate in a high-consumption lifestyle, yet have little actual wealth.
You might be saying, “I don’t have a $479 car payment. Mine is only $150.” Well, good for you if it is only $150, but do you have a credit card payment, or are you paying on other types of loans? My guess is that most of us, if we added together our debt obligations are paying far more than $479 a month in payments. These payments are costing us and our families dearly.
Your car, or your house, or the type of furniture in your living room, or the type of clothing you wear, will not define who you are or where you will go or how people perceive you (as rich or poor). The things that will help define your life and affect your future financially are your current behaviors and your attitudes, specifically toward money and debt. The more you buy into the practice of car payments and credit card payments, the more you will struggle to build a significant amount of wealth, save for your children’s college, and retire with dignity and enjoyment.
Reject the culturally accepted norm of going into debt and buying things on payments. Make a commitment to rid yourself of the debt burden and avoid debt FOR GOOD going forward. Your life will be better today and so will your future.