50. Debunking the Lie: Why Debt ISN’T Helpful

In this episode, Laura Sexton passionately challenges the prevalent belief that debt is helpful, addressing the pervasive marketing of debt products in society. The episode delves into the detrimental effects of credit cards, emphasizing that the credit card company is not your friend, and explores the connection between debt and living paycheck to paycheck. The host also questions the societal norms around car payments, student loans, and mortgages, advocating for financial independence and debunking common myths.

In this episode we’ll

.        Debunk credit card myths

.        Challenge the notion that debt is necessary

.        Outline a simple 5 step strategy to financial freedom

Check out Episode 16. Parent Plus Loans are Insidious 

Learn more about working with Laura Sexton

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Transcript

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Laura 0:02

Hello and welcome to the Accelerate Your Legacy podcast. I'm Laura Sexton, your trusted financial coach and money mindset specialist. Join me as we explore the world of money and money mindset while also paving the way for a lasting legacy that extends far beyond money. Together we'll eliminate stress, amplify freedom, and ensure you stop paying for your past so you can start saving for your future. If you're seeking peace in your finances, more margin in your budget, and a legacy that inspires generations to come, you're in the right place. Hey, accelerators. Welcome back to the podcast. I just wanted to talk with you very quickly about this myth, I guess, that's been coming up a lot lately. I would, I would even call it a lie. This lie that has been coming up a lot lately is that debt is helpful. Debt products are the most marketed products in the entire world. Think about how many times you've seen a McDonald's commercial, which is really high up there. Tell me that you didn't see a credit card commercial right before or right after. Some shows even have credit card commercials built in them. I was watching project runway the other day and 1 of the segments in the show, they were going shopping with their, whatever master card. I think it was Wells Fargo. Don't get me started on Wells Fargo. It was a Wells Fargo MasterCard and they were able to go out and spend money because you get 2 percent cash back. Yay. Are you telling, are you serious right now? You get 2 percent cash back. We've talked about this before on the podcast. 2 percent cash back, but you spent 18 percent more money than you would have if you had spent cash. You lost 16 percent on this. Credit cards are not a net positive. For you credit card points are not a net positive for you. They're not helpful because let me tell you, the credit card company is not giving you cash back because they are your friend because they want to help you. This is not a wealth building tool. The person paying for your points or for your cash back is not the credit card company because they're a multi billion dollar industry. They're making money off of you. The person that is paying for your points and your airline miles or whatever it is you are racking up. The person paying for that is a single mom that's struggling. A person paying for that is the minority class that is constantly being Chased around with these debt products, so they stay in poverty forever. That's who's paying for your credit card points and miles I just think I think it's a really sick game. So now that I'm off that soapbox real quick. I thought it was very interesting that I read a statistic that said 77 percent of Americans have some type of debt. And later in that same article, it said 78 percent of Americans live paycheck to paycheck. My question is that, is that causation or correlation? Are those correlated facts or is the paycheck to paycheck mindset stimulated by having the debt? If you didn't have the debt, would you be living paycheck to paycheck? A lot of people that I work with, a lot of my clients are paycheck to paycheck, but if they stopped having to pay the minimums on all their credit cards, they would be living in abundance. I have a couple clients where their minimum payments are 2, 500 a month. They're paying more on minimum payments on credit cards than they are on their mortgage. I just have to put it out here. I'm going to be really playing with you guys. I don't know why I'm in this, this very dramatic mood today, but it has to be said that if you weren't making those minimum payments, what would you do? Could you do something else with your life? When I started this journey is 1200 dollars minimum payments and I would have loved. Absolutely love to have an extra 15, 000 in my pocket. That's what my minimum payments were every year. It's 14, 400 in minimum payments. What? Are you kidding me right now? That's insane. What would you do with an extra 15, 000? If I gave you 15, 000 today, what would you do with it? So my clients that are paying 2, 400, every month, if I were to give them their money back, they'd get 28, 800 back in their pocket every year. What would you do with that money? It's really crazy because you don't know what you're going to do with that money because you're just going to keep playing the game and you're going to keep rolling around in these credit cards because that's what's normal. People are telling you this is helpful. That's not helpful. I had another situation where I was in a clubhouse room. Clubhouse was this audio only social media app that was really big during covid and unfortunately has kind of fallen off. It was really fun though. And there's a single mom. She's in there and she's saying she's struggling and. The advice that was given to her was, well, go out and get a credit card, and that'll help you bridge the gap. Someone explained to me how that's helpful. It helped her in this tiny little moment, but she wasn't able to make her minimum payments. Now she has a credit card to cover some of her minimum payments. And so on top of struggling, she just added another minimum payment. To her monthly budget, how is she going to do that? She's already struggling. Adding more debt is not going to help you. That's why I'm so big on having a 3 to 6 month emergency fund, because if an emergency happens, when an emergency happens, you don't want to add a financial crisis to your emergency. You don't want to have to go into debt and put yourself further into crisis mode. When you're in an emergency situation, you see in our society, debt is normal. But it's not helpful. It's not helpful. Some people say, well, you know, we have to play the credit card game because you're always going to have a car payment. No, my friends, you're not always going to have a car payment. Well, I have to play the credit card game because I need a credit score. No, you don't. You don't need a credit score. Why play a game that causes stress, anxiety, and fear so that one minute of one day can be a little bit easier? I'm going to figure it out. I'm not playing that game. I'm not in the rat race. Somebody else mentioned in this, debt is normal economy that we're in. They're like, well, there are good debts. I beg to differ. I don't think there's anything good about a product that gives me anxiety or stress or reduces my sleep. And let me tell you that that is actually what happens to your body. When you know that you owe something to someone, your body reacts physically. Your amygdala is set up to keep you on high alert when you know that someone is coming after you. And if you don't think that somebody's coming after you, stop paying attention to them. Ford Motor Company, stop paying Toyota, stop paying MasterCard, and see if they don't come after you because they can sue you, they can take your property, you are on high alert, you have anxiety, even if it's low level anxiety that you think you were repressing and you're going to be okay. There's an anxiety there that you do not need to be a part of. So when you say it's a good debt, I beg to differ, my friend. I really do and maybe, maybe you're going, I need to keep my mortgage because there's a tax benefit. I've been talking with a couple of my clients now, where we have gotten them completely out of debt. We are moving forward with our plan to make sure that they are comfortable when they are work optional. We want to make sure that their kids are able to. Get further education when that becomes necessary for them. We want to make sure that they do not have a mortgage as they continue on their journey. Because when you're retired, you don't want to have a mortgage payment hanging over your head. And one of my clients was like, well, it's not that much money. Like I, you know, I need it for the tax itemization. My friends, unless Unless you are 1 of the 12 percent of Americans that actually itemize your taxes, this benefit does not affect you. In order to do that, you have to give away an exorbitant amount of money to charities and other 501c3s because the tax benefits. Right now, the standardized deduction is huge. If you are a single person, your standardized deduction for 2024 is 14, 600 dollars. Did you give away more than that? Because otherwise, like, what are you deducting from your taxes? And for a married filing jointly 29, 200 dollars for your standard deduction. How big is your house payment that you're paying? That you're trying to cut down a quarter of your taxes. Most people in America do not itemize and I can guarantee that if you were listening to my podcast right now, you probably don't itemize your taxes. You probably use that standard deduction because it is higher than what most people have to deduct. So the mortgage benefit of keeping your house is not actually saving you any money and you're just paying interest to the bank. Why? So, if you go to, a tax preparer, they're going to be like, yeah, you need this deduction. It's wonderful. It is wonderful. And if you utilize the itemized deductions, I want you to utilize this to your benefit. But if you don't, let's get rid of it. Any kind of debt hanging over your head pay off your house. So, then the government can't come take it from you because you didn't pay your taxes. To the people that tell me that it is helpful to have a car payment or a student loan. I say. No, it is not, because it is stealing from your future. The student loan program is an abomination. The fact that we are constantly giving children hundreds of thousands of dollars in debt when they have no idea how they're going to be able to repay it, they don't know how they're going to repay this loan. But we live in a society that says, you have to go to college, you have to get a degree. And every time they say that they raise the price of tuition every time. Well, you have to get a degree. They're going to raise it another dollar. So, every time I'm saying this dollars going up dollars going up dollars going up because we live in a society that says you have to get this piece of paper. But if you actually sit down and look at what the study show, professors are teaching less students are learning less. You think for 1 2nd. That it is worth spending hundreds of thousands of dollars, giving students hundreds of thousands of dollars to earn degrees that are not going to make them that much money in their lifetime. People go in hundreds of thousands of dollars to work in the public sector, making 39, 000 dollars a year. Just over property level. There's no ROI on that, my friends. There's no return on that investment. And in fact, it could actually be harming them to make them think that, hey, you go into this school and you get all this money in debt. They have no idea what it means to pay it back. It is awful and to make it worse. The parent plus loan program is completely insidious. If you do not believe me, go back and listen to my whole diatribe on that back in an earlier podcast. I will link it in the show notes. Y'all I've been talking on and on and on about this and I will continue to do it. Because I really feel like you need to stop paying for your past and start saving for your future. Your car payment, my friends, an average car payment is 500. 500 in a standard index fund over a period of 40 years would net you over a million dollars. I heard a podcast the other day with a gentleman where he was paying 1, 700 on his truck payment, which made me want to gag. 1, 700. On a depreciating asset, 1, 700. Over a 30 year period in the stock market could net him 5, 000, 000 and instead he has an asset that is going down in value every single day. If you don't think that your car payment is stealing from your future, I implore you to go look at an investment calculator. Go check it out. Go see, go play with the numbers. The stock market has has an average return of 9 to 12 percent annually over the last 100 years. Yes, last year we were down, like, 18%. Last year was not great unless you're buying stocks because they were on sale, but most of the time they're going up 9 to 12%. So don't let your car payment rob you from having a comfortable. Wonderful future. I say, stop paying for your past. Start saving for your future. I don't mean just the debt payments. I mean, the emotional baggage, the stress, the frustration that goes with constantly making payments, trying to keep up, trying to catch up, trying to move forward. You can't do everything at once. You can't be saving for retirement and saving for your kids a future for college. You can't pay off debt and save for an emergency fund. There's too many things to be doing all at once. It's too many things to be doing all at once and make any real traction on any of them. You have to do 1 thing at a time. You have to wrap your arms around your money and just really focus in and say, okay, which is most important for me to do? How am I going to gain the most traction? Let's do that 1st. If you were unable to make a decision. I can lay it out for you pretty easily and just 5 simple steps. You want to have a starter emergency fund of around a 1000 dollars. You want to pay off all your debts. Then you want a 3 to 6 month emergency fund. Then you say for retirement. Then you say for kids college, it goes in that order. But if you have any questions, you can reach out to me. I would absolutely love to sit down and have a conversation with you, especially right now, because everybody's stressed out with money around the holidays. Let's have a conversation 30 minutes of your time where we can really pinpoint what it is your goals are and what kind of strategy we can create to get you there faster. Here's the thing guys. The American dream is alive and active. You are totally capable of achieving it, but you've got to get off this crazy train of debt is helpful. It may be normal, but you don't have to be. It is not helpful to you. Be weird. You can do this. Start today. Reach out if you need help. But until then, go out and make a difference. Thank you for investing your time with us today on the Accelerate Your Legacy podcast. Remember, your legacy isn't just measured in dollars and cents, but in the tools, habits, mindset, and reputation you leave behind. Don't just listen to the show, but take action on what you've learned. Share this wisdom with a friend who can benefit and help us spread the word by rating and reviewing the podcast. For questions or encouragement, reach out to me on Instagram at Accelerate Your Legacy or explore the resources listed in the show notes. I will be back with you next week. Until then, build your legacy with intention.