Photo: Deborah Feingold
Mistake #1: Putting Your Faith in the Traditional Definition of "Good Debt" vs. "Bad Debt"
Most of us grew up thinking that if you borrow to purchase things that go up in value—like a home—or to invest in things that will improve your future earning power—like a college education—the result is "good" debt. "Bad" debts were credit card balances, evidence that you borrowed money to buy stuff that would go down in value (clothes, cars, vacations—you name it). The conventional wisdom might be okay for good times, but we aren't in good times. Not only does the average American household carry about $15,000 in credit card debt, even now, several years after the Great Recession started, people continue to lose their homes to foreclosure.
The Fix: Here's the truth: Debt is debt. Probably the most important lesson of the recession is that the only difference between good debts and bad debts is that the bad variety can destroy your financial life more quickly. Now don't get me wrong; without a lending industry, we could not function as a society, and borrowing to build assets can make sense—if you have a real plan to repay your debt. But I believe that in today's economy, getting out of debt fast is the most important financial move you and your family can make. The faster you are debt free, the faster you are really free.
Mistake #2: Giving Up Instead of Getting Going!
For many of us, our biggest problem isn't the economy or even the state of our finances. It's fear. Fear of the unknown. Fear of what might happen next. Given the grim news about the economy—job losses, homes still worth less than the mortgages on them—people are letting themselves believe that they have no control over their financial situation and no hope for a richer future.
The Fix: Today's economy presents an amazing opportunity to hit the reset button on your life, both personally and financially. It doesn't matter what kind of a beating you've taken. What you do now will determine the kind of life you will have for years to come.
The key is to stay motivated. To keep positive momentum, I suggest you surround yourself with like-minded people who want to take back their lives. One of my favorite success stories is from a woman by the name of Genevieve, who created a support team at work that used my DOLP™ (Done on Last Payment) system to help pay down their debts. They worked together to keep each other motivated. Genevieve repaid over $70,000 with the support of her team. She's proof that no matter where you are and no matter where the world is, you can take control of your finances with the right mind-set, influences and tools.