The first time I ever totaled up my debt, I was shocked. Actually, “shocked” doesn’t even begin to scratch the surface. I was embarrassed of where I had found myself, angry with my past money choices, and dumbfounded at how I had let this happen. 

How did my husband and I find ourselves with over six figures of debt at such a young age? What money class did we both somehow miss in high school?

I honestly felt like I was wearing a scarlet letter on my chest…waiting for anyone that found out about my money secret to judge me. I didn’t want them to know the truth: that I was bad with money.

If you have debt, especially six figures of debt, you can likely relate to my situation. You may have even gone through the same emotions I experienced: denial, shame, guilt, and frustration. 

It wasn’t until I made it all the way through these feelings that I realized yes, I wasn’t always “good” with my money…but my debt had nothing to do with it.

In fact, I’m a firm believer that having debt does NOT mean you are bad with money. 

Debt Does Not Define You

Debt, whether it’s student loan debt, car debt, credit card debt, or personal loans doesn’t determine whether you are “good” or “bad” with money. Why? Because “good” and “bad” are completely subjective. 

Who gets to define the word “good” when it comes to your money? 

Who gets to define the word “bad” and what it looks like in relation to your finances?

One would argue that living in a home or apartment with debt payments, electricity, running water, and food on the table means you are amazing with money. Others might argue that having less than $1 million in the bank means you’re bad with money. 

Who is to say what’s good and bad? Well, you do.

What “good” and “bad” with money looks like is completely up to you and your personal experiences. 

Ultimately, debt doesn’t have the power to define you and your connection with money. Your past debt choices don’t get to be the deciding factor on whether or not you’ll be able to build wealth or barely scrape by for the rest of your life. 

The Power of Your Spending Habits

Your spending habits have a lot more to say about your relationship with money than debt does. A recent study by LendingClub and Pymnts found that 24% of people earning more than $250,000 were living paycheck to paycheck in April 2022. TWENTY-FOUR PERCENT! Of those 24%, 12% of these high-income earners were struggling to make their bill payments. That means they were losing sleep thinking about their bills and worried that they wouldn’t have enough money to cover their needs.

Now, I’m not one to judge, but this statistic caught me off guard. I did a little research and after taxes are withheld, you can expect someone who earns $250,000 to bring home about $15,000 each month. I think that we can agree that $15,000 is a significant amount of money. This means that someone who is struggling to pay their bills on this salary is not only making $15,000 each month but also spending about $15,000 each month. 

This reminds me, and hopefully you too, that yes…income plays a massive role in your ability to build wealth. But your spending habits shine a light on your relationship with money. No matter how much money you make each month, you won’t build wealth, or pay off debt, if you’re spending every penny of it.

I’d argue that you can have six-figures of debt and be excellent with money as long as you’re making all your payments on time and have money left over each month. Maybe, just maybe, your spending habits have more to do with whether or not you’re “good” or “bad” with money.

Let’s consider another example. Say someone is bringing home $5,000 each month and spends $4,000 each month. They have a car loan, student loans, and they are working to pay off their credit card. Would you say they are “bad” with money because they have debt? I wouldn’t. In fact, I’d say this person has excellent self-control and discipline with their money. They are making all their minimum payments and they have an extra $1,000 to spend how they wish. Whether they want to use that extra money to pay off debt, save, or invest – I’d say they are good with money. 

Debt is Neutral

One of my biggest revelations on my own debt free journey is that debt is neutral. I used to think of debt as this negative neon light hanging over me. I imagined it as a bright red arrow, pointing down at me, letting everyone know that because I had debt, I was dumb. I didn’t make the right choices, and I should have done better. 

However, one thing I learned over the years is that I had to stop letting debt define how I saw myself and my relationship with money. I was giving too much credit to debt. How could a car loan, personal loan, credit card, or student loan say so much about me? 

It can’t…as long as you don’t let it. 

Debt is neutral. It’s neither good, nor bad. It is not an indicator of what you can or cannot accomplish in the future with your money. Once I realized this, everything changed for me.

And if you have debt, it’s time for you to realize the same thing. 

I want you to think about one financial decision you’ve made that you aren’t necessarily proud of. Close your eyes and consider it: a choice you made in the past about money that you now know wasn’t the best decision you could have made. 

Do you have it? Can you imagine it?

Now, I want you to offer yourself compassion. Yes, you made that decision. But it doesn’t define who you are when it comes to money. In fact, you likely did the best you could with what you knew at the time. 

The good news, if I do say so myself, is that as you learn more about managing your money and how it impacts your life, you are free to make different choices. Choices like: investing (even when you’re in debt), saving money for upcoming costs instead of relying on credit cards, and choosing to pay off your loans, not because they carry a scarlet letter, but because you want to. 

Think This Instead

Instead of worrying about whether or not you’re “good” or “bad” with money, think about the type of person you want to be with money. Then, make choices that that person would make.

For instance, I personally want to be the type of person that invests, travels, gives back to others, and doesn’t pack her home full of crap just because she can. I desperately want my spending and my bank statements to align with my priorities and values. Which means I need to be crystal clear on what my priorities in life look like. When I know the type of person I want to be with my money, I am able to face life’s daily money decisions head on. 

The next time I go to make a money decision, I can ask myself if I’m making the choice that the person I want to be, the person I am, would make. 

Would she grab little trinkets from HomeGoods just because a shelf is empty in her home? 

No. Because she doesn’t want extra stuff collecting dust, and an empty shelf is okay.

Would she buy a pumpkin spice latte on Friday because it finally hit 70 degrees and sunny in notoriously hot Houston, Texas? 

Heck yeah she would, and she would do it without guilt. 

Would she take on an extra client project to increase her income for the month, knowing it will cause her to work more than planned? Well, maybe…as long as she was willing to ask for help and it didn’t take away all of her family time.  

When I stopped letting debt define me, my eyes were opened to how my small decisions every day have an impact on my money and my life. I finally realized that debt didn’t get to be the deciding factor on whether I was “good”  or “bad” with money. 

The Bottom Line

If you haven’t done so already, it’s time to let go of the idea that having debt makes you “good” or “bad.” Debt is neutral, treat it as such. Instead, focus on the person you want to be with your money and make sure your daily choices align with your values.