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Out of Debt and Still Broke

Updated: Aug 19, 2022

Believe it or not, you can be out of debt and still be broke.

"How?" Well, let me explain.

Being out of debt means, in most cases, that you are no longer using debt to finance your lifestyle and that you have sufficient cash flow to meet your lifestyle needs. This is a wonderful thing given that high-interest debt can be costly and place a real strain on your discretionary income. Discretionary income is the money you have left over after paying for taxes and necessary living expenses. Generally speaking, less debt = more discretionary income; however, it's what you do with your discretionary income that matters most.

I am not going to lecture you about your latte fix. I have one, too. In fact, I am drinking one right now. My favorite is the turmeric latte with extra turmeric from Sips Espresso Cafe in Athens, GA. If you are ever in town, make sure you swing by and get one. If enough of you do it, they might rename it the Modom Solutions latte - be sure to tell them I sent ya.

Getting back to the point, it's easier to restrain ourselves from making poor financial choices when the pain from one outcome outweighs the pleasure we might experience from another. For instance, if you find yourself smothered in the financial and emotional weight of credit card debt, it is much easier to resist the temptation of incurring more debt to satisfy a compulsive spending urge. However, once our debts are paid off and we feel as light as a feather, it's much easier to justify spontaneous retail therapy when it does not involve incurring more debt.

Under this type of logic, debt is the evil force behind our financial woes - not our spending behaviors or compulsive tendencies that may or may not be influenced by underlying stress. So as long as we are not incurring debt, we're in the clear. Right?


Companies are picking up on this "Just say no to debt" trend and rebranding a new type of lay-a-way option: Only the real ones know about lay-a-way - LOL. Christmas wouldn't have been the same without it. But I digress. Companies like Quadpay, Sezzle, and Klarna have a platform where you can buy now and pay later. They know that people have associated financial harm with traditional sources of debt and not through over-extending themselves with micro-payments that eat up their cash flow and leave them in the same feast and famine cycle they experienced when buried under a mountain of bills.

This is how people end up with 20 to 30 apps and subscriptions across various domains of their life and struggle to understand where all their money is going. Five dollars here and ten dollars there add up quickly. For some, this can be hundreds of dollars a month. Worse yet, some are paying hundreds of dollars a month for stuff they don't use or derive any real benefit from. Yes, you don't have debt. But you might still be living paycheck to paycheck. Yes, you don't have debt but you aren't building wealth either. Yes, you don't have any debt but you still might be operating under the same mindset while using different means to achieve your desired ends.

Most experts don't tell you that the pain of becoming debt-free was the driving force behind making better financial choices. What do you do when you no longer feel that pain? It's easy to say no to a hamburger after having a heart attack. It does not mean your tastes or preferences have changed. It doesn't mean that a maladaptive behavior you turn to under pressure or duress has gone a way. This is one of the hardest part of the journey - freedom.

Unfortunately, most people spend so much energy and effort getting out of debt that they fail to invest the same energy and effort planning for life without it, which leads to a very important point...

... If you don't have a plan for your newfound freedom, someone else will: You'll find yourself out of debt and still broke.

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