7 Debt Myths That Are Holding You Back (and What to Do Instead)

Discover the 7 biggest debt myths that may be holding you back from financial freedom. Learn what’s true, what’s not, and get practical tips you can apply today to take control of your money, reduce stress, and build a stronger financial future.

7 Debt Myths That Are Holding You Back (and What to Do Instead)

Debt is one of those topics everyone has an opinion about—your friends, your family, your coworker who once read a finance book, even random strangers on the internet. And while some advice is helpful, a lot of what people believe about debt is simply not true.

These debt myths can quietly limit your progress, keep you stressed, or even make your financial situation worse. The good news? Once you understand the truth behind these myths, you can start making smarter decisions—without feeling overwhelmed.

In this article, we’ll break down 7 common debt myths, explain why they’re misleading, and give you practical tips and real examples to help you break free from them. Let’s dive in.

Myth #1: “All debt is bad.”

Many people think debt is the enemy. But real life isn’t that simple. Debt can be harmful, yes—but it can also be a useful tool when used intentionally.

The Truth

Not all debt is created equal. Some debt helps you grow. Some holds you back. What matters is how you use it and whether you have a plan to manage it.

Good Debt vs. Bad Debt

Good debt: education loans, business loans, mortgages
These help you build long-term value or increase your income.
Bad debt: high-interest credit card balances, payday loans
These drain your money without offering lasting benefits.

Example

Helpful debt: A student loan that enables you to get a higher-paying job.
Harmful debt: Using a credit card for clothes you didn’t need, then paying 22% interest.

Practical Tip

Before taking on debt, ask:
“Will this help me earn more or build value in the future?”
If the answer is no, think twice.

Myth #2: “You should never use a credit card.”

Some say credit cards are dangerous. But like many tools, they’re only harmful if misused.

The Truth

Credit cards aren’t the problem—lack of strategy is. Used wisely, they can help you build credit, earn rewards, and protect your purchases.

Benefits of Using Credit Cards Responsibly

Example

Maria uses one credit card only for groceries. She pays it off every month.
Result?

No interest
Cashback every month
Strong credit history

Practical Tip

Use your credit card the way you would a debit card:
Only spend money you already have and pay the balance in full every month.

Myth #3: “Debt will always be part of your life.”

Many people grow up hearing this—maybe even from their parents. But it’s not a universal truth.

The Truth

Millions of people become debt-free, and you can too, regardless of your income or background. It doesn’t require extreme frugality—just consistent planning.

Why This Myth Holds You Back

Believing debt is “normal” makes it easy to accept it instead of managing it.

Example

Tom had $18,000 in credit card debt. He felt overwhelmed. But by using a simple snowball method—paying off his smallest debt first—he built momentum and cleared everything in two years.

Practical Tip

Try one of these proven repayment strategies:

Debt snowball: pay off smallest balances first for motivation
Debt avalanche: pay off highest interest first to save money

Pick the method that keeps you motivated, not the one experts say is “best.”

Myth #4: “If you ignore debt long enough, it will go away.”

This is wishful thinking—and a costly one.

The Truth

Debt doesn’t disappear. In fact, you’ll usually end up paying more due to interest, fees, or collections.

Why People Believe This Myth

Shame
Confusion
Fear of seeing how bad things really are

Example

Jenny ignored a $1,200 credit card bill for two years. With interest and late fees, it grew to nearly $3,000—and hurt her credit score.

Practical Tip

Face your debt head-on:

Log in to all accounts
Write down balances, interest rates, and minimum payments
Create one simple plan

Most people feel relief, not fear, once they finally look at the actual numbers.

Myth #5: “Your credit score is everything.”

Credit scores matter, but they’re not the whole story—and they’re not a measure of your worth.

The Truth

Your credit score matters when:

Applying for loans
Renting an apartment
Getting certain jobs

But focusing on it too much can lead you into unnecessary debt just to “keep the score high.”

Real Talk

A high score is nice, but being debt-free and financially stable is better.

Example

Some people keep a credit card balance because they think it improves their credit score.
Reality?
It doesn’t. It only costs you money.

Practical Tip

You don’t need to live for your credit score. Just do the basics:

Pay on time
Keep balances under 30% of your limit
Avoid opening too many accounts at once

Your score will take care of itself.

Myth #6: “You need a high income to get out of debt.”

This myth stops people before they even begin.

The Truth

A higher income helps, of course—but your habits matter more. Even people with high salaries can drown in debt if they overspend.

What Actually Moves the Needle

Tracking your money
Reducing unnecessary expenses
Consistently making payments
Avoiding new debt

Example

Two friends earn different amounts:

Anna: $3,000/month income
Sam: $7,000/month income

Sam buys a new phone every year, eats out daily, and carries a $10,000 credit card balance.
Anna tracks her spending, cooks at home, and pays off small debts first.

Result? Anna becomes debt-free first.

Practical Tip

Start by identifying 2–3 recurring expenses you can reduce:

unused subscriptions
eating out
impulsive online shopping

Even saving $100/month can make a huge difference over time.

Myth #7: “Budgeting is too restrictive.”

Many people think budgets are painful or boring. But the right budget should actually feel… freeing.

The Truth

A budget isn’t about limiting your life—it’s about giving your money a job, so it works for you, not against you.

Why People Resist Budgeting

They tried budgeting too strictly
They feel guilty about spending
They don’t know where to start

Example

Jessica used to think budgeting meant “no fun allowed.”
But after using a simple 50/30/20 budget (needs/wants/savings), she realized she could still buy coffee and travel—she just spent intentionally.

Practical Tip

Try these beginner-friendly budgeting methods:

Choose the one that feels realistic—not the one that looks the most “perfect.”

Bonus Myth: “You must do everything alone.”

Debt feels personal. But you don’t have to handle it in silence.

The Truth

Support—financial or emotional—makes the journey easier.

Who Can Help

Practical Tip

Talk to someone you trust or join a community focused on improving money habits.
You’ll discover that you’re not alone—and you’re not failing.

How to Break Free From All These Myths (Summary)

Here’s a quick recap of how to fight back against debt myths:

Understand the difference between good debt and bad debt
Use credit cards wisely—not fearfully
Believe that being debt-free is possible
Face your debt instead of avoiding it
Don’t obsess over your credit score
Build smart habits regardless of your income
See budgeting as empowerment
Seek help when needed

These small mindset shifts can lead to major long-term changes.

Conclusion: You’re Not Stuck—You’re Just Starting

Debt doesn’t define you. And it doesn’t have to control you. Most of the fear we have around debt comes from misinformation, and once you remove these myths, everything feels more manageable.

Progress doesn’t require perfection. It just requires awareness, a plan, and a willingness to take the next step—even a small one.

You deserve financial calm. You deserve stability. And with the right mindset, the right tools, and the right perspective, you can absolutely build a life where money works for you—not against you.