News Flash: Your Debt is an Emergency!!

I like to think of Mr. Money Mustache as an advanced personal finance blog.

We don’t talk about cutting up our credit cards, or clipping coupons to save $5.00 on the newest Swiffer mop, or making a budget that forces us to save 10% of our income while we devote the rest to “guilt-free spending”.

I don’t talk about my own personal battle with consumer debt and how much I struggled to get out of it, because come on, I am Mr. Effing Money Mustache. I was cleaning and ironing my five dollar bills and storing them meticulously in a photo album at age ten*, obviously I was never going to go out and spend so much on my credit card that I couldn’t pay it back at the end of the month!

This unique history and perspective allows me to see some things that are not immediately obvious to people who have been raised in the current consumer/debt society. And for all the Beginner Mustachians in attendance today, I would like to share one of these observations:

Your Debt is not something you “work on”.


Let’s illustrate what I mean with a few examples:

One time, way back when I was a university student, I lent a couple thousand dollars to a friend so he could pay his own tuition. The cash came right out of my own bank account, and since I had already paid my own tuition, I had just enough left to cover my groceries and other expenses for the school year. After the loan, that left pretty much nothing, but I assumed that my friend would have the balance paid back within just a few paychecks.

I was therefore surprised when the friend proceeded to live a normal university life of partying and eating out, even during the delayed repayment process.

Everything worked out fine in the end and the debt was repaid eventually, since this was an honorable friend. But I still learned something about society’s differing opinions about debt.

On another occasion I was visiting some other friends – a married couple. The guy was showing me his new TV and video game system. As we battled on the Nintendo Wii, the wife came home from working at the part-time second job she had boldly taken to accelerate the paydown of some old personal debts.

On the way home from work, she had picked up a bottle of wine and purchased a DVD containing some episodes of a popular TV show.

This may sound like a normal Friday night to most people, but note that the purchasing of expensive beverages, DVDs, and video games was put at a higher priority than paying off the debt.

The girl thought she was taking a second job to pay down debt, but in reality her second job was going towards wine, television shows, and video games.

And finally, nowadays I receive emails from people who are working on developing their own Money Mustaches. They often detail income, spending, and debt situations. Often, there is a category for credit card debt. Yet these budget sketches also include amounts for entertainment, cable TV, and multiple cars.

The final straw was when I ventured out to poke around on some other personal finance sites last week. I found one that had a post from one of the authors, containing a table like this:

Mortgage: $75,000 @ 4.5% interest
Bank of America credit card: $4500 @11.9 interest
Wells Fargo credit card: $17500 @ 18.9% interest (<-we HATE this debt!)
Citibank credit card: $2900 @ 14.5% interest
We’ve really cut down on our dinners out and Brad has even started biking to work once a week to save gas in his 15MPG F-150 truck…

Do you see the glaring problems in these stories? If not, you have not yet developed the appropriate hatred for unnecessary debt. So let me spell it out for you.

The correct response to this sort of debt is,




Go back and imagine this person about one month after they got that first Bank of America credit card. They went out for dinner a few times a week and bought some shoes and a few tanks of gas in that first month, and eventually the bill came in the mail for $1125. They realized that they only had $600 in the bank, but that was OK, since the “minimum payment’ was only $75.

In the absolute worst case, it is at this moment that the emergency bell should sound, for anyone in the world. The response should be:


I just totally blew it and spent more money than I earned!

I need to fix this immediately, so obviously all spending beyond food, and getting to and from work in the cheapest way possible, is now suspended.

No, I don’t need a “budget” to pay back my debt, and I certainly don’t need two more credit cards.

I simply need to do zero extra spending until my debt is corrected.

Logically, it follows that even if you only wake up several credit cards later and realize that you have fucked up, the emergency applies to an even greater degree.

If you borrow even one dollar for anything other than your primary house or a profitable investment,  the very next dollar you can get your hands on should go to paying that back.

You don’t space it out all nice and casual with “monthly payments”, and you don’t get “me money”, “entertainment allowance”,  or any other such nonsense. You don’t start a family or get yourself a dog, and you don’t go out for drinks and dinner with your friends.

There will be plenty of time for these things later, and they will feel much better when they are not set against the backdrop of Incorrect Debt Due to Error.

Don’t worry, there is nothing wrong with making errors. They are actually good things, since they help you to learn. But you learn by fixing them, rather than letting them ride.

“Sure Mr. Money Mustache”, some beginners will now say. “Of course you would say that, but I’m still less practiced than you. I still need my Starbucks Lattes and my husband likes TV sports so I can’t cancel cable. Can you please stop punching me in the face and let me adjust my consumption gradually instead of suddenly?”

Wrong Attitude!

Even if you are an absolute Beginner Consumer Sucka and your goal is still to consume the maximum amount of luxury products, you are still cheating yourself out of stuff just by running a consumer debt balance.

Every dollar you pay in interest to the credit card company is stealing dollars away that you could be using for more luxury purchases for yourself.

Those dollars are gone forever, and you’ve permanently lowered your ability to consume luxury products, for the rest of your life. Since you need those luxury products so much, you’d better get out of debt quickly so you can afford to buy more, right?

The credit card debts above are eating up over $4000 per year of your after-tax salary just due to interest payments. That’s hundreds of lattes, several pairs of shoes, thousands of miles worth of gasoline for your SUV, and even some massages at the spa and a couple of cross-country flights that you are foregoing every year.

Or, of course, once you start your Money Mustache, the interest savings could also be used to shave decades off of your mandatory working career..

And there is more good news, since this is an Advanced blog:

Your Debts Are Tiny.

I always have a little chuckle when people talk about a $10,000 debt, or even a $70,000 or $200,000 one as if it is insurmountable.

Sure, these sums of money are big when measured against the cost of groceries, and they are not sums of money to be wasted.

But this is an early retirement blog. Here we are learning how to rake together much larger sums of money to allow us to live our lives free from mandatory work. For most of us, that means somewhere between $400,000 and $1.5 million.

Beginners to Mustachianism find these sums unimaginable, but after a few years, the same people find their net worth spreadsheets increasing at over $100,000 per year due to investment returns and reduced spending.

Getting rich really is an exponential process, a concept that is hard to grasp until you realize that your money can work harder than you can. Once this higher level of financial skill is reached, you will realize that the debts of your youth were indeed small potatoes.

How do you get this elusive financial skill? If you’re still in debt, you get it by getting much more bold about wiping it out. Sure, you can do it slowly, just as you can lose 100 pounds by lifting a 5-pound dumbell a few times each day while you sit on the couch and watch Oprah.

But I recommend the more efficient path: put on your walking shoes and start walking as much as you can. Eight hours a day. Go straight to the most healthy and balanced eating regime and never deviate. Stay on it and let the forward progress accelerate your progress each day. Consumer debt and excessive amounts of body fat have a lot in common.

The more vigorous method has multiple exponential benefits: every dollar of debt you pay off creates a compounding snowball of savings that continue for a lifetime. And every dollar you manage not to waste, builds your skill at saving money and learning to spend it more efficiently. These skills stick with you for life as well.

So if you still have a car loan, credit card, department store or even a student loan debt, you should destroy that as a prerequisite to beginning the more relaxed stage of saving for financial independence.

At the later stages, you can start to take it easy, but right now is the time for some hard work. Depending on your life situation, you might decide to go car-free, live with roommates, eat a vegetarian diet, take on extra jobs, delay parenthood, enjoy only local travel, and do any number of other things to get the job done. This stage will be short and effective.

Then I’ll see you at the next stage, which is really where this more advanced blog begins.

* This is actually true

  • Michael January 23, 2019, 7:53 am

    Very well written article. But the problem is, those who are in debts, don’t like reading! If they read, they wouldn’t go in debt in the first place. And even when they read open-eye articles like this, they still skim it fast so they miss the important points and logic. Their confirmation bias is usually high.

  • UtahRappter February 25, 2020, 9:51 pm

    Glad to have seen this, even so many years after it was first published. The scenarios of easing into a more disciplined financial lifestyle reminded me of a quote:

    As often is the case with addictions, the fanciful notion of a gradual discontinuance only provides a comforting pretext for more sustained indulgence.
    – Ron Chernow in Alexander Hamilton

    No more indulging the spending addictions! We can all do that and be happier and wealthier. I guess it’s time for me to stop using the vending machine at work…

  • Mark Dumanon March 8, 2020, 9:46 pm

    I have a question.

    I am still studying and have made the mistake in the past of taking a student loan. Obviously, I have halted the loan.
    It’s a loan with zero percent interest, and a 35-year payback time frame. I work at a part-time job next to my studies. Do I invest now and pay it off later since there is no interest on the loan? Or do I work towards paying off the loan first and invest after?

    With kind regards,
    Mark Dumanon

  • Bright Steve July 26, 2020, 10:14 pm

    I’m from a developing country that has a medium cost of living in the region. Some debt could grow faster without noticing. I’ve just realized how urgent it is to pay off the debt in the early days of my personal finance. I’m still working on it.

  • Greg January 1, 2021, 9:56 am

    Brilliant post, I’ve always been fairly sensible with debt as I’ve seen the impact it can have. Some close family members of mine have struggled with debt for a long while and I get very frustrated seeing spending on unnecessary things like satellite TV and premium sports channels – I might send them this and see if it gives a kick!

  • Paul Michael Tidwell April 2, 2021, 6:05 pm

    Thank you for advice, I just took it to heart but I am on Social Security currently although I have started a Hustle with essentially selling product on Amazon, Our figures are not much to look at yet but we’ve done several thousands in business already and probably made a cool 1k from it.

    I take in 22k a year though roughly and still live with family but as of midnight should be completely out of debt.my credit score should skyrocket shortly.

  • Mommy-of-five December 13, 2021, 3:11 am

    Hey, I don’t expect anybody to read this nearly 10 years after this post was first published. Nevertheless, I am hugely proud that today my husband and I paid off our consumer credit of 16k. We carried it for years and being financially illiterate, we thought it’d be okay to just pay it back according to the repayment scheme. (It was at a 2.4% interest so nothing knee-cap-breaking, but nevertheless still a consumer sucka credit). After discovering MMM about 18 months ago and reading this post, I was diligent to get a handle on our finances. I educated myself, got a HUGE amount of motivation here (thanks MMM and all the others!) and made extra payments whenever possible, even when I started to stay at home with baby #5 (I know it’s okay to have just one, but we decided to go down another route ;)). I took on freelance writing jobs, optimized our grocery budget, started biking (even with a baby, toddler and kindergardener in tow) and managed to put all the “extra” money towards our debt. During that time, we also paid off our car. Today I checked the balance of our credit account and it’s ZERO. I AM SO PROUD. Also, I was able to stash away my first 2,200 € in index fonds. ALL OF THAT JUST IN 18 MONTHS WHILE STAYING AT HOME FOR MOST OF THE TIME. I still feel immensely stupid for being so late to the party and wish I had known all of this 15 years ago aged 20, but well better now than never, right? Now our focus lies on educating ourselves more on finances and stashing away extra cash in investments.

    • Mr. Money Mustache December 13, 2021, 12:35 pm

      Congratulations M5!! And yes, there are still people reading these things every day, even after ten years. Thanks for being one of them!

  • Maria January 18, 2023, 12:40 am

    So if you lend money to a highly indebted person, isn’t that the epitome of co-dependency? For the same reason, you don’t go buy more beverages for your alcoholic relative and you don’t buy drugs for your addict friend. But with money and debt, which can also destroy lives (yes, the bodily harm only compares so far), many people just can’t seem to make the connection…


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