Don't Let Debt Crush Your Financial Dreams One word will keep half of you from realizing any kind of financial security or independence in your lifetimes: Debt.

By Steve Tobak

Opinions expressed by Entrepreneur contributors are their own.

Somewhere in the neighborhood of half of American households are in over their heads when it comes to debt. That single four-letter word will probably keep half of you from realizing any kind of financial security or independence in your lifetimes. I might be off by 5 or 10 percentage points, but it's definitely a big, scary number.

Student loan debt in the U.S. is $1.2 trillion and nearly a quarter of that is delinquent to the point where people are months behind in their payments. Meanwhile, the average American household carries more than $200,000 in debt from mortgages, student loans and credit card loans. And almost a third of us have no savings whatsoever.

I don't want that to happen to you. If you feel the same way, then we have common ground for a little heart to heart.

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I talk to a lot of young people about their hopes and dreams. I talk to a lot of small business owners and startup founders trying desperately to make it. And I talk to a lot of middle-aged folks who are getting a late start but working hard to beat the odds and come out on top. And the vast majority have four things in common.

When it comes to financial basics, they are clueless.

I'm not trying to be condescending here. Even though I've got a good head for numbers, there was a time when I didn't understand the basics of finance either. So I took a few graduate courses early on and learned the rest on the job as a marketing and sales executive.

Here's the thing. This is not optional, unless of course you want to spend the rest of your life living hand to mouth.

They live way beyond their means.

Perhaps because you don't understand the basics of finance, most of you live way beyond your means, and that's a recipe for disaster.

When I was in college, I ate macaroni and cheese, ramen noodles, and hot dogs. I never went out. Even as a professional, I've never lived above my means, never carried credit card debt, and paid down on my mortgage with every spare dollar I earned until it was paid off.

My wife and I lived in a pile of junk on a beautiful property for a dozen years before we were debt free and had the cash to tear it down and build our dream home. I was 49 and a quarter century into my career when we broke ground. To this day, we do most of the work around the house and the property ourselves.

They believe in magic.

Their mindset on financial matters defies logic so I'm just going to call it what it is: magical thinking. In other words, they have this utopian notion that somehow, somewhere, the debt and money troubles they're accumulating will simply work themselves out and everything will turn out find in the end.

They won't and it won't. When it comes to finance, there are only three things that matter: income statements, balance sheets, and cash flow. There is no magic involved; just math.

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They're not nearly as concerned as they should be.

I've been a senior executive with half a dozen corporations and consulted for many others. They all had CFOs and all their CEOs were fiscally savvy, but I've got to be honest here, not all of them ran their companies the way I would have, and it cost their companies in the end.

Clearly, this isn't simply a knowledge problem. These were all very smart people and yet they let their egos write checks that reality couldn't cash. Funny thing is, they took those risks with other people's money. They may have screwed their stakeholders but they all made out just fine. You, I'm afraid, won't be so lucky.

It's good to take risks, but when it's your career, your company, and your money, you need to make smart decisions concerning risk.

Look, this is not rocket science so I'll just give it to you straight. If you're on a solid career trajectory, live within your means, have a little common sense, and make financial independence a priority, I'm sure you'll do fine. If not, chances are your debt will crush you and your financial dreams. Don't let that happen.

Here are four rules. Do yourself – especially the future you – a big favor and follow them.

  1. Learn about finance. Now.
  2. Never live beyond your means. Ever.
  3. Grow up; there is no such thing as magic.
  4. Don't let your ego write checks that reality can't cash.

Related: 11 Qualities Our Next President Must Have

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Steve Tobak

Author of Real Leaders Don't Follow

Steve Tobak is a management consultant, columnist, former senior executive, and author of Real Leaders Don’t Follow: Being Extraordinary in the Age of the Entrepreneur (Entrepreneur Press, October 2015). Tobak runs Silicon Valley-based Invisor Consulting and blogs at, where you can contact him and learn more.

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