We live in a debt culture. The majority of us have debt of some kind, be it a mortgage, student loans, a car loan, a line of credit, carrying a balance on our credit or store card(s), a government-endorsed loan against retirement savings, a buy-now-pay-later purchase, a payday loan, a pay advance, a debt owing to a bookie or dealer, or a mix of the above.
While many would argue that the seriousness of the various types of debt varies from “good debt” to “avoid at any cost,” I would argue that the fundamentals of how they affect our behaviour and how we feel are generally the same, thought I’ll admit the last few on the list may seem a little extreme.
The problem with how we think about debt stems from the “common sense” statements we often hear when it comes to:
- Business assets: leasing is cheaper than buying because it’s tax deductible
- School: it’s an investment in your future and you need to go to the best school you can get into
- Investments (such as starting/expanding a business, buying stock): you can use other people’s money and only have to pay the interest, and that means that the return on your own money is significantly greater when you’re leveraged*
- Buying a home: it’s better than renting and you should get as big of a home as you can afford because it’s an investment (and, in the US at least, the interest can be tax deductible)
- Love: you need to get that bling on her finger, no matter what
- Work: everyone needs a reliable car to get to work, a car payment’s just like any other monthly bill
- Social status: it’s rude not to have a big, fancy wedding because your friends and family have to celebrate with you in style
- Fun: FOMO or YOLO, life’s too short after all
As a society, we’ve become experts at rationalizing and normalizing debt. We’ve become so good at it that it’s hard to believe that, for the most part, all these financing options weren’t around before the Boomer generation. In fact, most of these appeared after the 1970s. And we’re worse off for it.
It’s time to relearn what those born before WWII know: though they might sound good, these “common sense” statements ignore the human factor.
We’re not machines. We have feelings and these can include worry, apprehension, anxiety, depression, panic, nervousness and restlessness.
Conversely, we can also experience calmness, contentment, satisfaction, gratitude, pleasure and peace of mind.
No marketer or banker will ever tell you about the advantages of bankrolling yourself instead of letting them do it for you. Instead, they emphasize that you shouldn’t have to wait, you shouldn’t have to miss opportunities, you deserve it, you should feel good…NOW!
The reality is that nothing feels better than owning something outright. Nothing feels better than having had to work for something before getting it.
Every time we use something we don’t really own—thanks to “other people’s money”—it’s a slight let down. We may not feel it at first, but once that new car smell is gone or once we’ve broken in that new pair of designer shoes, belongings that are not truly ours serve as a constant reminder that we owe someone money, that we’re not truly free. They can make us feel we’re handcuffed to a:
- Job we don’t like
- Business we’re not passionate about anymore
- Degree we know isn’t right for us anymore, and possibly even to a
- Relationship we no longer want to be in
But hey, at least we look good, right? We look like we have it all together. We look…happy.
When we own what we have and use regularly we feel different, better. We may not have the newest, nicest, best or most of everything, but when we know it’s our—truly ours—it all looks and, more importantly, feels just so much better.
Money, ours and theirs, is all about control.
The ultimate question then is:
Who do we want in the driver’s seat?
I’d argue that the freedom that comes from bankrolling ourselves leads to a richer and more satisfying life. And that, to me at least, is worth a little patience and some delayed gratification.
*I definitely drank that Kool-Aid during my business school years.
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