Building a Tolerance for Debt
The first time I got a mortgage, the feeling of being in debt occupied my mind and kept me off balance for quite a while. I felt I should cut back on spending as a response to this feeling of financial “emergency.” Eventually, I got used to it, as do others. The trouble comes when you get used to more serious debt problems.
When discussing credit cards, I usually tell people that having a balance on credit cards you can’t pay off each month is a hair-on-fire emergency that should trigger immediate cuts to discretionary spending. No more eating out, movies, or other unnecessary spending until the credit cards are paid off. However, it’s not possible to stay in a panic state for a long time. It’s very easy to get used to being in debt.
Many people who lose their jobs or have some other financial calamities find themselves not only with credit card debt, but also in debt to hydro, the gas company, the phone company, and many other creditors. As they dig themselves out of debt, just owing on credit cards feels like a relief.
It’s harder to persuade most people with credit card debt to cut back on eating out and other discretionary spending if they’ve experienced much worse debt problems in the past. They’ve built up a tolerance to the panic feeling of debt trouble. I’ve met some people whose response to debt trouble is to become more sensitive to even small amounts of debt, but there are more people who become relaxed about debt.
One of the less obvious negatives about going through big debt trouble is that it can leave you relaxed about having smaller debt trouble.
When discussing credit cards, I usually tell people that having a balance on credit cards you can’t pay off each month is a hair-on-fire emergency that should trigger immediate cuts to discretionary spending. No more eating out, movies, or other unnecessary spending until the credit cards are paid off. However, it’s not possible to stay in a panic state for a long time. It’s very easy to get used to being in debt.
Many people who lose their jobs or have some other financial calamities find themselves not only with credit card debt, but also in debt to hydro, the gas company, the phone company, and many other creditors. As they dig themselves out of debt, just owing on credit cards feels like a relief.
It’s harder to persuade most people with credit card debt to cut back on eating out and other discretionary spending if they’ve experienced much worse debt problems in the past. They’ve built up a tolerance to the panic feeling of debt trouble. I’ve met some people whose response to debt trouble is to become more sensitive to even small amounts of debt, but there are more people who become relaxed about debt.
One of the less obvious negatives about going through big debt trouble is that it can leave you relaxed about having smaller debt trouble.
If only half your hair is on fire, that isn't as bad as having all your hair on fire, right?
ReplyDeleteI keep telling people having less debt is like having half a hole, you still have a hole!
@Alan: Sadly, too many people just get used to their hair being on fire.
DeleteIt can also be a "sign of the times". I've talked with people of different generations and I've heard members of the young-ish crowd proclaim that it's natural to carry a balance on a credit card, whereas the older generation either avoided debt or paid it quickly. There is a reason why personal debt is at an all-time, but to lay the blame squarely on the individual is perhaps not totally correct.
ReplyDelete@SST: I'm not sure why you think my remarks are blaming the individual. This process of becoming accustomed and relaxed about being in debt is one factor that leads to our greater indebtedness. Another factor is the incredibly successful marketing of debt, primarily by banks.
DeleteMy comments were just general comments, not condemning your statements or inferring anything.
ReplyDeleteYup, those marketers are very skilful.
Human are good at building tolerance. I decided to swim almost everyday* for a 1 month now even if the pool temperature is 62-71F and now, I got tolerant to it (I dont care anymore). It's not bad to toughen of ourself a bit, depends of the goals and reasons. Like you, I used to be almost insomniac when it comes to debt and repaid students and car loan in a blink. Latter, I realized this was one of my financial "weakness". On the other end, I never been affected by markets swings like most!
ReplyDelete*especially for the cold effect benefit after hard weight training 4x/week AND because we booked for a 5 days stay in Old Orchard ;)
@Le Barbu: There are a few of us around who are maybe too concerned about debt, but there are way more people who keep spending and drive up their debts.
DeleteYou are right about this Michael! But I don't think the debt junkies read your blog (unfortunatly)
ReplyDeleteSST "sing of times" comment remind me that in our society, if you have no debt (or very low debt) you are more likely to be considered as a kind of looser or someone with no life at all. Consumaturism and debt are close friends and people behind the scheme are smarts!