I am a man of extremes. I was once described as having a personality that is either being in first or fifth gear when it comes to my passions and interests. This was so over the course of my entire life. From being a completionist with my Star Wars toys collection when I was eight to having a multi-amp surround sound car audio system with the very first available in-car TV / video monitor when I was eighteen. The challenge with nearly everything you can buy or collect is that there is a cost associated with it no matter if it’s licensed toys or high-end Electronics. Depending upon how much of a completionist you are or how high end you want to go that cost can be extreme.
When you’re younger your parents just say no. You simply don’t get anymore and that’s that. When you’re a little older and that early adulthood of your life’s journey happens to coincide with the modern eras explosion in consumer credit availability, then there are less things holding you back from engaging in your passions. Add the accelerant of an environment that tells you you deserve it because you’re working so hard and it’s easy to see where a tremendous debt load relative to one’s income can develop. Back then I was using different lines of credit for the different things I wanted and I thought my debt management was savvy. The credit card companies were of course much smarter than I was and I remained in debt for years oftentimes paying exorbitant fees and comically high interest rates.
The debt load quickly became an unending battle. I tried all the usual methods to get out of debt such as consolidation loans and borrowing from Peter to pay Paul, or my my case Judy to pay Jane. In truth I came close a few times. I had learned how to get out of debt, or at least how to get close to it, but I still didn’t know how to live debt-free. Unfortunately during my early adult years I did not have a wife to put the brakes on my stupidity and I would repeat my mistakes again and again with whatever passion I had embraced that would require me to acquire something. Then marriage happened and I started looking at the long-term.
Finally thinking about something larger than the passion of the moment, I embraced the teachings of Dave Ramsey. I sold everything that was not nailed down, and through other financial machinations in partnership with my wife we eliminated all the debt. We have lived debt-free,sans mortgage, for over a decade now.
The key to understand about living a debt-free lifestyle, a truly debt-free lifestyle, is that it is not easy. Well I guess it would be easy if you had a tremendous income, but if your income is anything close to the median in America then it’s just hard. You always have to say no as in NO I can’t have the car of the make and model that I love, no I cannot have a great podcast studio with video production capabilities, and no I cannot get my kids a really awesome tree fort inclusive of a zip-line.
Debt is a continuing theme of my work, so why bring all this up again? Well recently I told the story of how we got the financial double shotgun blast of an unexpected and dramatically high property tax bill that required us once again to have to give up things we want just to keep what we have. In communicating with a trusted confidante on matters such as these, I got this response in one of my emails:
…You’ll NEVER EVER be able to make the math work
…average government salary is $44k per year = Living in deep debt with a pension
(If you make under $200k with a family, you WILL live in debt – that’s a mathematical fact –just accept it).
Nothing matters when you die anyway
…and the guy who dies with the most debt wins!!
Stop driving yourself crazy trying to make the math work – it will NEVER work…
Just say (expletive) it, grab a cold beer & start watching all the episodes “Game of Thrones” in order – it’s a great show! Better than Star Wars.
Life will all be over before we know it. So, “Don’t worry… be happy”
Now admittedly much of what they wrote was meant to be tongue and cheek although they were fairly serious about the 200k comment because that’s a somewhat average household income where they live. The underlying point they are trying to make is valid. The ultimate question is if you are of average income, should you just accept that debt will be a part of your life? Should you embrace the Dark Side of debt?
The Debt Cycle Lifestyle
One of the biggest continuing vents that my wife and I make to each other has to do with another friend of ours. This person works in manufacturing and all of the years that we’ve known him he has managed his financial affairs completely opposite of how we do. Emergencies, even emergencies that you know we’re going to come like tires needing to be replaced are all handled with a credit card. He’s gone through the cycle of maxing out all of his cards and then claiming bankruptcy multiple times. I think he’s even had a car repossessed once or twice.
The cycle takes a few years and there’s up and down times in it. When they are in an up time then they have every cool new toy, every great tool, and are going on wonderful trips. When they’re in a downtime their phone is constantly ringing with collectors calling and they never have any money. When he never has any cash then he can’t go out or be social. The full cycle is supposed to take 7 to 10 years or more but from what I’ve witnessed, in reality it takes 5 to 6 before he starts getting offered credit cards again. To expedite this cycle he can double up by having his spouse at a different part in the cycle. If one’s credit is at the bankruptcy point, the other is at the point where they are “building up their credit” because they have been given credit cards by a few lenders. You know when they reach the point of building up their credit because that’s about the time that the new car shows up. Admittedly they are kind of landlocked to their house but they never really are in any Jeopardy of losing it because the bankruptcy system allows you to keep your home even if you bankrupt all your other debts.
As I said, we vent about this. We vent when we see our friend with nicer things than we have, working less than we do, and not really seeming to suffer from it much. In fact they are living the exact lifestyle espoused by my confidant at the beginning of this narrative.
So I have one person telling me directly to give up. They argue I can never get ahead by living debt-free. I have another person who, through example, is telling me just get anything I want on debt and really all of the negatives that people are afraid of aren’t really all that bad. Is it any wonder where the temptation of credit cards and living a debt filled lifestyle is always on the periphery of my awareness?
This is fatalistic thinking, right? It’s crazy to think about never getting ahead. Unfortunately No, current economic realities are on their side of the argument. I don’t’ want to go into the enormity of the status of unsecured debt in America, you see a good overview over at nerdwallet.com, but a quick look at the statistics that resulted from the 2016 consumer debt survey showed:
- The rise in the cost of living has outpaced income growth over the past 13 years. Median household income has grown 28% since 2003, but expenses have outpaced it significantly. Medical costs increased by 57% and food and beverage prices by 36% in that same span.
- To close the gap, overall U.S. household debt increased by 11% in the past decade.
- Households that carry debt average the following balances:
Credit Cards ($16,425), Mortgages ($180,018), Auto Loans ($29,058), and Student Loans ($50,868)
So if we look at American families, it’s like a herd all running in the same directions and that direction is right to the credit card companies and federal government student loans.
Why don’t I just give in?
Everyone is different, and as we saw I’m in the minority. So should I give in to the power of the dark side of debt? As good old boys around here say “It’s not just no, it’s hell no!”. As usual, my visceral reaction is not just based in my stubbornness, although I’m sure that’s a part of it. I have several logical reasons for it.
One of the first reasons that I’m not really into the debt lifestyle is that I have a preference for delayed gratification. A preference, that sadly hasn’t really worked for me, ever. My earliest memory of this was when I was in grammar school. It was probably second or third grade. The teacher had given us three math homework sheets to do. They were the kind that were printed in purple ink and had a weird smell from the mimeograph machine. Two of the sheets had simple rows of addition and subtraction problems. The third sheet included problems laid out in the form of a snake. If you did the math, then you could add up the answers to a chart on the side of the sheet to learn the name of the snake. The teacher told us that we could do two sheets that night, and the third sheet the following night. I went home and worked on the two sheets that didn’t have the picture figuring It would give me something to look forward to the following night. The next day we got to class and the teacher asked out loud “So class, what was the name of the snake?” and apparently I was the only one who didn’t choose the picture worksheet because every other student shouted out the name of the snake in unison. It was my first time hearing a spoiler before experiencing the discovery for myself. I was crestfallen! The name of the snake was “Sammy” in case you were wondering.
Sammy may be in the past, but delayed gratification is still here in the present. Currently i’m holding off on several things I want and could easily acquire with debt. I’m currently holding off on getting a utility golf cart, a couple of nice picnic tables for my property, a Ryzen based 1080ti gaming pc , and many other relatively ‘little’ things that can easily be purchased with a credit card. We can go into why I prefer anticipation to reality later. I’m sure it has something to do with happiness, but the point is I still put off the things I want today for the enjoyment of finally getting them crossed off my ‘things I want’ list when I have the cash to do it.
Another reason is the big fish / small pond preference. I’ve discussed that in my old neighborhood how so many people thought of my wife and I as being rich even though we both make nearly exactly the median income for the average worker. Why is that? It’s because of access to cash. We save first, spend later. So where others have to see if they ‘get approved’ to buy something we just use the cash we had saved when a deal or a need presents itself. Apparently, in a world where leveraging is the prefered method of financial management, if you have cash, then you are among the rich.
I’m also motivated by the fact that life is hard. Yes, there is no question that it’s harder for others, in some cases very much harder, but there are always challenges and that means it’s possible to dream of an existence where those challenges don’t exist. I love this promise of something better. The debt lifestyle is giving in, it’s saying this is all i’ll ever have so let me make the best of it. I dream of a world with no debt at all, not even a mortgage. When I dream of winning the lotto or having a successful business, i’m not dreaming of yachts, or four car garages filled with my dream cars, i’m dreaming of no debts and enough cash set aside for the interest to pay for maintenance and upkeep on the things I have. Literally my dreams are all about not losing what I have. That is a better life for me by my definition.
One way that life gets harder is when debt management is apart of it. I am anxiety ridden and don’t do well with the pressures of trying to manage finances when money is tight. Money is always tight if you don’t keep considerable buffers. Back in the day when I embraced credit cards I discovered that I’m also horrible with bill collectors who are trained to manipulate the emotions of those they are collecting from. Some people have no problem with this. My credit loving buddy for example just doesn’t pick up the phone when he knows it’s collector. We are very different in that every ring stresses me out but it doesn’t bother him at all. I’m not ignorant about the realities of collections. If I bought the things I wanted, I know that i’ll most likely be able to make payments and if not, I also know that technically nobody will repossess a gaming PC or old picnic tables. Even though it’ll never happen, it simply doesn’t make sense to me to have any risk of that in my life even the infinitesimal risk of it happening. Avoiding anxiety is not just about money, I make these decisions in other areas of my life. For example, I wake my kid up from her nap after a couple of hours because I’d rather not have to look forward to the stress induced by a child who won’t go to bed later.
Finally, there is a challenge in saying no. I like challenges, there is a certain satisfaction when you don’t give in. It’s like exercising vs. eating the big meal. It’s also like sitting down and writing another article when I just want to go clean up some fallen trees or play video games. “I can do this” I say to myself and then get to work on my goal. Credit is too easy, too seductive. You swipe and your done. What’s the pleasure in that?
Yes, I know i’ll never be completely payment free, even if I pay off the debt of the house. I still would argue that having some payments that you can’t avoid is better than a bunch of payments that you can. At least that’s my opinion. Going back to my confident and my friend, as well as the macro numbers, apparently I’m very much in the minority. In the Star Wars movies you never hear Darth Vader or any of the evil Jedi discuss the fun of the dark side. They always are seduced by the power of the dark side of the force. Like the dark side of the force, there is a tremendous power in debt. In the larger economy debt management allows large corporations to grow. It allows cities to have roads, parks, and other infrastructure. If improperly used it also causes “irrational exuberance” that leads to economic chaos which ultimately destroys the lives of thousands of workers when big companies go bankrupt. In the family economy it allows for both bridging the widening gap between what you earn and what it costs to live and it also allows you to engage your passions, at least until you go bankrupt. Then you have to wait another three to six years before you can start that process again.
A story where the protagonist experiences a journey with big ups and downs and eventually, through embracing their passions, figures out a way to win against insurmountable odds is a great plot for a summer blockbuster film. That roller coaster ride is not what I want when I think of what is a good life. If I want to experience an adventure I’ll just check out the latest Star Wars movie. That being said I may just have to wait until it hits netflix, because I can’t afford movie tickets at today’s pricing and I certainly won’t be putting it on a credit card.