Briefcase Study: The Aspect of Debt You May Not Have Considered

If you’re like many of our fellow Americans, you’re considering what rising inflation, a declining stock (and bond) market, and higher interest rates mean to you and your financial choices.

And while there are a lot of varied consequences to this new ‘normal’, I think we can agree that one big change is that it’s immediately more painful to borrow money. Cheap, low-interest debt had resulted in fewer reasons to stay out of debt over recent years, but have we really considered the many faces of debt? Aside from the interest owed on credit, is there another ‘cost’ we should consider when contemplating taking on and servicing debt? 

Let’s get right to it. I want something new to me, or bigger or better than the one I have, yet I don’t have the money to pay for it outright. Since I will not be denied, I buy it now, on credit. After all, I’m willing to work hard to pay off that debt, so why wait to get that new, bigger, better thing? This is how debt is introduced into our lives; by being human.

So now I have this great new thing, and some debt. Here’s where things get really dicey though: because this new thing in my life requires accessories, maintenance, insurance, time to use it, attention paid to it; I now have more of my precious resources dedicated to this thing. Because it’s even bigger and cooler than I had before, the resources required to support it are also bigger than before.

Remember, I told myself that I’m willing to work hard to pay for it in the future. Well, that future is now. Sure, I may make more money than I did before, because I earned a pay raise at my job, but more of that money is going out of my hands…to support the bigger thing I had to have that requires more resources than I’d expected. In other words, I’m working even harder and taking on more responsibility to earn more money so that I can pour even more resources into the thing I had to have back when my life was smaller and simpler. Do you see that?

When someone we haven’t seen in a while asks us how we’re doing, what is our go-to response? “I’m so busy.”

Why are we all so busy? We’re working like crazy people to earn more money to pay for the stuff we borrowed in order to have, long before we’d earned the right to actually pay for it!

And I haven’t even mentioned the interest charged on the debt we incurred to buy the thing.

So when we’re encouraging people to save more for their future, increasing their 401(k) and Roth IRA contributions for a brighter future, we’re really only giving them a small fraction of the story. How can we save more if we’re multiplying the resources needed to support an ever-growing lifestyle that we indebted ourselves to years ago?

There are no easy answers here, just a frustrating set of principals to ponder. In fairness to ourselves, we really need to think of ways to make certain aspects of our lives smaller, in order to expand our experience. Because it’s so easy to bury ourselves in stuff and debt, we’re always at risk of speeding up the treadmill at the very time when we should be stepping off of it, or at least slowing it down.

The next time you find yourself considering that new, bigger, better thing, ask yourself what the true costs are, now and in the future. You may find that making your life bigger and better is easier if your stuff isn’t.

Easier said than done, I know.