The Way We Think About Debt
Mike: One of the things we examined this week was what debt means to us as individuals. What should we think about when paying it off? There is no one right answer, of course, because debt means something different to each of us. So let’s talk about this. Logan, your debt is all consumer, right? You don’t have any student loans.
Logan: Yes, mine is consumer debt. Consumption. Ha. Yes. But it is an interesting division. Does the kind of debt matter, psychologically? When I had a car loan, I thought about that debt differently than I thought about my credit card debt.
Mike: How so?
Logan: I’m not sure. I didn’t think about the car debt, at all. So much that when I was adding up my debt last year, I had to be reminded to factor in it. To me it was another bill. But the credit card debt totally felt like this disgusting black cloud. DARK. TERRIBLE. DANGEROUS.
Mike: Maybe it’s because the car is something you needed and were happy to pay for, while your consumer debt was mostly a bunch of stuff that you wanted, but could have survived fine without. I feel that way about my student loans. I’d probably freak out about credit card debt and would want to pay it all off ASAP, but with my loans, they’re there, I pay them every month and don’t really think about it. My interest rates are pretty low and the interest accrued adds up to less than $2,500 a year, which is the deduction limit for student loan interest come tax time. Anyway, that’s boring tax talk, but what I’m getting at is that I’m not too worried about it. I know they’ll be paid off by the time I’m in my 40s—possibly sooner. And in the meantime, I can live pretty comfortably.
Logan: The car was a decision made with a sound mind, and it’s a decision that I didn’t have to validate or feel bad about. I needed a car, I bought a car, I got insurance, I made my payments. It was a good car but a modest car. The payments were reasonable. There was no sense of, I’ve really screwed myself here (though there were months when, sure, I bemoaned my month payment and thought, I’ve really screwed myself here!). The credit card debt was different in that it was a lot of tiny decisions that I validated at the time (I deserve this dinner out, I need this haircut to feel better about myself) but added up were not so easily defensible. “I spent $20K to make myself feel better,” just doesn’t work the same way, “I spent $20K to get to and from work” does. Sometimes I’ve toyed with the idea of thinking about it almost like a medical debt. I spent that money on regular sessions with a not very good or effective a therapist, called dinner and a bottle of wine.
Mike: But you also don’t feel the need to pay it off ASAP, right? I mean, the way I’d feel about it, or the way Lisette and her partner have decided to tackle it so aggressively. I don’t think I would tackle it as aggressively as they did/are, but I do think I’d make paying it off a priority.
Logan: Well, there was a time when I for sure felt like I had ruined my life by racking up this credit card debt, and that I wouldn’t be able to “start my life” until I paid it off. I’ve since changed my mind about that, mostly. I don’t feel ashamed about it anymore, mostly. But I didn’t ever feel that way about my car debt. I didn’t feel like the car payment held me back in the same, way, psychologically. Even though the payments, well at least for a long time, was pretty similar. I think it has something to do with the fact that interest rates on the cards are high, and so there’s this sort of feeling that I can’t save any money, that I need to pay off the cards first. But … I also don’t want to not spend any money? So in my head, it’s always been, pay bills, live, pay off cards further with extra if there is extra (the only time I’ve managed to have “extra” is when I’m close to paying off a card and just want it gone!), and then ONE DAY, I’ll save for …. something.
Mike: It’s all about finding that balance and whatever will work for you to reverse that debt back to zero. I think it’d be unrealistic for you to go from charging things without thinking about it to magically breaking all your bad habits and focusing all of your money to get your credit cards paid off. But I also think it’s fine for people to want to do that—to go through a period of misery in pursuit of some bigger goal in mind. I think about my parents—how when they were my age, I was already old enough to start school. And I think about how we lived in this awful one-bedroom apartment together—my family of five—for a few years until they had saved up enough money for a down payment for a house. I don’t remember it being so miserable, but I’m sure it was for them. They made it seem like we were one big happy family in that single bedroom, but I’m sure in the back of their minds, they were like, “The kids need their own rooms! We need our own space!” And then I was in third grade, and we had a house, and a backyard, and all that temporary misery was worth it. So, I don’t know why Lisette and her partner are putting themselves through hell while shedding their debt or what their end goal is, but I do have an understanding of why people do it.
Logan: I used to wish I was the kind of person who could do that, I used to daydream about moving somewhere and doing a job—oil fields! cruise ship dishwasher! I don’t know—where I’d work all the time and have zero places to spend money and I’d just do it for a year and then I’d pay off my debt and I’d start fresh. I do like the idea of starting fresh. But it’s not something I’m actually interested in doing. And to people who are? Bravo.
Mike: Bravo, indeed. Bravo to anyone who figures out the thing that works for them when it comes to debt (or savings, or just living, basically).