Big Debt, And Should We Learn To Live With It?
Back in the day, I’m sure the idea of a $20,000 credit card bill would have stopped traffic, let alone a conversation. Nowadays, while the idea is still shocking, it’s not even close to unheard of. Then think of huge mortgages, or student debts, or car loans. We live with debt as the norm. But should we?
Debt As Part Of The Deal
According to research, debt wasn’t part of the average person’s psyche before the 1920s. To those earlier generations, if you didn’t have the money to buy something, then you just didn’t buy it. Then came the advent of the car and its widespread popularization, and with it came credit. It must have been obvious to those original marketers- people can’t afford to buy it outright, so lend them the money with interest so they can attain their own set of wheels.
Debt Normalisation
Once the idea of credit and loans was introduced as a means of consumer power, it is easy to see how it became part of the normal functioning of society. Loans became necessary to buy a house, then government loans became necessary to gain a tertiary education. But there seems a big difference between loans that gain you an asset, and credit card debt which, except in very rare instances, doesn’t.
Credit Card Debt
Apparently one survey showed that the average American household owed $8,500 on their credit cards. That’s a sizeable chunk of an income, and if that isn’t getting cleared at the end of every month, it can be a recipe for some hard times. How did this happen? How did we get to the point where big credit card debt became part of the normal functioning of our lives?
With only a recent history (credit cards really coming into mass popularity by the late 70s), it’s probably a combination of factors- the ease and apparent security of a credit card, the killer combo of delayed pain and instant gratification and perhaps a general trend towards living beyond our means and using credit to achieve that. So should it be the norm and how can we buck the trend?
Breaking Free of Credit Card Debt
There is nothing to say you need a credit card. Debit cards with credit functions are now widespread, and take the money directly from your savings account. No interest, but all the functions of a credit card. Think of it like getting back to the old days, where you didn’t buy something until you had the money for it.
The reality is we live in a time where we have to come to terms with debt to an extent. I admire anyone who can save the money for university, but it’s not the reality for most of us. There’s an increasing amount of people who have no inclination to own a home and stay debt-free that way. That said, both of these debts are due to asset-building and with regulation and rationality, will pay for themselves in career advancement and investment.
Credit card debt does none of those things. If you want to break the credit cycle, cut up your cards. Save up for the things you want. Set up a weekly direct deposit into your debt repayments the day after you get paid- the money will go out before you can spend it on something else, and your debt will start to dwindle. Credit card debt may be the norm, but it doesn’t have to be yours.
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