This has been by far the biggest struggle of my life. Growing up in a society that pushes the idea that you deserve everything and you should have it all right now, it has been nearly impossible for me to simply wait until I can afford things to acquire them. The call of awesome things is so strong and so easy to get the wrong way that nearly all of us succumb to one of the most nefarious financial tools ever created: credit.
How much money have we wasted in interest charges over the course of our lives? I know that I have spent far more than market value for many of the things I’ve owned due to interest charges. At the time it always seems like a fair trade: pay a little more to get what I want right now. This emotional decision has cost me so much money over the years, and when I think back on it I wonder how much more I could have right now if I had been able to just wait to pay cash for things.
Another thing we don’t think about, in addition to paying more, is the fact that we are locking ourselves into a payment agreement for several years, if not decades. Even something as simple as a car loan typically takes five or more years to pay off these days, and once we sign that piece of paper we are obligated to hundreds of payments regardless of how our life circumstances or preferences may change. After the agreement has been made, the bank usually has no further interest in your feelings and are solely concerned with collecting their payments from you.
This is a problem if you have a change of heart at some point during this process. Once you lock yourself into an agreement, you options immediately become more limited because you have this obligated monthly payment. I have had many times where I regretted purchasing something large because I wanted to make a change, but I simply couldn’t afford to because I owed more for something than it was worth and couldn’t trade or sell it.
I find myself in this position right now with my travel trailer. My primary dream has always been to live on a sailboat and cruise the world, and I’m at the point now where I would love to buy a very cheap one with cash and then live on it while fix it up over time, but I owe far more my RV than I could reasonably sell it for, so instead of being able to shift gears into a boat I’m forced to stay in my current situation until I can figure a way out of it.
The advantage of experience is that we learn lessons that we aren’t equipped to understand when we’re young. What isn’t so good is that it takes us making these mistakes over and over again before we finally get over ourselves enough to learn from them. After many years of working and spending, I have finally reached the place where just the thought of borrowing money makes me shudder. My goal is to become debt free and remain that way. I just don’t need these things so badly anymore that I’m willing to lock myself into a situation to get them.
Now for the political part: our country suffers from exactly the same problem. We feel an urgent need to spend more than we make. In our desire to push this grand social agenda that many in our government espouse, we have borrowed trillions of dollars against our future to secure things that we are too impatient to wait for today. We justify this by telling ourselves that we are “saving lives”, but the truth is that we are simply trading lives today for our children’s lives tomorrow. There will be a reckoning when we finally borrow so much that it becomes clear we’ll never be able to pay it back, and it will be they who suffer for it.
There is a lot of talk about “reducing the deficit” in our budget, but this is an example of our unwillingness to do what is necessary. A reduction of our deficit simply reduces the rate at which we borrow money. It means we’re still spending more than we make and increasing how much we owe. The goal should be getting to a budgetary surplus so we can start paying back the money we owe, not reducing how much we borrow, but that would require we give up our pet projects and no one seems willing to do that.
Our national debt crisis will end at some point in the future, but the question is how will it happen? My gut tells me that we are too selfish and inconsiderate to set aside our pride and start making smart financial decisions to turn back the tide. Instead, we will continue borrowing and borrowing until our financial system totally collapses and we no longer have any credibility in the world. I shudder to think what things will be like then.
How do you feel about debt? Have you mastered your control of it, or do you live like most of us do? What about our government? How much longer do you think we can last this way? Credit always feels like this amazing solution to get what we want, but we never see the other side of this incredibly sharp double-edged sword. If we want to have any chance of a brighter future, we must learn to avoid this insidious tool whenever possible.
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