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Credit Card Debt Calculator”

Excellent comment about debt

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A Million Paths leaves this excellent comment on my recent post, When your debt feels like your arm.

I was going to say something about how I agree and how debt is bad and blah, blah, but something really bugs me about everyone’s comments.

Debt is the new fat. It’s just one more thing to be ashamed about and carry guilt about., and for other people to be pious about and to lord over other people about.

I have a ton of student loan debt (no credit card debt), but I spent seven months living and teaching English in France. Maybe I should have stayed behind earning a bigger paycheck working to pay my debt. But I’d been working real jobs for three years and the debt was still there, and I was still struggling to get by, and I wasn’t going on vacations or anything, and the debt could possibly be with me until I’m 40 if I do all the “right” things and by then I’d be too old to participate in the program!

I have a friend who now has as much student loan debt as I do (she got her MBA) and a mortgage and a husband and right now she’s miserable. She’s spent her entire life post-college, and doing everything “right” and while she’s probably in better financial shape than I am she’s infinitely more trapped. Not just because of the debt, but because of the mindset that comes with thinking that finances can dictate her life instead of the other way around. Your life dictates your finances. If you want something badly enough you can find a way to afford it that doesn’t involve getting into hock up to your ears.

We’re not taught that.

I think careless consumer debt is dangerous mostly because it stops people from living the lives that they really want to lead. But I think the opposite is true too. there’s such a thing as being too cautious too. Of waiting to do everything “the right way” and ending up dying and not having done anything.

Money is not an end in and of itself, it’s a means to an end.

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  1. I agree with this post – it’s a matter of what’s most important to you and how you allocate your effort and time in the short time we spend on this rock.

    However, I think the comment sums it up nicely in the end… there’s a balance – buying everything in sight is dumb, but so is living in a cave and never spending a penny.

    Some people get off on seeing a huge balance in the bank (or no balance on a debt ledger) whereas others are willing to accept the added cost of carrying debt in order to enjoy life the way they want to. Very personal choice, but what’s important is that people are educated enough to make the choice in an informed way.

    Here here for balance! Great site, Ramit… keep it up!

  2. I agree with “A million paths”. My younger brother, who apparently is infinitely more wise than I, lives frugally but doesn’t deny himself the fruits of his labor. I was once spouting the virtues of being austere with ones finances, when he easily retorted, “hey bro, do you work to live, or live to work?” He quickly silenced my tirade and admitted than saving is good, but not the only thing. Thanks A Million for the reminder. (no pun intended)

  3. That’s true and a well-thought-out answer, but you have to be careful when adopting an attitude like that about money or you may end up regretting it later.

    I have a close friend who basically decides what experiences she wants out of life, and goes and buys them without regard for her salary or future earning power. She’s a part-time executive assistant (secretarial work) and a part-time waitress. She has bought a condo downtown that she lives in which is just barely within her means to afford, and she financed the downpayment with a loan because she had no money saved but wanted to own real estate. She owns a car that she loves. She doesn’t ever drive it because she lives downtown and doesn’t need a car, so she has it uninsured sitting in a parking spot that she pays a ridiculous annual fee for, and the car isn’t paid off yet. But she refuses to sell it because the car makes her happy. She also decided this year that she needed to travel for a year to “find herself” and she would regret it if she never took the time off to do this, so she is currently living the high life around Asia and Europe, financed entirely by a loan, and she is not bringing in any income for the entire of 2007.

    I know she thinks it’s worth it now, but I hope she still thinks so when she’s 40 (she’s 28 now.) I’m very afraid for her that she’ll end up bankrupt with the debt she has taken on to finance her must-have experiences of a lifetime.

  4. I suppose that is one way of looking at it. On the other hand, debt continues to be money borrowed from your future. Not paying it off reduces what you can do, just as lending money increases what you can do.

    The money you spent in university still costs you today. This might not matter if you are happy with what you have at this moment. It doesn’t change the situation. This can be taken further – if you continue to spend more than you earn, the amount you will be able to do gets smaller and smaller. Many people are in that situation. Many won’t turn it around because they feel they would have to give up their lives! You are always going to pay for what you do – the more efficient you are with your money, the more you’ll do. It seems efficient to reduce debt early and abruptly than slowly and over a longer period of time.

    Either way, it should be approached from the mindset of measuring what you want now relative to what you want in the future. If you enjoy your present life so much that you don’t want to build towards anything, it doesn’t really matter if you plan ahead, save or pay off your debt.

    That makes the real question “Will you/they be unhappy in 5 or 10 years?” And maybe even more importantly, is it really the debt that is making her unhappy? Many people get married and settle down too early – this doesn’t mean that the alternative is to be spending your future and enjoying life. I’m not sure how the ‘right’ thing includes getting married and having a mortgage – neither are purely financial decisions and could simply be someone who didn’t listen to their inner voice. Maybe it’s the expectations of a giant house that are draining the joy out of it – I’d say that happens a lot. What would of been unusual is not getting married or having a mortgage in order to pay down the debt and being miserable.

    Just ask if slashing your budget and owning a smaller home so that you could pay off your debt (and/or save) enough that you could take an extra vacation every year – free in the sense that you paid for it in the past – would make you happier overall? Will they remain as miserable when they no longer have a mortgage (say, “a raise” of 35%)? Will the satisfaction of having the money to put their kids into university without the bondage of loans be worth it? What will really make them happier over the course of their lives?

    What I see in my own life is that the happy ones are those that have the flexibility to do more while having a secure future. You just don’t see them very often – they are the quiet ones that you don’t really expect to have money.

  5. I agree that everybody thinks diferrently inregards to debt. I personally can’t wait to finish paying off my car loan. I pay as much as I can every month and limit myself from buying other things and at the same time I save a little in my savings account. I figure that if I keep it up and when my loan balance is low enough, I’ll transfer all of my savings to pay it off. That is my idea of balance.

  6. I don’t think that person who wants to take a big trip yet has debt needs to make such a stark choice. It is possible to live a fulfilling life without sacrificing saving and while paying back debt.

    Personally, I do not like to wait for the future to fill my life with interesting experiences and travel. I travel for work so I take a little extra time to explore the places I go. I take vacations to exotic locations but I stay in cheap (but clean) hotels. I don’t have cable TV or buy a lot of crap so that when I want to travel or splurge on a last minute experience, I can afford to do it.

    I cannot afford to do both – live an extravagant life and save for the future. Most people I know cannot do both either. However, I can afford amazing life experiences and save for the future. I choose experiences over purchasing more crap for my house, more clothes, more shoes more Starbucks. Some people I know choose to buy a lot of crap and then wonder how I can afford to do what I enjoy without going into debt. We all define quality of life differently, I guess

  7. Amen! I’m personall buckling down for a year to get rid of my debt, but ONLY so I can live a better, more travel-filled life. I wanted to move about a year ago, and I realized I didn’t have the money to do it! If I get rid of all my bad debt, it’s about the same as giving myself a 20% pay raise, and I intent to do something fun with (some) of that money! Money is a means to an end.

  8. I agree. Debt is the new fat. It’s true… I hate sitting next to debtors on plane flights. I wish the airlines would pull their credit report and make them buy an extra seat. It’s only to us people who aren’t in debt.

  9. I believe in expanding your means, than living below it. My only debt is my student loans and I am currently paying it off. But I do not want to give up my lifestyle by rushing to pay it off so I take my time and find additional income to pay off the debt and also still have a life. You don’t have to live like a caveman all the time to get rid of debt .

  10. I love when people act like student loan debt isn’t that big of a deal. Cracks me up. They have no idea how much their diploma cost them. La-dida-da.

    If debt is the new fat, Millions will undoubtedly develop heart disease– but damn those croissants were delicious weren’t they!