Debt-Onation: Is Your Debt Out of Control?

Debt Out of Control

Hello $wanigans! Welcome back to The Green Swan. As you know, I don’t post much about debt around here. I don’t have a compelling debt story where I climbed out from under an insurmountable credit card or student loan bills. But it isn’t hard to notice that it seems like debt is going up everywhere we look.

As a matter of fact, it is going up everywhere. Just take a look at the US Debt Clock! Really, look at it for a few minutes, you’ll learn something. What you’ll notice is that all the tickers are going up! US national debt, State debt, local debt, corporate debt, mortgage debt, student loan debt, credit card debt…it is all going up. And it can be a bit daunting if you look at it long enough.

So try not to…my recommendation is focus on what you can control, your debt. Has your debt gone up in the last year? Are you conscious of your debt situation? Understand all debt has risk associated with it. Debt used wisely can be great, like a mortgage loan, but debt can be dangerous too. Even mortgage debt can be dangerous. Many folks saw significant drops in home values in the 2008/2009 recession and were underwater with their mortgage (home was worth less than the debt). Like I said…all debt has risks.

All high interest rate debt, like credit cards, should be avoided like the plague (unless you have the cash ready to pay off the credit card debt when it comes due before any interest kicks in)!

No matter what, debt shouldn’t be taken lightly. We should think long and hard before entering into debt to make sure it is right for us. To talk more about debt, I invited Jacob from Power Over Life to share a few thoughts. In short, his view on debt…bold!

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Your Debt: Idiotic and Inconceivably Stupid Decisions

Debt is ruining the world that we know and love. Here are four distressing statistics:

  • In 2015 alone, the U.S. spent $223 billion of our tax dollars to pay the interest for the national debt. This total amassed to 6% of the federal budget (Fix the Debt.org)!
  • The average U.S. household with credit card debt has balances totaling $16,061 (Nerd Wallet).
  • In the 3rd quarter of 2016 there were 44.2 million people that had outstanding student loans that totaled nearly $1.3 trillion…and yes that is trillion with a ‘T’ (Student Loan Hero).
  • For those who have auto loans, the average U.S. household has $28,535 of debt (Nerd Wallet).

And people say we don’t have a debt problem…that’s a bunch of hog-wash. Individual, business, and government debts are hitting astonishing levels.

Of course, there are great reasons to have debt. Rarely does an individual have enough money to pay cash for a home. In a lot of instances, it makes sense for businesses to incur debt so that they can use that debt to make income. That’s just called leveraging, and if used correctly, it can be extremely beneficial.

But the real problem is stemming from a society who has allowed themselves to have a lackadaisical attitude about money and debt. This has led to massive amounts of borrowing.

I understand the logic of taking out money to buy a house or go to college, please don’t misunderstand. But there is an ever increasingly higher percentage of our debt coming from, excuse me for being a bit too straight forward, idiotic and inconceivably stupid decisions.

Here are a few recent examples of people around me (and I’m sure you have these people around you too… maybe you are this person?) that are making idiotic and inconceivably stupid decisions.

  1. My wife’s friend and her husband are $40,000 in debt, yet they just went to Hawaii on a two-week vacation. And I know that they didn’t camp on the beach to cut costs.
  2. One of our neighbors has $50,000 of student loans (so far), yet they love to go out to eat and go to a movie (which aren’t cheap) every…single…weekend.
  3. A relative of mine just bought a brand new $60,000 BMW. I forgot to mention that he is only 24, with student loans and not a great job. “I just really wanted it” was what he told me.

Now, having said all of that… I have made some of the same idiotic and inconceivably stupid decisions myself, and I will tell you here and now that I paid dearly for making those mistakes. I know better now and I hope others can learn the same thing.

I can promise you this… the lackadaisical attitude that we, as a collective society, have towards our finances will have a much deeper impact on us in the future than we could ever have realize today.

If you are making idiotic and inconceivably stupid decisions, will you please (I beg you) reconsider? There is a different way of getting what you want, without potentially jeopardizing your future…it’s called saving for it (imagine that)!

Debt, if left unchecked, has a great chance of ruining your financial life. Debt has caused a lot of heartache, countess sleepless nights, and left marriages and families in shambles… and if you aren’t careful, you too might DEBT-ONATE!

Debt Out of Control

Bio:
Jacob Merkley is a full-time blogger who started in the accounting, financial, and retirement realms before switching to working online.  Now he focuses on teaching others about Life Skills that put YOU in control, including the important principles of money management.  He blogs over at PowerOverLife.


Thanks for sharing your bold view on debt, Jacob. Always good to get a wake-up call. It is never too late to take a fresh look at our debt situation and to take back control.

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33 Comments

  1. Great post, JW and Jacob. I appreciate the bold perspective and straight talk.

    Those statistics are staggering. It’s no wonder we are collectively in the situation we are in when you factor in lack of financial education and the societal pressure to spend, not to mention the constant barrage of advertisements we see telling us we just have to have the newest, shiniest widget.

    I definitely have some friends and family members similar to your relative with the brand new BMW. Sometimes I just wish I could flick them. Hopefully they will have their moment of enlightenment sooner rather than later so they can get to work on climbing out of the whole they have dug for themselves.

    1. Thanks Dollar Habits! Unfortunately, being bold is something that we all need to do more often, especially regarding debt!

      I love that you want to “flick them”. I’ll do that to my friends and family members the next time I see them. Thanks!

  2. I’ve noticed the same thing you mention in this post. Debt used to be a terrible thing. Second mortgages were only taken out in the most dire of circumstances. People didn’t have car loans or student loans-if you couldn’t afford it, you didn’t buy it. Heck, people used to have mortgage burning parties because they were excited about being debt free.

    Easy access to credit and changing societal attitudes around debt have led to it not being something you take out in the most dire of circumstances, but instead it’s “normal”. Having a mortgage into retirement, home equity loans, car loans, student loans-they’re all now considered normal and sometimes a good thing. I personally still feel they’re all terrible and want to get rid of my last debt (mortgage) ASAP.

    1. Great points, Liz. It’s amazing how society changes over time. Now people look at a second mortgage and think why not? If the bank will give it to me, why spare a second thought… Crazy.

      Thanks for the great comment!

    2. Liz, you’re absolutely right. I remember my parents thinking that I was crazy taking out student loans…since they never did! It’s unfortunate that credit is so easily accessible. Thanks for reading!

  3. Sometime in the 80s we as a society switched over to a debt based society. There are so many reasons why, but the more important question is where will it lead us. As an individual it obviously leads to as you called it “debtonation”. But what will it mean for society as a whole. I had th out 2008 represented a changing tied on people’s views on debt, but we seem to have reverted already.

    1. Good thought, FTF, I wouldn’t have disagreed. It seems like debt is way too entrenched in our consumer and materialistic lifestyles, I don’t see it going away. Hopefully we can just get better managing it as a society and avoiding the worst forms of debt.

      Thanks for stopping by!

  4. Good post. I have no credit card or consumer debt. However my mortgage debt is enormous. Nonetheless I do have quite a few rents to back it up, BUT the overall number is HUGE, so I’ve gradually started adding extra principal payments to get my “imaginary” debt clock out of my mind to slow down!

  5. This is a terrifying issue if you let yourself think about it too long. There’s a general lack of accountability in our society, and a sense that we ‘deserve’ whatever our hearts desire today, rather than deferring instant gratification. But much like drugs, debt has a dealer, and it’s all the institutions that make it so easy to acquire that are also part of the problem. Our entire economy is unfortunately running on debt fumes and no one knows where it will lead. If there’s a fallout, we’re all going to feel it, even the responsible ones, but at least some of us have conditioned ourselves to live simpler lives. I can say that since I’ve eliminated all my debt, I’ve felt much more at peace! Great post and graphic!

    1. I agree, instant gratification is far too hard for folks to get over. I’ve always focused on the long term and my financial goals which has helped keep me from falling into that never ending trap.

      I’m not much of a blame the banks person. As a banker myself, I shouldn’t be anyway :). There are definitely bad actors out there that are predatory, but with most things in life it’s dangerous to lump everyone together. There’s a morality issue there but we also need to accountable for our own actions too.

      Thanks for stopping by, Max Your Freedom! I appreciate the great comment!

    2. You’re absolutely right… It’s unfortunate that the institutions out there are making it so easy to acquire loans. I know this is just speculation, but I believe that the next crash we have will be bigger than 2008, and it will be fueled by the massive amounts of debt.

  6. Debt is a four letter word for a reason. Great post guys. In the examples your provided it just seems people lack self control, the discipline it take to spend less them you make. The YOLO mentality has taken over and unless people change their behaviors the will live in debt forever.

    1. That’s right, Brian. It’s a culture thing that ties with the consumer and materialistic trends in our society. Unfortunately it doesn’t seem like many have bucked these norms like we all have.

      Thanks for stopping by!

  7. Excellent post. I like the slap-your-face style because that’s what it takes when talking about a topic this serious! We tried sugar-coating it before and it ain’t working because the debt just keeps piling up.
    What does this mean for all of us in the FIRE community? Save more! Someone has to make up for the laggards to finance the spending habits of the no so frugal. And we might be the ones paying more taxes in the future to pay for the government debt, arg!
    Cheers!

    1. Yup absolutely. Having extra cushion is a good idea as taxes could rise. For the long term trend I certainly don’t see them going down!

      Thanks ERN!

    2. You’re right…the slap-your-face style is needed. The ironic thing was that after writing this, I felt a bit bad. I almost didn’t send it to JW because it was a bit on the “loud” side with calling people out.

      But unfortunately we are now to the point where we need to wake people up. This entire nation is going to have problems in the future because of this (even us who are more conservative with debt). Thanks for reading!

  8. The biggest problem is the credit card debt in my view. And the figures are actually worse. While it seems like that there’s $3.7k credit card debt per USA adult, I read that “only” less than 40% of the US households have credit card debts. So those who have, are even in bigger $hit… And we’re in a low and rising interest rate environment…

    1. Staggering isn’t it! That’s scary debt if you aren’t paying it off in full every month. And what happens when credit cards are maxed out and no wake up call yet… Pawn loans, payday loans, other high interest rate debt…?

      Thanks Roadrunner.

  9. Thanks for sharing, Jacob! This is a very good point. Overall our culture has a laissez faire attitude towards debt. I had to unlearn years of “debt is normal” talk from my parents to realize my financial behaviors were unhealthy. We’re crawling out from under $225,000 of debt before we’ll be totally debt-free (including our mortgage), so I know it’s not easy. We had to completely change our lifestyle to quickly pay off debt. As Mr. Money Mustache says, we need to treat debt like it’s an EMERGENCY.

    1. That’s a great perspective, Mrs. Picky Pincher. Granted, if America viewed debt like an emergency, we probably would STILL be in debt, but I think we would have a lot less.

      Our culture definitely has a laissez faire attitude. I wish it wasn’t so. Like Max Your Freedom mentioned above, even the responsible will get hit hard when the entire culture has a fallout with the debt.

      Thanks for reading!!

  10. The normalization of debt is why I think a lot of my colleagues remain in student loan debt for so long. I paid off my loans really fast by basically just not upgrading my lifestyle, but I saw so many of my classmates do the exact opposite and immediately start buying everything in sight! All you’ve got to do is take a little bit of time early on and really avoid that debt-onation!

    1. Thanks Financial Panther.. you are spot on. I think you hit the nail on the head… people want to constantly “upgrade their lifestyles”. That’s the problem. Lets face reality…we can’t purchase everything! As a whole, we all need to get over the fact that we can’t have everything.

  11. Not only is debt seen as normal, but people seem to feel entitled to a certain level of lifestyle, whether they can afford it or not. Someone I know is in dire straits financially with not a lot of earnings, but they still try to “keep up with the Joneses” and spend money in situations where I (in a more stable situation) would not. As was said, they lack self control and discipline. Those are scary statistics you shared, and indeed we have a scary situation on our hands.

  12. Hate to say but reading that list…check, check, and check. Did every one of those, luckily not to that extent but still.

    I think even smart people do this because they can justify it as ‘leverage’ or ‘smart debt’ that I can afford. Others feel they are betting on themselves and their incomes will always rise. Which works great until it doesn’t.

    I think having a map or budget is the biggest step, and seeing it on paper allows you to truly attack the debt smarter. It’s easy to forget when set to autopay the minimum.

    Great Article!

    1. Thanks for the great comment, SSDD! I agree even smart people don’t understand the sacrifices they make by losing on debt and keeping up with the Joneses. Perhaps that suggests it’s an education issue… It’s taboo to talk about during childhood and the schools don’t offer much curriculum… It all falls on the individual who we can only hope starts reading personal finance blogs young…:)

  13. Wow, i don’t like to compare myself to others or being compare at all, but I can never buy a $60k car. Even if I have the money I still can’t pull the trigger. It’s quite surprising that our society values higher education, but yet, a very high percentage of people have no clue as to how to manage their finances. Worst of all, some people don’t understand the simple concept of living within your means. Great post to wake those people up.

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