How to Mess Up Your Financial Life

I thought I knew a thing or two about making financial mistakes.  After all, I’m the guy who once received a $60,000 inheritance and turned it into $20,000 of credit card debt.  And it only took me two years!

I messed up with money the old fashioned way.  I didn’t pay attention to my income and expenses and blindly went about living beyond my means.

But I just discovered a new way to foul up your finances: Feel good about your debt.

Debt as a Confidence Booster?

According to the headline on a recent article, Young Adults Feel Empowered By Debt.

Huh?  I had to read the headline twice to make sure I had read it correctly.

Sure enough, the article was about a new study showing that the more debt 18- to 27-year-olds carried, the more self-esteem they had and the more they felt in control of their lives.

Since the researchers didn’t ask explanatory questions, they could only speculate about what exactly the respondents found so empowering about their debt.  One said, “Debt can be a good thing for young people – it can help them achieve goals that they couldn’t otherwise, like a college education.”

But it wasn’t just student loans that gave people the warm fuzzies; they felt good about credit card debt as well.  “Both kinds of debt had positive effects for young people,” the lead researcher noted.  “It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.”

According to the article, “The researchers also explained that these young adults might be enjoying their debt because it has allowed them to buy things they wanted without having to wait.”

When Warm Fuzzies Lead to Fuzzy Logic

When I read the article, I couldn’t help but think of a video I saw of a series of person-on-the street interviews in which people were asked about their debts.  One woman said she had, “Maybe $6,000” of debt, which she described as “not a lot.”

Not a lot?  I’m sure she didn’t realize it, but if by some miracle she stopped going any further into debt and made the minimum monthly payments on her “not a lot” level of debt, using some fairly common assumptions, it would take her over 40 years to pay off that debt!

Far from “empowering,” debt is entangling.  It prevents people from achieving their goals, steers them to jobs they’d rather not take, and messes with their most important relationships.  Research shows that couples with consumer debt are more likely to fight about money and other things more often than couples without such debt.

Defriending Debt

So many young people are starting their careers behind, weighed down by a load of student loans and credit card debt, that it feels normal.  As a result of their debts, many end up choosing a career other than the one they studied for, marrying later than they’d like to, and then fighting with their spouse because of their bills. Which makes me wonder, why would anyone want to be normal?

Whenever I teach workshops for college students or engaged couples, my message is to be different.  Be odd.  Do what your friends are unwilling to do.  Live well beneath your means in your early years so you can get out of debt as soon as possible and live free for the rest of your years.

Carry a balance on your credit cards?  Never.  Finance a vehicle?  Don’t do it. The only acceptable debt is mortgage debt, but even there, the key is to keep your mortgage debt at an unusually reasonable level.

Do those things and you will experience something very few people ever experience: true financial empowerment.

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9 Responses to How to Mess Up Your Financial Life

  1. Matt Bell August 24, 2011 at 10:25 PM #

    Michelle – I assume you’ve checked with your employer to see if any tuition assistance is available. I got my master’s degree courtesy of a couple of former employers.

    Assuming that isn’t an option for you, and since you said you make decent money and have no kids, the best way to pay for school is to do so out of cash flow. The double income no kids phase of life is likely the most financially flexible time ever.

    You may need to make some adjustments to make it work. For example, make sure you’re not spending more than 25% of gross monthly income on housing. But again, in the double income no kids phase, this should be doable without taking out loans.

  2. Michelle August 23, 2011 at 9:01 AM #


    Speaking as a student myself, most of us cannot afford to pay for college up front. In my case, I am twenty-three, married, and have no children. My husband and I both have 4 year degrees and working well. I am continuing my eduction this fall and was approved only for a student loan, with an interest rate of 6.8%. It seems because we have no children and make decent money, that we do not qualify for assistance. Do you have any advice?

  3. Katie G. July 18, 2011 at 1:38 PM #

    Such great thoughts! My husband and I (both 24) and recent grads, have many friends who view their debt as just another normal part of life, as if it’s expected. But it really is so freeing to be completely independent of any debt obligation. We took this advice after college, and lived on his $30,000 income and put all of my income towards our student loans. Now, only 2 years later, we will have paid off $86,500 worth of student debt in October 2011!

    It has been a tremendous blessing by teaching us discipline in our spending, as well as enabling us to purse careers as missionaries in the future.

  4. Laquetta July 6, 2011 at 10:03 AM #

    It’s true. Credit cards can be empowering because you get to make choices for yourself and, for awhile, have what you want. But it’s the wrong kind of empowerment. Some years ago, I attended a financial class where the facilitator’s message was “Be your own banker.” Using examples of card card debt, financing a car and mortage debt, he proved how you could create your OWN financial freedom and accrue “interest” for yourself! Today, I’m proof of that. Living in the black, having a savings account and a car that’s paid for is truly empowering.

  5. Matt Bell June 16, 2011 at 9:11 PM #

    Great comments, everyone.

    Financial Independence, I completely agree with the idea of controlling vs cutting (assuming a person isn’t out of control with spending). It’s why I like to talk about “spending smart” vs. being frugal.

    Cassie, really good point. I qualify for a card so I’m worthy. Can only lead down a bad path.

  6. Cassie Featherston June 16, 2011 at 10:21 AM #

    One scary possibility for this phenomenon is that the credit card companies have been marketing for this effect. Young people feel empowered by their debt because it means in someone’s eyes (Citibank) they measure up. Credit tells them that they are adults and they are worth or will soon be worth real $.

    I’ve seen many adults carrying a crushing debt load that feel the same way about their very high credit scores.

  7. Martha June 9, 2011 at 5:21 PM #

    Oh my! I had to ask that question out loud to make sure I read it correctly and even then it did not compute. What logic are they using?

    Let me try to understand another way:

    “I feel good about my debt because ____________.”

    Still a blank; doesn’t feel right.

  8. Financial Independence June 9, 2011 at 12:58 PM #

    Honestly. Life is a collection of experiences.

    The best way to save – have two-three jobs, do not go out or on vacation. Do not have anything on your mind but job and savings.

    Sure you can retire at 40+. Even better – you won’t need much, as during your life you did not do much.

    Is it what the life is about? You spent 80 grand on top of your earnings. You lived big, you lived big.

    I am not advocating it, as a life style. But when I analysed our family expenditure over three years. I just got some information and we decided to freeze them. Not cut, just try to control ourselves.

    Otherwise what is the point? A penny for your thought.

  9. Juan June 9, 2011 at 9:52 AM #

    I must second your notion. It is absolutely ridiculous that young adults see unreasonable levels of debt as empowering. It makes me wonder if they have ever taken basic math course and know how to see just how much that debt will end up costing them [and constraining their lifestyle]. But then again, after having seen some of the people in community colleges [and universities] I am not that surprised.

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