Why Do We Get Into Debt?
A friend of mine was dating a Turkish gentleman who had never lived in the United States. While they were shopping she found a pair of boots she liked and decided to buy them – with her credit card, of course – and he was absolutely appalled.
“Why don’t you use cash?” he asked her.
“I don’t have enough cash to pay for them,” she explained.
He was flabbergasted. “Why don’t you save up a little each week and then buy them when you have the full amount?”
“But it’s only a hundred dollars,” she protested.
She went back later and bought the boots using her credit card when he wasn’t with her.
To my friend, whipping out a credit card was a socially acceptable way to get her hands on something she didn’t have the cash for. To her boyfriend, it was an absurd use of credit and really boggled his mind. In his culture, needing to use a credit card for everyday purchases was embarrassing. If you wanted a pair of boots, you simply saved up the money to buy them.
We get into debt because it’s socially acceptable. It’s the norm. Ask a stranger on the street to open his or her wallet and there’s a good chance that there are a few credit cards within its folds. People who do all financial transactions using cash are considered exceptional to the rest of society.
What would happen if every time you presented a credit card to make a purchase the clerk was shocked and appalled? You would probably be much less likely to impulsively buy a pair of boots on your credit card if it was a public demonstration of your financial ineptitude. In our society, though, buying boots on a credit card is simply business as usual.
Auto loans, mortgages, student loans, and credit cards are all par for the course for today’s consumers. It’s comforting to know that even though we’re wallowing in debt that we aren’t the only ones. It would be a lot harder to be as comfortable as we are in debt – and we would probably pay it off a lot sooner – if there weren’t so many other people in the same situation.
There are plenty of other reasons why people get into debt. Sometimes life circumstances just make it happen: the house burns down, the car gets wrecked, you lose your job. The truth of the matter though is that if debt wasn’t so accepted and expected then the same people who find themselves in financial distress may have instead had a large emergency account sitting somewhere collecting interest, so they wouldn’t have to turn to credit to pay for emergencies.
After all, if you didn’t have money going to credit card repayments AND student loan repayments AND mortgage repayments AND car repayments (you get the point…), imagine how quickly your savings account could grow.
The only way to get out of debt and stay out of debt is to change your frame of mind. Yes, debt may be acceptable and everyone else around you is in debt, but until you decide that it isn’t okay for you, you’ll always be under the impression that debt is just something you have to accept and there is no way out.
Of course there’s a way out: Be a non-conformist. Pay off your debt and don’t incur any more.
Related posts:
- Guide: How to Pick the Right Credit Card
- Life or Debt: The Psychology of Consumer Debt
- Debt Consolidation: Is it the right move?
- Banks seize homes over credit card debt
- Good Debt vs. Bad Debt
Retailers are horrified by the idea that people actually pay for things in cash (electronic or physical) now. When I bought a fridge the first question the salesperson asked me was what finance package I would prefer – responding by asking for a cash discount tends to raise eyebrows :)
Your advice is so simple, however the majority of Americans do not listen
Thing is their are comfortable with the ways things are going—get paid, pay bills, repeat, keep doing it until they retire at 65
I used to think that most people have a credit card balance. They don’t. Social influence is real. You are who your friends are.