Todd Christensen Profile Picture
Staff Writer at Debt Reduction Services

Why We Keep Ourselves in Debt and How to Change our Approach

I read a nice blog post by Frugal Farmer about 3 mindsets that had put her and her husband into debt and kept them there. Yes, her husband’s layoff was the catalyst for their accumulation of credit card debt, but I appreciated her honesty in sharing the three “Broke Beliefs” that kept them there:

  1. “There’s Nothing We Can Do About It.”
  2. “We Deserve this (or that)”
  3. “We’re Not As Bad As The Others”

If you think about it, they have one thing in common: They all involve deflecting blame or responsibility for our own financial situation due to some perceived unfairness. If we think that there’s nothing we can do about our situation (#1), then that means fate has placed us here, and, by extension, only fate can get us out. We also know that fate is fickle and inequitable, so our inner sense of fairness is offended. We either stand up to fate and live how we want (by overspending) or we move into the victim mentality and accept that being in debt is our lot in life. Neither choice will bring long-term prosperity and stability.

We don't get paid for effort but for demand.If we work hard but still don’t earn enough to have what we want (especially when we compare ourselves and our income to others who don’t, as far as we’re concerned, work nearly as hard as we do), then it only seems fair that we deserve (#2) the same luxuries and comforts that others have (usually this “others” refers to other spend-n-consumers). This mentality is extremely common because we tend to collectively believe that we should all be rewarded according to the effort. After all, don’t we argue with our teachers from early on that if we just work hard and try our best, he or she should give us an A for effort? It seems harsh to say, but life doesn’t always reward just effort.

Here’s how I teach this principle to 1st and 2nd graders: I stand on one leg in front of the class and then hop up and down as I spin in circles with my arms flying around. For an old guy nearing 50 like me, this could be considered a considerable effort on my part. So I ask the kids which of them would be willing to pay me for my effort. In spite of the 2 or 3 that inevitably pity the silly old fool before them, the class generally agrees that they have no desire to spend their money on my antics. “Why not? I’m trying really hard not to fall!” The Answer: it does little to nothing to benefit the students. Similarly, no matter what our employment, its only financial value is found in others’ willingness to pay us for it (demand or results), regardless of how hard we work or how much time we put into it. Consequently, we need to shift our thinking from the value of our effort to the value of what we do for others (including our employer).

And if we compare (#3) our spending to those around us (family, friends, neighbors, coworkers), it’s easy to find a worse example of financial restraint than our own. Our spending becomes relative to others, which means we’re aiming for a constantly-moving target. As others change their spending behaviors, we will adjust our own to appease our sense of fairness. Unfortunately, our paycheck is usually a fixed income and does not move relative to the spending of others. We absolutely must relate our spending to our income, not to others’ spending.

Savings is a CommitmentAnother blog from GetRichSlowly discusses the mental attitudes that have huge, immediate and long-term consequences on our finances.

In my post on redefining financial classes, I made the distinction between builders and consumers. Those who mentally keep themselves in debt are consumers. They believe in possessing and consuming THINGS, and usually nice and expensive things (cars, electronics, furniture, video game consoles, and equipment, etc) that return no financial reward. That’s why we call them “Consumers.” Builders, on the other hand, spend money on assets that, on balance, return more money than what they cost (real estate, stock market investments, education, business opportunities, etc.).

So there you have several ways of viewing attitudes and how they relate to our financial success. Take your pick, since you’re bound to find something to relate to. It’s a fascinating, and still a relatively new field of study, but one worth looking into individually and as a society.

todds-headshot-twitterTodd Christensen

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