The Sad Story of a Debt-Financed Lifestyle

by Kevin on July 16, 2011

If you are in debt, your primary financial concern must to be getting out of debt as quickly as possible. Every dollar that goes to financing your life goes to a company that is profiting off of that unsustainable lifestyle. Every dollar in interest is a dollar not generating compound growth for your first home purchase, your kids’ education, or your retirement.

But those things are so far off, you’ll certainly have time to get back on track for them, right?

The Debt Lifestyle Cycle

Having a debt-financed lifestyle can seem nice on the surface. You have all new things: a shiny set of cars in the garage of the big house you put little or no down payment on and great furniture that you have 18 months to pay off. You were even able to swing a new TV and washer/dryer set out of the whole deal, all for “just” monthly payments.

All seems well… for a while.

Everything is shiny and new… for a while.

But over time those shiny items get a few scuffs. They get marred with dings from the grocery store parking lot. They get ruined by the neighbor kid running up the stairs with a full glass of juice. Or it could be as simple as the item wearing down with normal, continued use. Washers go bad, cars get too many miles. Those precious items suddenly don’t seem so precious.

That leaves one, big, unavoidable problem in the room: you’re still paying for those run down items. The payments you have made over many months or years have just put a dent into the principal owed. You are left with items in need of repair or replacing, but you still owe a balance on them. And because you are living a financed lifestyle, you certainly haven’t saved any money to pay cash for the items. How can you save when your monthly bills take up all your cash?

Rinse and Repeat, The Cycle Continues

This is when things usually take a tragic turn. Faced with mounting monthly bills, no extra cash, and legitimate household items in need of replacement, we run back to the credit faucet one more time. We turn the levers on as hard as we can in hopes of getting just a few more drops of that precious lifeblood. We scrounge up a few dollars — just pay a few bills late, no big deal — and are able to swing another financed item to replace what needs replacing.

And the cycle continues, with a new payment to go with our old, with a higher list of monthly expenses as ever before.

Break The Cycle, Make Tough Choices

You come across a man digging a hole. You observe the following:

  • The man digs a nice sized hole. He piles up the dirt he digs out into a big pile next to the hole.
  • He stops, and climbs out. He picks up his shovel and tosses a few more scoops of dirt back into the hole.
  • He jumps back in the hole, and continues digging.
  • He stops again, gets back out, and throws a few more scoops back into the hole, before hurriedly climbing back down into the hole to continue digging.

If you came across this man, would you not think him insane? Sure you would, but that is what a majority of debt-financed lifestyles look like. We dig, and dig, and dig… then we stop for a bit to put a band-aid on the issue, then get back to digging.

So what will you do? Dig or fill in the hole?

{ 5 comments }

tmgbooks July 16, 2011 at 8:57 am

Let me state the obvious that you fail to mention in your post:

Debt is only a symptom of the real problem and the real problem is spending more than you earn.

But there are also other symptoms and the worst is a lack of adequate savings.

When you come to your senses and make the decison to begin living within your income, the next decision you make could be as bad as continuing to over-spend: And that decision would be to concentrate on eliminating your debt.

Your actual focus in that situation should be to build your savings.

Kevin July 16, 2011 at 9:01 am

I agree and I disagree.

Spending less than you earn leads to being able to either pay off debt or to put money into savings.

Which is more important? Paying off a 19.99% credit card or earning 0.2% on your savings?

I’m not saying having adequate savings is not important, but for someone with a huge debt load then savings doesn’t make any sense. If you have $50,000 in debt and $50,000 in savings… you’re paying interest for no reason.

Emily August 3, 2011 at 7:57 am

I just don’t get the whole getting into debt thing. My parents only ever had a mortgage and car payments (and those low-we were a low-income family) and I was always scared to be in debt.

Kay September 5, 2011 at 9:24 am

I’m in this situation right now and it truly is overwhelming. I could have lived a more fulfilling life if I didn’t owe student loans AND credit card debt. I owe on both most than the average American. It’s a sad cycle that I developed from my mom. She too is in credit card debt. She always tells me “don’t end up like me, in your 60’s and still paying off cc debt” and I always think about it. I think about the thousands of dollars I sent to credit card companies in which that money could have been used to fund so many other things. For example, my own apartment, down payment for a new house, or my ultimate dream to live in Europe, Asia and Africa for a few years. I can’t take back the time and money wasted, but I will do my darnedest to make a better financial future for myself. I have 3 more years until I’m 30, and I’m determined to go and do a long travel for my 30th birthay – credit card debt free and with atleast 40% of my student loans paid off.

Kevin September 5, 2011 at 8:10 pm

The bad news is you’re in debt.

The good news is you know it, and want to change it.

The best news is you have the ability to learn how to do that, and the will to complete the task.

Keep your head up and keep pressing on.

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