How Do You Justify Your Debt?

by Miranda Marquit · 1 comment

Most of us are well aware that we shouldn’t buy things that we can’t afford. We know that we’re supposed to save up for purchases, and that we shouldn’t make purchases using debt. However, when it comes right down to it, too many of us rationalize building up debt.

It’s easy to fall into some of the traps that seem to justify racking up debt:

“But I Really NEED This!”

I know there are times that I’ve pulled out the credit card for what I considered needs. Unfortunately, too often the line between needs and wants is blurred, and it is easy to classify something that is a luxury as a need. At one point, my husband and I were convinced that we had no choice but to use the credit cards. We’d cut everything to the bone, and our jobs just weren’t cutting it.

Looking back, though, I realize that we had cable TV, a cell plan, and went out to eat more than we should have. We thought we needed to use the credit cards to pay for groceries. However, if we had cut the cable, and ditched the cell phone plan, we would have had enough cash for our needs.

“I’m Getting Paid Soon. THEN I Can Repay this Debt!”

Another common rationalization is the idea that you will repay the debt when you are paid, or when some hoped-for payment comes through. While using your credit card as part of a budget plan, when you already have the money in hand, can be a smart financial move, just using the card as a stop gap isn’t the same thing.

Many people satisfy the impulse for instant gratification by saying that they will repay the card when they have the money. in the moment, it seems as though the money will available in a small amount of time. In reality, it’s difficult to keep track of how much money you are spending in this manner, and chances are that you will amass more debt than you can afford to pay off anytime soon.

“But It’s GOOD Debt!”

Realize that just because something is considered “good” debt doesn’t give mean you should agree to more of it. Yes, it might make sense to borrow for an education. But do you really need to go to the most expensive school and take out student loans for living expenses on top of tuition? Many people also use this rationale when purchasing a house. Since a mortgage is considered “good” debt, it is assumed that a bigger mortgage is also acceptable. But stretching your finances to “afford” a mortgage for a home that is bigger than you actually need is rarely a good idea. Before you tell yourself that it’s okay to go a little overboard with good debt, remind yourself that it’s still debt.

Debt can ruin your money dreams, and set you up for a financial future of bondage. Pay attention to your thought processes and recognize when you are rationalizing your debt.

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{ 1 comment… read it below or add one }

selena February 28, 2013 at 8:33 pm

your description of ‘good debt’ makes me think of the way some people diet. they declare some food-stuff to be bad (candy, chips) and some good (vegetables, bread). and than cut out everything bad from their diet. but they are still hungry, so they start to gorge on ‘good food’, such as bread and rice.
after a while they might realize their mistake, but rather than practicing some moderation they now also completely cut out bread and rice, missing out on vital nutrients.

such a black-and-white view is dangerous, because it allows you to rationalize having heavy debts (‘but it is good student debt’) and it makes you deliberately misinterpret your own situation (using the money for living expenses and partying, and barely for your actual study).
sometimes it might actually be a rational choice to finance living-expenses through a loan, but be honest to yourself about it. that will make it easier to set new boundaries: rent-money is a necessary cost, partying is not. and so you don’t try to squeeze the latter into your general ‘education’ budget.

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