Using debt is not ‘living beyond your means’
The first step in fighting budget culture is eliminating the stigma around using debt
The obligation to pay off debt is a dangerous message that’s foundational to budget culture, much like the obligation to lose weight undergirds diet culture. It causes so many of us to feel shame about using debt resources, exacerbating our already unequal access to those and other resources.
As long as we carry debt, budget culture shames us for any spending decision because we don’t use every available resource to eliminate debt as quickly as possible.
In many conversations about money management and budgeting these past six months, I’ve become convinced that the first, most important step to fighting the restriction and shame of budget culture is to eliminate the stigma around debt.
That’s why I’m excited to start publishing contributor stories next week — all about experiences with debt!
I’m so grateful to all the bold writers who reached out to share the messy debt stories personal finance media usually ignores. You all answered the call with your stories about the reasons you’ve deliberately chosen debt, surprises you’ve faced dealing with debt, challenges you’ve had, weird things you’ve learned, and life goals or transitions debt has helped (or is helping) you achieve.
Sharing these stories out loud is vital to breaking the stigma around debt in our culture and gaining a better understanding of the reality of this resource in people’s lives.
To prime you to read contributors’ stories with compassion, empathy and a realistic understanding of debt, today I’m sharing an edited excerpt from You Don’t Need a Budget that addresses one of the most pervasive myths about using debt: that it allows people to “live beyond their means.”
Using debt is not ‘living beyond your means’
I’m often stunned by what people actually believe about debt. Many of us have so internalized budget culture that it feels like a fact of nature that debt is bad and people with debt are bad.
In fact, debt is largely a necessity, incredibly useful and extremely common in our culture.
A 2015 study from Pew Trusts found that eight in 10 Americans hold some kind of debt, with 39% holding unpaid credit card balances.
69% say non-mortgage debt (like credit cards or personal loans) is a necessity for them, but they still would prefer not to have it, reflecting the shame our culture attaches to debt. 68% of people also say debt has afforded them opportunities they otherwise wouldn’t have access to, like investments or purchases.
“These findings suggest an uneasy comfort with debt — a sense that it is needed and possibly even advantageous — but is still not desired,” the Pew Trusts report says. “Furthermore, although most Americans consider debt a necessity in their own lives, they view it as a negative force in the lives of others.”
79% of people in the study said other people usually use debt irresponsibly, and 85% believe other people use debt to live beyond their means. When other people carry debt, we imagine it’s the result of frivolous overspending — and we know that’s how others view our use of debt. Because of that culture of shame and blame, it’s hard to use debt as a resource without feeling bad about it.
We somehow imagine using debt as a way of what some call “living beyond our means,” and we blame irresponsibility and indulgence: You should have known better than to accept the mortgage with an ever-increasing interest rate. You should have chosen a lower-cost school closer to home if you were going to major in the humanities. You should have gone without that dress, that night out, that present for your kids, if you weren’t going to be able to pay off the credit card before the end of the month.
That stance falls apart, though, when you realize debt is, in fact, one of the “means” available to you.
Debt is one of many types of resources available to support your life under capitalism. With that understanding, using debt can’t cause you to live beyond your means any more than using your paycheck can. Framing debt as a result of living beyond your means is one way budget culture reinforces a cycle of shame and restriction.
Even if you can’t shake the belief that debt is bad when it’s used for so-called frivolous purchases, you should know most people don’t use debt that way. The most common type of debt Americans hold is a mortgage, and nearly as many have an auto loan as have credit card debt, according to Pew Trusts. Even most credit card debt isn’t the result of overconsumption. Nearly 3/4 of people who hold credit card debt accumulated it because of day-to-day-expenses, medical emergencies, or unexpected expenses like home or car repair.
A minority of people use credit card debt for anything budget culture would label “discretionary.” 11% have debt from retail purchases like clothing or electronics, which are both necessities if you want to live and work among humans. Another 11% have debt from vacation or entertainment — also not frivolous, though budget culture uses the wants-versus-needs framework to label them as such. Nearly 10% of American adults have some medical debt, with the greatest burden on disabled and Black Americans.
Debt isn’t, in fact, a vehicle for overconsumption in our culture; it’s a means of capturing resources in a culture that expects way too much of everyone and pays way too little to most.
Debt isn’t, in fact, a vehicle for overconsumption in our culture; it’s a means of capturing resources in a culture that expects way too much of everyone and pays way too little to most. Just as with everything else in budget culture, proponents of debt payoff cite basic individual responsibility: You signed an agreement and borrowed the money; you must pay it back.
The concept that a responsible person ought to repay any money they borrow sounds straightforward — until you layer in the realities of our society:
Wealth and income gaps increase some people’s need for credit to meet everyday commitments and participate equitably in job and social markets.
Legal discrimination in credit scoring taxes marginalized people with higher interest rates that increase how quickly debt balances grow.
Predatory marketing and promotions distract borrowers from the risks of the complex agreements they sign.
An insufficiently regulated business model incentivizes lenders and credit card companies to encourage you to carry a balance that costs you money.
Intentionally complex debt products operate on systems of scoring, interest, fees, billing dates, minimum payments and compounding that most people don’t have the capacity to unravel during a financial decision.
The notion of individual responsibility assumes you’re entering a credit card or loan agreement in good faith, and it’s easy to argue that any decent person should do that.
But the lenders and credit card companies are not entering these agreements in good faith.
They’re designing products — right up to the line regulations allow them to — that depend on you being what financial experts label as “irresponsible” and ensure they get exponentially more than they give. The hypocrisy in budget culture’s moral compass is that we allow financial companies to collect on debts in ways that ruin individual lives but don’t allow individuals to ignore debts to the minor inconvenience of financial companies.
Debt payoff doesn’t have to be your highest priority by default. Once you strip debt of the shame and blame our culture piles on it, deciding how to deal with debt is just a matter of weighing costs, benefits and priorities.
The hypocrisy in budget culture’s moral compass is that we allow financial companies to collect on debts in ways that ruin individual lives but don’t allow individuals to ignore debts to the minor inconvenience of financial companies.
Just as with commitments, the key to making choices about how to use debt and how to deal with it is understanding the consequences of any kind of debt you take on. When you understand how your financial products work and how they can impact your life, you can make decisions about how to handle them that are based on a simple cost-benefit analysis, rather than on shame and expectations from budget culture.
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One of my favorite insights gleaned from your book is that rich people and corporations aren’t shamed for their debt - no matter how massive - the way middle class and poor people are. For them, it’s a viable tool in a full financial portfolio, even if they never plan to pay it off. But for everyone else it’s somehow a moral failing and the root of America’s problems.
I think about this all the time and am still baffled that in 30+ years of consuming personal finance almost daily, I’ve literally never heard this perspective anywhere else. And while I still struggle to fully embrace it, I’m beginning to reframe my experiences with debt over my lifetime as much more nuanced and complicated than I had previously allowed.
Your posts have helped me be more aware of the inherent assumptions I grew up with about debt, and bill payment, etc. . .and it usually had some sort of moral connection. And so it recently occurred to me that a lot of us were raised being taught that paying our bills on time was an act of morality, but what about the morality of people being paid a living wage? There are so many bunk assumptions that I'm just now becoming aware of. And like you discuss in this and other posts, debt can be a tool - and an especially essential tool in a society that doesn't offer the same opportunities to all.