Never Go Into Debt Again

I paid off my last credit card in 2005. It wasn't a huge balance, but I was moving from one country to another and I didn't want to be trying to navigate two financial systems at once. I made one final payment from my last paycheck and celebrated my achievement. I was free forever from consumer debt, and as I rode off into the sunset I thought:

“I'll never go into debt again!”

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Realistic Expectations

Is that really what happened? Well, I have never taken out another credit card, but I have gone into debt. A personal loan for a car, an entire degree on HECS and a mortgage, plus the occasional and carefully managed BNPL purchase. Of those four things, I could have managed without the BNPL purchases, but the other things were a necessity at the time. I could no longer drive my car when I was pregnant, as I couldn't fit behind the wheel. Upgrading it was necessary and I didn't have enough in savings. I couldn't afford a whole house in cash. And I certainly couldn't afford to stop working and pay university fees up front.

What I'd been saying to myself when I cut up that credit card was that going into debt was bad, and I could simply avoid it forever. But life has a way of throwing things at us that we don't expect, and my expectations weren't grounded in a realistic assessment of what might happen in the future.

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Harmful Promises

Now, I'm not saying I was forced to take out that personal loan. I could have chosen to take public transport, to keep renting and to not get that degree. The decision-making power still rests with me. But if I had adhered to my promise of never going into debt, simply because it was a promise I'd made, would that have been the best outcome for me?

When we make promises to ourselves, we should do so in a way which is forgiving of the need to reassess and re-evaluate our circumstances. Adhering to the promise of not going into debt might mean not going into business, if I need a loan to purchase equipment or stock. Or not going to the dentist because I can't afford the fee, and spending weeks in pain while I save up for an extraction. While consumer debt can have a negative effect on our quality of life, it also has a place when things happen outside our control, and we have to adjust our game plan. We shouldn't be denying ourselves important opportunities because we made a promise that doesn't take changes into account.

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I Am More Than My Credit Rating

People sometimes build up an identity around a quality they possess. There are people who frame  their identity around the car they drive, the university they attended, even the colour of their hair. If we create an identity around a particular quality, it becomes very difficult to critically examine our view about that quality because now it's part of who we are.

For a while, I defined myself as a person who “didn't go into debt”. I would see ads for credit cards, or see my work friends borrowing money and thought - “I'm not that kind of person”. So when I needed to borrow money, I felt like I'd somehow failed myself and that created a lot of additional stress and anxiety.

But whether or not I have debt doesn't define who I am as a person. I'm not “an indebted person”,  I am “a person who has debt”. And whatever the situation right now, it's going to change in the future. I might get more debt, I might get less debt. Either way, I'm going to manage that debt responsibly, and I'm not going to get angry with myself for needing it. Ideally I'll set up an emergency fund so that I don't need to go into debt too often in the future. But even if I do, it doesn't change who I am, it just changes what my budget will look like for a while.

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* The information provided in this article is general information only and does not take into account your objectives, financial situation or needs. Before making a financial decision, please assess the appropriateness of the information to your individual circumstances and consider seeking professional advice.

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