Debt Addiction

July 28, 2016

It’s hard for me to take all the whining about crushing debt burdens seriously. Medical debt I totally understand. Our medical system is beyond fucked up. And honestly I don’t think taxing people unless they buy health insurance from for-profit companies helps. But pretty much every other debt is optional.

Debt is voluntary. It’s an at-will contract between a person with too little money and a person with too much money. You don’t have to do it, but you’re free to do so if you want. Having the opportunity is a bit of a freedom, really. Credit and banking provide immense opportunities for upward mobility. That’s why many charities focus on providing banking services in developing nations, providing group loans, micro-loans, mobile banking, and so on.

But here’s the thing: You don’t have to live above your means. It’s not required. It’s your choice. It astounds me when I hear statistics of how an average American lives paycheck to paycheck, unable to afford a surprise expense of a few hundred dollars. And it’s not just low-income people. High-income people are living paycheck to paycheck as well. It’s absurd. Here’s America, the wealthiest nation in history, and the majority of people, top to bottom, are praying for their next paycheck, voluntarily living in peonage.

I have a credit card. I never use it. It’s for emergencies. I use a debit card. I spend money I have, not money I will have. Working for money you’ve already spent is stupid. Some credit cards offer benefits, some percent off certain purchases or whatever. Honestly I don’t care. It’s stupid to finance depreciating consumer purchases with debt, even if I can automate the immediate settling of the balance. The concept just doesn’t mesh right with my mind.

I love how credit and debit cards are named. It’s almost backwards. They’re named not from your perspective but from the perspective of the issuer. A credit card debits you to a creditor, while a debit card credits you from your debtor.

I’ve never taken out an car loan. Honestly that’s unsurprising as I’ve never owned a car. But never owning a car has also meant I’ve never had to pay for auto insurance, gasoline, smog service, oil checks and changes, parts and labor, license renewal, vehicle registration, or all the other little nickle-and-diming fees at the Department of Motor Vehicles. Cars are huge depreciating assets that lose a chunk of their value the moment you purchase them. I don’t understand why anyone would buy a new car, let alone finance the purchase, when minutes after purchase you owe more than the car’s worth. And in my experience, a two to five year old car is substantially cheaper and performs the same utility. But since I haven’t lived beyond my means up to this point, I can go right now and buy a car with cash. I doubt I will, though, due to the amount of costs involved.

In some places, cars are necessary. If I ever move out of the city, I’ll probably need to buy one. But even if a car’s necessary, why would you finance the purchase of an expensive one instead of buying an older one, or a beater, with cash? The value of the car’s just going to tick away with every second it’s owned and mile it’s driven. I can only see it as a vanity expense. Both a $5,000 beater and a $100,000 Tesla drive on the same roads at the same speed, one just looks trendier.

When it comes to student loans, if you can’t afford to go to a four-year university, go to a community college and transfer. It’s substantially cheaper, at least half the cost, even still today with all the community college cost increases over the last few years. The great lie of higher education is that there’s any difference between undergraduate schools and their degrees. They’re completely fungible, just like highschool diplomas. The only differences between universities are their professors and masters programs. Why pay substantial sums of money for the extended highschool half of a bachelor’s degree when you can pay a few bucks per credit at a community college.

If you must take on debt to finish your degree, if you even want or need to finish your degree, it’s really not a lot of money. I read in the news about people complaining about their ‘crushing’ debt burden of ten, twenty, thirty thousand dollars. Really? First, those latter numbers sound like someone went straight to a four-year and didn’t put any principal down. Second, that thing you voluntarily signed up for and are spreading the repayment of over decades is ‘crushing?’ In some cases, the minimum is just tens of dollars, and all repayments are tax deductible as long as you don’t make too much money, making it, essentially, free to service. You can’t find a job in your major? I’m sorry if Latin majors aren’t in demand, but that was probably fairly obvious before you took the classes.

People say it’s a scam, or that they simply didn’t know, that student debt couldn’t be discharged in a bankruptcy. But it says that right in the surprisingly small contract, and the phrasing of the statement “I didn’t know I couldn’t…” sounds a bit like you intended to default from the start. As far as I’m aware, Sallie Mae can’t repossess knowledge, nor can they repossess your degree and recoup the loss by selling it to someone else in a debt auction, like any other creditor can with any other asset. And due to inflation, the actual value of the debt decreases in time. Should you never repay the debt, it’s written off, or if you become disabled, it’s discharged, which is good.

Then there’s home loans. Mortgages I actually understand. Houses are expensive, the real estate they’re on has the possibility of appreciating in value, and your repayment is spread over decades. The amount you owe also decreases over the decades thanks to inflation, as unlike some countries, for whatever reason the United States likes writing contracts in nominal terms. Also, generally, over time people settle into higher paying jobs, decreasing the burden relatively. Mortgages are pretty much the only form of debt that makes sense to me, especially since the repayment is generally tax deductible and often equivalently priced to renting. The only added obligation is property taxes and utilities, assuming you’re used to renting from places with those included.

So of all of these debts, excluding medical emergencies, what’s crushing? Do people just want free money? I don’t know. I don’t know if my brain is just wired different. I don’t know if people inflate their burdens for drama, or if whiny people just whine really loud.

I read something once about being able to delay gratification leads to statistically better life outcomes. Maybe that’s the problem with some people, that in today’s world of over-abundance and easy credit, they’ve allowed themselves to have everything now, now, now, pay later.