Rationalizing Debt

I like nice things. Many people like to own nice things, and when they do buy them, they buy them on credit. For years, my rationalization was: I am going to buy it eventually , so I might as well have it now. How wrong was I!? That attitude and rationalization strategy easily led me into a pile of debt, with a good deal of it sitting on a credit card. I am out of debt now, and what it took was a different debt rationalization strategy.

While sitting there and staring at a large credit card bill and seeing the 20% interest charges on top of my purchases, I realized that pretty much everything I bought going forward was going to cost me roughly double what the item cost. This forced me to look at purchases differently. I am out of debt now and still force myself to look at things in the same way.

Why does it cost double?

• It takes a little less than four years at 20% interest for the amount to double.
• New purchases are the last ones paid off: Even if you only buy something that is $100 and can pay $100 on your credit card next week, that does not mean it is paid off. If you owe $5000 on your credit card, and you purchase a $100 item, you need to pay off $5000 before you can pay off the $100.
• Additionally, it’s a nice easy figure.

This rationalization worked well in a comparative sense. When looking at paying $80 or $100 on a pair of shoes it was easy to say that they were worth $20 more. But by the time they were paid off, it was a difference of $160 or $200. Hard to justify spending $40 more… Maybe the $80 shoes would do the job.

Applying this to all items, that $15 trip to the movies may not prove to be worth $30. Going out for a few drinks at $6 a piece may not look as good at $12 a drink. A $10 dinner at Subway is suddenly $20 - an inspiration to make sandwiches at home? The difference in cost between items is doubled, meaning that you pay closer attention to comparisons and really look at the value of items.

The rationalization that you will end up paying double what everything costs by the time it’s paid off got me out of debt, and I hope that looking at things that way will keep me out of debt. So before your next purchase decide if you are willing to pay double what the sticker says and decide if it’s really worth it to you.

Tags: debt