If there's one thing I've learned in my financial life, it's that I hate debt. I used to find debt annoying, you know, like getting a ticket for rolling through a stop sign or stepping on a piece of gum. But that wasn't good enough.
I've been thinking about debt during this whole financial crisis because to me, the frantic push to reopen the credit markets is a solution for people who only find debt annoying. Let's just get the credit flowing again, and we'll worry about the rest later. For me, that's like someone who destroyed their marriage saying, just forgive me and everything will be fine.
Debt is on my mind today for two reasons. One is Stacey Vanek Smith's series on Marketplace. She spent some time in Sioux Falls, SD, the town that credit built. A lot of credit card companies are based there. Today, she looks at what's happened in Sioux Falls since Americans laden with debt can't pay their cards off.
Plus, our Public Insight journalists are asking about debt on their blog, the Trading Floor. Their question of the day is: What are your top three debt regrets?
I hate debt because I've been in it, and I can't stand the feeling. In a Marketplace Money story a few years ago, I said it was like being underwater.
That story was a personal one. I was $10,000 in debt at the time, and I was asking whether I should cash out some of my 401-K to bail myself out. The financial expert who advised me said absolutely not, and she listed several excellent reasons why. I took her advice and kept plugging along, which is how the radio story ends. But later on, despite cutting costs, with the interest mounting and a tight salary, I wound up further in debt. I finally caved. I sliced off a portion of my retirement money and paid it all off.
It was one of the best decisions I've ever made. I just couldn't handle the stress. I honestly didn't think I would live to retirement with that hanging over me all the time. But in exchange for taking the "easy" way out, I had to learn to hate debt and vow never to get in it again. I haven't, and I won't.
I'm mainly talking about credit card debt, but I'm cautious of all debt now. Sometimes, you have to take a chance if you want something bad enough -- starting a business, going to med school, buying a house, etc. There's an expectation of reward that will allow you to pay it back. It's still a gamble. I just wish, as a country, we would think more carefully about the consequences of living on credit. Maybe we will now?
Since I can laugh about it, here are my top three debt regrets:
- I just told you that story.
- I bought a house in what I thought to be an up-and-coming neighborhood. I wasn't counting on making money. I bought it because it was a nice house and I could afford it. But I was hoping there might be a small profit down the road. Shortly after I signed the papers, the city council decided to turn a nearby road into a freeway.
- Right out of college, the radio station I worked for bought me a car. Well, they made the payments for me to supplement my paltry $15,000 salary. I decided to tack on a few goodies to the car, like a sunroof, and pay for those myself. A year later, I left the job to go into TV. My new job paid $13,000, and now I had the full car payment, including all the tricks. I remember Friday nights when I would choose between renting a movie and eating dinner. Fun times.