Gails Blog

A lot of the people who watch my show are not in debt. They watch because they find the stories so compelling. But over and over I’m asked, “How can people get themselves into such a mess?” I’m less aghast. I know falling into the debt hole isn’t as hard as it looks.

First there are the people who’ve had a significant change in their life, but haven’t come to terms with the financial implications. Whether it’s through divorce, the loss of a job, sickness or death, changes in our lives don’t necessarily translate into changes in how we manage our money. So later, when we suddenly realize what we’re doing isn’t working, we’re stunned at the mess we’ve made and at a total loss as to what to do about it.

There are also some psychological factors that play into our Dance with Debt. At a website called The Frontal Cortex there’s an interesting article on how the subprime crisis happened. It boils down to the fact that we’re wired to be more responsive to short-term gains than long-term risks. It’s the old, “bird in the hand” principal. Johan Lehrer says, “Our feelings are thrilled by the prospect of a new home, but can’t really grapple with the long-term fiscal consequences of the decision. Our impulsivity encounters little resistance, and so we sign on the bottom line. We want the house. We’ll figure out how to pay for it later.” Whether we’re talking about subprime mortgage or zero-down home-ownership or whipping out our credit cards so we can go on holiday, the same principals apply. The reward now is more powerful than the potential cost in the future.

There are also a fair number of people who feel entitled. “I work hard, I deserve a vacation.” If I had a dollar for every time someone has said this to me, I could cruise around the world…twice. People believe that just because they want something they have a right to it, regardless of whether they can afford it. That’s how Buy Now Pay Later became such a hit. “I want it. I have to have it. If I can’t pay for it, I’ll just find a way to get it without paying for it.” Then when the bill comes due at a whopping thirty-something percent, people whine about how rapacious the rates are.

And then there are the people who are Delusionally Wealthy. They have a big screen TV, a late model car, computers, the latest cell phone (which, like dopes, they lined up for when they could have been working)… the list goes on. Instead of measuring ourselves by the amount of money we have accumulated (which is what wealth is), we use stuff, things, crap to create the delusion of wealth.

The brother-in-law to Delusionally Wealthy is Capriciously Credit-worthy. These are the people who measure their success in life by how much credit they’ve been granted. I’ve met people who brag about how much borrowing power they have. I remember when we used to braq about how much we had saved. Not anymore. Now it’s all about how deep in the hole we can go. Wow!

And then there’s Hubris, or the belief that god-like we will always be able to magically escape whatever mess we’ve made. There’s nothing magic about money or economics or the process of debt repayment. The belief that we’ll never have to pay the piper, that we’re above the rules, is what gets us into a mess and then keeps us there.

Sadly, even in today’s very difficult economic times (will it get worse?), there are people who cannot smell the coffee burning. For them, and those who love them, the caca is still to hit the fan, and there will be hell to pay and pay and pay.