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Elizabeth wants you to treat debt like the hair you pull out of the plug hole in the shower

Personal Finance
Elizabeth wants you to treat debt like the hair you pull out of the plug hole in the shower

By Elizabeth Kerr

Its all just a bit too emotional in here.

Some scholars argue we spend money because we want to increase our status amongst our peers or as a way of attracting a suitable mate.

Whichever way you look at it when it comes to spending money it all pretty much emotional - you buy something because of an emotion that you perceive you will have after the purchase.

Last week we talked about your non-negotiable needs and if you followed the steps you would have figured out what was on your non-negotiables list and how much money your personal money machine would need to spit out regularly for you to meet these needs.

But before you run off and start I need to address something with you first - your consumer debt.

Every pay check, once you have met all your non-negotiable needs, spending is reduced to opportunities to raise an emotion inside of you. Maybe you spend because you like it ... it will feel good to own it.

You purchase because someone else needs you to have it and you don’t want to disappoint them, maybe you will feel guilty if you don’t buy it.

Maybe you spend because you’ve had a hard day and you feel you deserve a treat; or because you don’t want to feel “so last season darling”.   You get the idea ... Just think back to the last item you brought and I bet there was a feeling that precipitated the need to own it.

Advertisers work super hard to make sure you feel emotions that only their products can alleviate for you.  

Now let’s look at debt.

Debt is not an emotion.

This is why the decision to use debt to pay for something is usually not a hard one to make.

Using debt to make a purchase does not feel like anything, it’s just a means to get what you want.

The dominant emotion is still attached to how this purchase will make you feel once it has been made. Because you aren’t paying with real money it might even feel like you are getting something for nothing ... But in reality it is just stealing from your future self.

So the question for today is under what circumstances is it okay to use money to buy new stuff instead of paying down consumer debt such as credit cards or overdrafts?

The answer of course is NEVER !

If you have consumer debt (credit cards, overdrafts, hire purchases, personal loans, payday loans), then you are in the equivalent of a dodgy motel with a badly stained mattress and no clean cutlery. It’s a very uncomfortable place my friend.

Unless you check-out quickly the increasing extra costs from the added interest and overdraft charges are akin to finding a dead cockroach in the motel kettle. The longer you stay the worse it gets.

Your priority before spending another cent on anything other than your ‘Non-Negotiable list’ should be getting the hell out of the debt motel as quickly as possible.

“Okay”, I hear you say, “I have a plan to get rid of my debt at regular payments of $30 a week and it’ll be gone by February 2016.  So why don’t I just live a little and enjoy myself at the same time - I have a plan don’t I?”.

Well, it’s because I know you and I know your path is full of good intentions but you’re too easily tempted otherwise you wouldn’t have checked into the debt motel in the first place.

I know that you probably won’t stick at it for very long.  Similar to gym memberships – it's all good to commit when you’re feeling ambitious and motivated after Xmas lunch but by February going to the gym is all but a memory.

Debt is the same ...  Its one thing to set the plan but I bet you can’t stick to it. Otherwise there would be no such thing as consolidation loans or debt collectors now would there?

So, the answer is NO – you can’t be spending elsewhere and trying the softly, softly approach to paying off your debt.

You must stand perfectly still and use whatever money you can source to check out of the debt motel once and for all by paying it all off immediately.

The second reason you can’t take the softly-softly approach is because life can suck sometimes and it has a tendency to throw you curve balls when you least expect it. Shit happens, redundancies happen, accidents, grief, bad health and sudden death happens. Earthquakes, changes to public policy, surprise babies and GFC’s happen.

When those things come around you do not want to be caught with your pants down by consumer debt because that will limit your ability to cope with managing your non-negotiables’ and getting on with your life, let alone continuing your plans for having your own money machine.

In a nutshell, the longer you have consumer debt the greater your risk for personal financial failure. Full stop.

But how you wonder?

Well, you just take every single dollar you earn after paying for your non negotiable needs and give it to the finance company who takes great pride in holding your future savvy self in captivity in the first place.That means every single pay check until it is gone. No going back, no peeking through the door, and definitely don’t drink from the kettle. Just check the hell out of there.

For some of you it will take years to have paid back all your consumer debt and its going to be tough.  It’s going to take discipline and commitment.

You are going to have to tolerate going without the things that everyone boasts you must have to live a fulfilled life.

The only thing you can hold on to in order to get through this is the fact that you will get there, and it is an achievable and worthy goal. For if you don’t get rid of this debt, you will seriously f**k up your chance to achieve any kind of retirement, let alone an early one with the help of your money machine.

Oh and here is an idea ... After you’ve paid off that consumer debt you might as well just redirect those payments into your money machine, harness that energy and just keep going.

It's not all your fault by the way. In my personal opinion we’ve all gone a bit mad. We’re collectively looking in the wrong direction, scrounging after the biggest income and trying to purchase our way into keeping up with the Jones’ by making our homes look like the catalogues, working ourselves to oblivion for longer than we need to because we’re convinced that doing so is the secret to happiness, financial independence and respect.

But honestly all of that is so draining! It’s like running a race where the finish line keeps moving out a few kilometres just when you get close.

It’s exhausting, demoralising and will only serve to make you unhappy.

The better option is to just stop and naval gaze at your own financial needs instead. I want you to treat using debt like the hair you pull out of the plug hole in the shower – its gross, you don’t want to touch it and you dismiss it before you dry-heave.

Here’s an idea ... repeat after me.   "Old School is the New Cool."

Before credit cards and overdrafts, before personal loans were handed out like lollies, before celebrities endorsed pay-day loans and companies bribed you with hire purchase schemes, people had to give respect to their coin.

Nowadays we call this 'old school'.

They marched themselves to the bank, made a withdrawal and then went to the store to make the purchase. The whole process gave ample time to check in with their emotions and think about whether the purchase was a good idea or not. If they didn’t have the money they had only two choices 1. save for it or 2. go without. It’s so nice when things are simple isn’t it? 

Fancy that - going without ... or re-using what you already have, saving a little bit often, repurposing something entirely different instead, borrowing and sharing, or giving it a go with your own two hands – all of those ways are worthy of bragging rights and insecurity-gram photos.

Instead of boasting about the deal you got or what you own id like you to enjoy the pride and confidence that comes from working your money machine and finding other creative ways to get what you want – or just go without.   #oldschoolisthenewcool.

So if you’re thinking of using consumer debt or taking the softly-softly approach to paying it off, then re-read the first paragraph of today’s column and everything I have ever written, harden up and think again.

Frequently asked questions about consumer credit.

1 Can I use my credit cards?

In short, yes.  Even I know that credit cards have a place in our lives when it comes to booking accommodation, buying online and holding open a bar tab. But you must pay them off right away as soon as you have made the transaction and well before those expenses accrue interest. Why not switch to a visa-debit card which at least uses your own money significantly reducing the likelihood you would overspend in the first place. Also, I doubt very much that the things you are using a credit card for are things that you could not do without in the first place.

On another note, how suave is it to pull out cash for those occasions instead. I bet those young whipper-snappers don’t often get the chance to thumb through some hundred dollar notes these days. C’mon all we’re embracing tailored jackets, the 10-speed, shirts with the top buttons done up and brown brogues ... lets take it the next step and return to the suave days of the real touch it sniff it money.  There is no extra costs from using cash from our stash and you have to admit ... it’s pretty darn sexy !!

2. But it’s interest free for 36 months?

*Slap* – yes I just slapped you!

Errghh no ... whilst they say it is interest free for a certain term what they are not telling you is there is usually an establishment fee for the privilege of purchasing this way. Then they kick you in the shins with a yearly fee for the privilege of still paying for it.

On top of that they will try and insist you take insurance in case something happens to you and you can’t manage these payments – you will have to pay this monthly along with regular monthly payments.

And, to make matters 100 times worse you miss out on the privileged price of paying with cash. Most retailers that offer finance generally will offer discounts for using your sexy cash stash for purchasing outright on the spot. And if you can prove that the product is cheaper elsewhere they will usually meet it as well. Buy on finance and both of those options are taken away ... and I might slap you! 

This video is a tidy reminder of how all of this comes together.  Enjoy!

SNL-dont buy stuff you cant afford from Dean Francis on Vimeo.

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Old school, indeed. I haven't had a lesson delivered in this style since I was in Standard 2, several decades ago. I'm inspired to jump on my 10-speed, wearing roman sandals and grey school uniform, and spend some pocket money (some of those $100 dollar bills lying around in my school bag) on an ice block from the dairy on the way home. Message received, thanks Miss.


Thanks Pythagoras.   :)


Well you can get another cheap loan to deal with your existing debts! It's no harder than buying a cheap chinese made wet and dry vaccum cleaner from Bunnings and suck out the yucky hair in the plug hole.. Easy..


I strongly agree. I use my credit card to pay for everything because of the rewards, but I find the debt so disgusting I find myself impulsively paying it off several times a month. This is a habit I will need to get out of once I get a mortgage and begin using the credit card to reduce interest payments via an offset loan.


Y'know, I am beginning to suspect our young friend is being paid by the word...


Why get a credit card in the first place? Get a debit card. 


Cash back points! Good example.... I get $500 cash back every year on my ANZ gold card visa. I pay no annual fees and pay in full every month. It makes sense, however can make it little tricky to keep track of outgoings.


HI Tito, good point.   And there is a movement overseas whereby people will sign up and spend on certain cards just to acquire enough to get the rewards.   Here is a blog post from MMM about it.   Its a shame our banks dont seem to be as persuasive lol .…


With a credit card you get certain rights.
With a debit card, if for some reason somethign goes wrong and your money disappears or can't be used, they don't care as much; it's your problem.    when it's their money, it's their problem.


I'm guessing consumer debt means deppreciating assets?


Hi Midgetkiwi.   Consumer debt is most commonly things like credit card debt, payday loans, hire purchase, store arranged finance which often attract very high interest rates.   


consumer debt is the counterpoint to investment debt.

Investment debt is on something that earns income/value, so repays itself.
Consumer debt is on stuff that the loan holder must find funds to repay the debt.


I couldn't agree with your article more. I was seriously shaking my head when I read about the guy that took out extra cash from his mortgage on a boat and jetski (see the article link below). Obviously the thought of having more toys now outweigh having a better retirement for him, in saying that it is interesting to see the different attitudes of people towards money.


I don't envy people that have surpluses of money lying around, I mean most of the time they worked hard (debatable) for it and got to where they are because of that.  However the ones with outrageous consumption behaviours reinforces the beliefs and attitudes of people who don't earn money like that but yet they load up with credits/loans that they will never be able to pay back with buying the in-things just so they 'fit' in and also for self gratification.