Debt: It creates choice in what you can have and removes choice in what you can do.

We borrow money so that we can have lots of things: material things, experiences, education, cars, homes. In theory, this seems positive. Debt, or borrowing money, allows us what we want right now. We borrow money and then slowly we pay it back in a way that feels manageable. We think about those smaller payments, and we rationalize how they fit with our income. We might say, “I need a reliable car and it’s only $500 a month” or “buying a home costs as much as renting so I might as well buy” or even, “everyone else borrows money, so what’s the harm?” “The interest rates are so low, it’s basically free money!”

When I was fresh out of law school, I wanted a different car than the one I had. The one I had felt silly to me. It was bright red and looked a little bit like a minivan. I didn’t feel like it matched the lawyer and business owner I had become. I test drove another car and I was told by the salesman that the payment would be about $300 a month for the next five years. This seemed great. I could look like the person I wanted to be for only $300 a month for the next five years! 

I don’t think I actually had any wisdom at the time that prevented me from buying that car, but ultimately I didn’t. Perhaps deep down I understood that the $300 a month payment would have meant that I had to earn at least $300 on top of what I already needed to earn to cover my then-expenses. And, maybe, that scared me. Maybe I even realized the irony of “looking like the person I wanted to be”. 

When we need to earn additional income to support something that we bought with debt, we take away our choices. We remove choices about work, careers, relationships, where we want to live, how we want to spend our days. We take away our own autonomy. 

Know what a debt payment actually means. Look at the impact it has beyond the simple assessment of whether you can “afford it”. You have the choice to take it on, but you must know what the tradeoffs become. Debt payments are greater than simply the cost in your budget. Having choice and autonomy in what you can do is what ultimately provides happiness.