The Psychological Impact of Debt

For some reason, most of us are raised these days with the idea that it is okay, and perhaps even necessary to accumulate debt in order to live. So we purchase things that we think we “need” or that we are told that we “need” and if we don’t have the money, we put it on a credit card. If we need a car, we don’t work and save up money, we go to the dealership, fall in love with a shiny new or semi-new vehicle and then hope and pray we will get financed. While I know not all of us do this, the vast majority of us are struggling paycheck to paycheck to pay bills, with a good portion of that money going to pay interest. We even begin justifying purchases in terms of how it will make us feel better. However, according to Maslow, we will not “feel” better until we have secured or first two levels. Debt is a lack of security, which causes violations in the second level of the pyramid. If you didn’t catch last week’s post, click here for the post on Maslow’s Hierarchy of Needs.

Debt is a curse and eats at us every day with resentment, guilt and pressure. It beats us down and is a constant reminder of how we are not good enough to “make it.” We externalize our blame to credit card companies or banks that gave us the loans, but overall debt is our doing and deep down we feel more and more ashamed of ourselves as that debt number grows. Dave Ramsey talks about debt in regards to a snowball, and as that snowball rolls down the hill, it gathers more debt through interest and grows until it becomes an avalanche that rolls right over top of you. This leaves us constantly running from the debt collectors, who are trained to take advantage of our shame and feelings of inadequacy to try and get you to pay them off. In fact, with some people this drives them to purchase more “needs” to prove to others that they are not failures.

In sessions, we talk with many clients who have money issues making them feel inadequate and like failures. While there are a number of probable ways out of debt (i.e. MegaMillions Jackpots, inheritance from an unknown uncle) the only proven true way out of debt is to pay it off, which often requires major life changes. However, these changes can literally be life altering, because the “debt snowball” also goes the other way. When you start paying off one debt and then take all the money that you paid to that debt and add it to the minimum payment of the next debt, you begin to push the snowball the other way. Then the “snowball” builds until you are knocking off loans left and right and feeling great! Why are you feeling great? Because you are managing your money and telling it what to do, not letting your money manage you. In addition, you are securing your second level and can more confidently move up the Maslow pyramid.

As noted above, this process often takes major life changes and adjustments in one’s point of view of the world. It requires us to accept that fact that we have failed, learn from those failures and to stop trying to be like the Joneses. Dave Ramsey is an excellent source of information on how to get out of debt and one that I have personally used. However, some of these changes may require a little more help. If you feel that you may need a bit more guidance as you try to alter your financial point of view, do not hesitate to contact a therapist to explore some of the struggles we have regarding wants versus needs. In doing so, do not hesitate to ask for a therapist that may specialize in helping individual’s or couples with their financial issues.