The Anti-Debt Culture

JD over at Get Rich Slowly recently had a good article about the America Culture of Debt where it was debated about who’s fault was it that so many people are in debt: the consumers who dug their holes or the banks who lead out the money in the first place. In the end it is sort of both, but what stuck me about this is what kind of long term blow back are we going to see from this. Will we see the rise of the anti-debt culture out of this?

I know I’m personally anti-debt. I dislike owing money to anyone for any reason. As such I’ve been finding the concept of using debt to buy assets difficult. I can do the math and understand how debt can be a tool to build wealth at the same time my gut keeps saying to me “this isn’t a good idea.” My mortgage is my last big debt hanging over my head and I have to admit I still like the idea of turning all my excess cash flow against the beast and killing the debt as fast as possible regardless of the math that shows that might not be a good idea.

So do you think any over excess consumption culture can spawn an anti-debt culture? I think it is possible in the broad sense, but I don’t think it will occur at once. People that did not learn any money management skills will tend to make the same mistakes as their parents, but the real test is can they learn the lesson of good money management faster then their parents. This could bring anti-debt into fashion when we all wake up from our collective debt hangovers and wonder what the hell were we thinking.

The long term issue with being anti-debt is it does limit your potential. By never taking on debt you can find yourself in a situation where you have a great potential investment but you are short on cash. The obvious thing would be to take on some debt for the short term to take advantage of the opportunity, but being anti-debt would make this a very difficult decision.

In the end I see anti-debt culture rising, but only as a phase. Very few people will stay anti-debt forever. In the end we will all learn (including myself) debt is like a gun. Just because you have doesn’t mean you have to use it and if you use debt it won’t make you good or evil. Debt is merely a tool.

2 thoughts on “The Anti-Debt Culture”

  1. I don’t think there will be any lasting effect. The GRS article states “Banks know better than the consumers how much debt a person can afford” which is very wrong – no one should know better than you how much debt you can afford to pay back (the next sentence is even funnier if you’ve heard any news in the last year).

    Sure there’s a few things you learn from experience, but it sounds like the problem is people knowing it can’t work and doing it anyways. There’s too many people who just can’t ignore a quick fix no matter what the cost is. Maybe seeing this will eventually cause a generational shift, but I think a lot of people who get away without losing too much won’t change their ways.

    It seems like there’s a recent shift to consumers having more credit available than they can really afford to use which may have caught people off-guard, but if there’s any reaction to that it will probably be a backlash purely against the lenders for taking advantage of their customers.

    In the long term things could change, but that might take 50 years or more.

  2. Debt is certainly useful in some situations. Buying a house, for instance, where saving up the cash to buy one could take decades. Or buying a profitable business… generate cash flow and grow a future asset. But debt to buy consumer goods (new stereo anyone?) Not so wise…

Comments are closed.