How Your Thoughts Affect Debt
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Yesterday, we talked about how your beliefs can attract wealth. Not only do your thoughts influence your investing and saving habits on a personal level, but these beliefs, in a collective sense, can cause macroeconomic changes.
But can your thoughts attract debt?
It seems so. Your spending behavior is directed by your beliefs. Financial psychologists say that, like most mental processes, these beliefs can be complex and often contrarian. Thoughts and beliefs about debt are the most complicated.
You probably think that debt comes from over-confidence, or financial hubris. You’re spending money you don’t have because you’re sure the resources to repay the debt will be there one day… some day. But that may not be the case.
One possible reason for over-spending is a confusion between wealth and displays of wealth. Wealth is often portrayed, especially in popular entertainment, in visible symbols: big cars, sweeping mansions, and nice clothes. By attaining the symbols of wealth, people believe they have attained wealth.
A poor person who lives within his or her budget and has a higher degree of freedom is much wealthier than the well-off person who’s deeply in debt.
Another belief that generates debt is the deep insecurity that you are incapable of generating wealth, so you can generate debt. Debt doesn’t take planning. It doesn’t take introspection. And it can be done instantly.
Our society and government actually reinforces this notion. There are debts on income, but a tax break on mortgages. There are taxes on capital gains and dividends, but none on credit card balances.
We take this to the next level. Our economy nearly crumbled because of massive debt levels. People who weren’t ready to buy homes, did so. People who couldn’t afford a mansion, bought one. We may have skimmed this economic abyss because of insecurity and a lack of self-worth.
After all of this, it’s easy to assume that debt is evil. It’s not. It’s a tool. And, like all tools, they can be used for good–or evil.
It’s the belief that matters.
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
