How you relate to money can make all the difference!

Do You Have a Relationship With Debt?

by Gary Foreman

Do you have a relationship with debt? You hate it, but feel helpless to stay away from it? If so, you're not alone. According to a New York Fed report, U.S. households have $12.3 trillion in debt. To help us dig beneath the debt, we reached out to David Weliver, Managing Editor of Money Under 30.

Q: Sometimes people fall into debt suddenly due to an accident or major illness. Short of anticipating and insuring that type of event, is there any behavior that can help put people in a better position to withstand sudden expenses?

Mr. Weliver: Although an unexpected illness or accident is a common cause of major debt, it's also very preventable. The best thing you can do for your finances is to have emergency savings on hand equal to at least six months' worth of your monthly expenses. To help you get there, I recommend having two checking accounts and at least one savings account. You deposit your paycheck and any other income into one account and then transfer a fixed amount to the other checking account and that's what you have to spend. Then, you can transfer the surplus to a savings account and begin to build your emergency fund.

Of course, there will be situations that will draw down even a well-funded emergency fund. If an illness or injury threatens to bankrupt you, slow down and think about the big picture. Doctor's offices and hospitals will pressure you to pay bills, even if it means putting everything on a high interest credit card. But that may not be the best strategy. You may be able to negotiate medical bills for significant savings, for example, but not a credit card balance. In addition, entering into a payment plan with a hospital may be far less costly than paying 20% interest on a credit card.

Q: Is being a "shopaholic" just a symptom of a larger problem? Are there behaviors that tend to lead to shopaholic behavior?

Mr. Weliver: I think so. I'm not a psychologist, but based on my own experience, "retail therapy" absolutely provides a temporary high and I can absolutely see how people can get hooked on that like a drug. And just like a drug, the high from spending money is very short lived and immediately followed by a longer-lasting low of guilt and regret.

If you notice a pattern in which you're spending money not because you need something or have been saving for something you want, but because you're bored, depressed, anxious, etc., I think making an appointment with a therapist should be your first step. Most financial issues are, in fact, behavioral issues.

Q: What healthy behaviors can people imitate that will help keep them from having debt problems?

Mr. Weliver: The acts of gratitude and being present will go a long way in preventing debt. We're not only happier when we're grateful for what we already have instead of wanting for what we don't, but also we're going to save money instead of spend it. And when we're focused on the present, we're more likely to be satisfied with the important things in life like our psychical health and the people we're with, not material things.

Do you have a debt problem? Find out if you do and how we can help.

Q: Are there some behaviors learned early in life as children or teens that predict a tendency to have debt problems later in life?

Mr. Weliver: I definitely suspect our early experiences with money shape how we manage money as adults. For example, although my parents were good about teaching me to save money for things I wanted as a kid, I never saved money "just to save money" or for long-term goals like education or retirement. Therefore, I learned the saving lesson, but the way I learned it is that saving is really for buying more expensive stuff! I think that explains a lot about why I overspent in my early 20s and had to learn better money habits on my own as an adult.

Related: Can a Debt Consolidation Loan Solve My Debt Problem?

Q: Does changing behavior automatically solve debt problems? Or will other steps be required?

Mr. Weliver: Sudden and total behavior change is quite difficult and extremely rare, so I think embracing a debt-free lifestyle will be a process for most people. There will always be situations that tempt you, but if you commit to living within your means and begin to value the security that saving provides more than the gratification spending provides, you'll make more good money decisions than bad ones. The more you do that, the wealthier you'll become.

Reviewed April 2018

Take the Next Step:

  • So how do you build and maintain a healthy relationship with money? Here are 6 ways to help you.
  • Find out: Could debts ruin your retirement?
  • Understand what the future may have in store for you if you decide not to do anything about your debt.
  • Funding an emergency fund now can help prevent debt problems and even bankruptcy later. Start saving today with these 11 easy ways to find $1000 for an emergency fund.
  • Stop struggling to get ahead financially. Subscribe to our free weekly Surviving Tough Times newsletter aimed at helping you 'live better...for less'. Each issue features great ways to help you stretch your dollars and make the most of your resources. Subscribers get a copy of Are You Heading for Debt Trouble? A Simple Checklist And What You Can Do About It for FREE!
Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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