Awhile back on The Frugal Farmer I wrote about how household consumer debt is rising again. In the article, I referenced an anonymous article I read that said it was okay that consumer debt balances were increasing because the delinquency rates were low; about half what they were during the Great Recession.
We seem to be a nation obsessed with living off of other peoples’ money. It’s touted in political circles, social circles and even in wealth-building books you’ll find experts that promote getting wealthy by using other peoples’ money to increase asset holdings.
What’s Wrong With Using Other Peoples’ Money?
Real estate experts tout making a living through real estate with other peoples’ money. Credit card companies and banks strongly encourage us to use their money to, as the bank I worked for would say, make “better living through plastic”. It’s not only acceptable, but eagerly pushed for to get better things and have a better life with the use of money that doesn’t belong to you.
Using the money of others to get things in life can have its time and place – when used wisely. However, when used without much forethought or a plan to end the cycle, using other peoples’ money becomes highly dangerous.
Remember that article I told you about that said it was “okay” that household debt had risen to such high levels because the delinquency rate was low? That article was written in February – of this year. Two months ago.
This week, just two months later, another article came out. Guess what it said:
“Credit card charge-offs have been rising steadily, posting their biggest surge since 2015 in February.”
The article stated that “after years of packing on more debt, more consumers are struggling to pay the bills.”
Using other peoples’ money for one-time projects and paying the debt off in a timely manner is one thing, but when using other peoples’ money becomes a way of life, it’s a completely different ball game. Why?
It Teaches One to Avoid Financial Responsibility
Using OPM as a way of life resolves any need to save money or stop living above one’s means. Why would you when you can just go out and get more OPM? Our good friend Brian found this out the hard way. He and his wife got into over $100k of consumer debt, and Brian will tell you that the only reason they had a wake-up call was because they had maxed everything out and no one would extend them more credit.
My husband and I only had our debt wake-up call after a similar revelation. As our debt load increased, it became more and more difficult to manage the monthly payments which once seemed so manageable.
Living off of other peoples’ money as a habit makes it much too easy to avoid living within your means and being responsible with your money. There’s simply little motivation to do so as long as someone is willing to extend you more credit.
It Limits Your Freedom
Another problem with living on OPM is that it limits your freedom. Instead of being able to do what you want with your time and money, you’re limited to making choices based around having enough money to pay your creditors. You can’t switch jobs unless the one you’re considering pays enough to cover your debt payments. You can’t go on vacation because you’re financially strapped as it is.
You can’t take advantage of great deals on things you might need or want because the cash simply isn’t there. The more you depend on OPM to fund your life, the less ownership you have over the money you earn each month because you’re in bondage to those “other people”.
It Sets You Up for Financial Disaster
Living off of OPM as a way of life is also dangerous because it puts you on the brink of total financial disaster. Those who make living off of OPM a way of life often have no money saved as a back up in case of an emergency such as a job layoff or a health crisis that takes away their ability to work. They can’t help a loved one in financial need because they’re just scraping by themselves. They can’t handle an economy bust because they’re barely making it now.
Using OPM Wisely
In some cases, using OPM can be helpful. Buying a house comes easier and faster when you take on a mortgage. But in order to minimize the impact of that mortgage on your life, it’s a good idea to make a commitment to pay it off as soon as possible.
Using OPM for a college degree can also be beneficial. But again, the goal should be to minimize how much you have to use and to pay it off as soon as possible and get rid of the bondage that holds you captive via monthly payments.
You Deserve Better
I know I’m a bit of a conspiracy theorist, but I firmly believe that those running the system love that so many people have become dependent on credit. Since most people who live off credit live a lifetime of using OPM, there’s little chance that they’ll lose that person as a customer. Instead, they’re forced to pay payments and interest for decades on end.
Getting out of debt, saving money and learning to live within one’s means takes a hell of a lot of hard work, dedication and, as my friend Brad likes to say, “ruthless prioritization”. And it’s tough to have the ruthless prioritization that will help you get out of debt in a society that is so ruthlessly encouraging people to give in to instant gratification.
You might like this: Other People’s Money: The Real Business of Finance
But friends, there is a better way. There is a life of peace, quiet and contentment that comes when you start paying off debt, saving money and bucking the system, refusing to depend any more on OPM and instead creating a situation where you have the ability to depend on the financial stability you’ve created. Try it. I have a feeling you’ll like it there. 🙂