Other Peoples’ Money

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. 🙂

16 comments on “Other Peoples’ Money

  1. “I firmly believe that those running the system love that so many people have become dependent on credit.” I don’t think you need to be a conspiracy theorist to believe that, Laurie. I worked with a teacher who had spent some time working with a big bank. He and his colleagues were all advised to “encourage minimum payments” from their credit card clients. It was said with a sort of, “Read the significance of this message – it’s more than the words I’m saying,” kind of look. There is a debt industry that profits off of indebtedness. Banks and credit card companies are key players. It’s tough to navigate with that knowledge, combined with our genuine needs for financial assistance as well as our own consumer temptations. Best way forward? Out of debt, and cushioned by savings. The OPM phenomenon is a powerful trap.

    1. I remember when I was a sales assistant for a top mortgage producer in our area. Our company approached it from a sneakier perspective. We were constantly praised for the wonderful things we were doing to “help people achieve their dreams”, i.e. a bigger, better house. It felt so good to tell a person they were approved for a higher dollar amount than what they had asked for. We were groomed and trained to believe that we were doing them a favor to get them into the top tier home they could be approved for and as such it never occurred to us that we were helping them get into dangerous financial situations.

  2. OPM fulfills the I need it now syndrome. Banks and credit card companies love the idea of the minimum payment, it keeps them profitable, and you trapped and tethered to them for years. We felt good for a short period of time using OPM, but soon felt stressed, began anticipating the next pay raise to help manage all of the minimum payments. If that raises wasn’t quite was I expected it was because my employer was terrible. It a bad cycle to be in, and only causes fear and stress.

    1. Yes!! It creates a constant need for dependence on others. So glad for you guys that you broke the cycle, and are now teaching others to do the same.

  3. Nobody cares about your money as much as you do. If you believe that and live by it, you’ll make decisions that will be completely different from what others will tell you is best.

    1. Great comment, MB!!!! My dad always told me growing up that people will always pick their own best interests, even to the hurt of others, and that I needed to make sure and watch out for myself (I was always wanting to help and please others). Best advice I ever got.

  4. Really insightful, Laurie. I agree that debt is living off others’ money and it’s just not a reasonable or healthy way of life. I don’t judge people for it since it’s so ingrained in our culture that it’s difficult to see clearly about it. And we have used credit card rewards in the past and I suppose that’s the same thing in a way. But actually living in debt should not be a sustainable lifestyle.

    1. Right. People use it as a way of life, and that’s where it can become really risky. We use rewards on and off too. Sometimes it works well, other times we find ourselves getting too lax with our spending.

  5. This is so rooted in our culture that it’s hard for people to see it. For so long, I just thought of debt as an inescapable fact of life. But a shift in mindset quite literally changed my life. The stress, worry and lack of choices are virtually gone since we’ve paid off our consumer debt (though we still have a mortgage).

    1. That is commonplace, Amanda, thinking of debt as an inescapable fact of life. I’m so happy for you that you know differently now!

  6. OPM is an easy habit to fall into, and once it’s a habit, it’s a problem for all the reasons you mention. If we instead try to rely on ourselves and our own money, I think many would be surprised at what they could accomplish if they put forth the effort.

  7. I hate debt as well, which is why I don’t use. One of my friends used to own a mini-conglomerate that combined auto dealerships, a few factories and a big real estate portfolio. His company was very leveraged, and when real estate turned south he was forced to sell he company to cover those loans.

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