What They Don’t Tell You About Debt

What They Don’t Tell You About Debt

When I was in college, I took an economics class. And by took, I mean the class was on my schedule, but you’d be hard-pressed to find me in the lecture hall.

I didn’t understand the concepts and my teacher sounded like Ben Stein (think “Bueller? Bueller?” for 45 minutes three times a week), so I refused to attend and therefore, learned nothing.

If I hadn’t been such a snot-nosed 18-year-old, those economics concepts probably would have saved my financial life.

According to Econ 101 – which I have since learned – everything you do, financially or otherwise, has an opportunity cost. Basically, you have finite resources and infinite ways in which to spend them.

You can sell your time to your current employer for $X or to another employer for $Y, but you can’t sell your time to both employers simultaneously.

This necessitates careful decision making by thoughtfully weighing all alternatives; but unfortunately, this is where we humans fail miserably.

I attended college for 5 years and earned a Bachelors, ¾ of a Masters, and about $60,000 in debt. At the time, I thought student loans, and debt in general, were normal so I never even considered the opportunity cost of my decisions.

Fast forward to when dear old Navient sent my first loan payment bill, and all I could think about was the opportunity cost. There’s something truly sobering about seeing a dollar sign followed by too many zeros actually printed on a piece of paper. Honestly, I had no idea how much student loan debt I had accrued.

And then fear set in.

Should I make my student loan payment this month or replace the bald tires on my car before winter hits? Which is cheaper the 3-ply toilet paper with the cute little bears on the package or the 1-ply cardboard-y stuff and the butt cream it necessitates? Is it safe to eat Ramen noodles 6 days in a row?

Words cannot explain how disheartening this line of thinking is. Stepping out into the real world should be a wonderful experience full of new and exciting challenges, not an exercise in spending as little as humanly possible while still meeting your basic needs.

And here’s the thing, my situation isn’t unique.

I don’t have an unusual amount of debt. Most people think living like this is normal, but that’s a lie. Debt isn’t the path to the American Dream, it’s the very thing keeping you from it.

The bottom line is that if you have to finance a purchase, then you can’t afford it; and if you can’t afford it, then you shouldn’t have it. (I anticipate some readers thinking, “But what about a house or a car?” A house usually appreciates in value.) 

If it appreciates at a rate greater than your interest rate, then you’re making money, and the mortgage may not be a bad idea. But this doesn’t hold true during a market downturn, so weigh the opportunity cost. The same line of thinking works for investment properties from which you receive monthly income. A car is different; it depreciates in value, and quite rapidly. You will never get out of a car what you put in to buy it. Not a good idea to finance.)

The biggest problem with debt is that the interest accrues constantly.

It’s the classic three steps forward one step back situation. And the longer it takes you to pay off, the more you end up paying. And if that doesn’t make you mad enough, think about this: there’s someone or some company somewhere benefitting from your debt. Someone is getting rich off your interest payments.

So what’s the solution?

Pay your debt off as fast as possible. Learn the difference between needs and wants, and write a budget (with the help of Tiller). What can you live without? Then sell it. If you can’t reduce your spending any further, can you increase your income? Can you work overtime? Can you pick up a side hustle or a second job? Get creative, but get it done.

I am currently working a full-time job, freelancing as a bookkeeper, attempting to get a business off the ground, and delivering newspapers every day at the ungodly hour of 3am. My motto is “embrace the suck.”

No, I’m not crazy, despite what my husband might tell you. I’m determined.

And at the end of the day, the suck is temporary. I have one goal and one focus. I can actually visualize a debt free future and feel deep in my bones that sense of freedom it will bring.

After I can finally end my obnoxiously one-sided relationship with Navient, all the money I currently send them is mine to use how I see fit. I can save for a house or invest in my future or buy something extravagant just because.

By the time I pay off my loans, I could’ve bought a small house, or two cars, or funded a 529 plan for my daughter and saved her from my mistakes. I’ll never get back that money. I’ll never get back the time away from my family while I worked 60-70 hours a week. And is a college education even worth the money? Well, that varies from person to person and is an in-depth conversation for another day, but for me, it wasn’t.

The opportunity cost of my decisions is costing me everything I have to give.

I would’ve been much better off spending my time and money elsewhere. If I had only known this at 18 (or attended my economics class), maybe I could’ve saved my twenties.


By Ansley Fender of Fender Financial Services. Read an illuminating interview with Ansley at “Your Financial Future is Wide Open