The Psychology Of Debt

Debt exists as much or more in your mind as it does in the so-called "real world," and the damage it does there may be even more "real."

Debt is like a weight dragging you down.

In our culture, money and the lack of it largely determine how we perceive the world.

Money = Power = Freedom

Debt = Powerlessness = Slavery

This is unfortunate, but it is the way things are.

Since "doing things" usually takes money, without it we feel paralyzed and frozen.

So debt, more than being just an amount of money owed someone, is a psychic burden that restricts your freedom, the way you perceive opportunities, your self-esteem, and your view of the future.

All debt has some of this power, but when it becomes an unmanagable, out of control, and financially crippling debt, then it takes on new dimensions. It is accompanied by fear, worry, doubt, shame, embarrassment, feelings of failure, blame, and a general hopelessness.

Some people even kill themselves, thinking that debt has destroyed their reason for living. This is an awful lot of power to give a piece of paper and some numbers on some company's computer.

Debt implies a promise to repay, so if circumstances arise that make repayment impossible, then this results in a broken promise, which in turns causes guilt. This is where the "moral dimension" of the problem arises.

Very few people get into debt "over their head" as a way to "rip off" their creditors. It is more like a case of frogs in a pot of water getting slowly hotter until it boils. Almost unconsciously, many of us are trapped and doomed to either default or increasing payments almost without end. This is not what we envisioned when we started out with credit cards.

Denial is a big part of the problem. It starts when we don't bother to read the "fine print" on our agreement. It continues as we morph from paying off the balance every month to just paying the minumum balance. Soon we accept higher limits, new cards, "convenience checks," etc., and we deny to ourselves that we have a problem. Soon we can barely stand to open our bills much less read them.

We finally fall off a cliff when an investment fails, our business has trouble, anticipated earning don't materialize, etc. Also, many folks encounter an illness, job loss, divorce, or other crisis which can suddenly without warning make a manageable debt too much to handle. At this point we are like a pilot in a crashing plane, we either go down or bail out.

"Bailing out" can take the form of bankruptcy, default, or some form of debt settlement. Since we already feel guilty and to blame for breaking our promise, we tend to assume that our creditors are in the right and have all the power. After all, we did borrow the money, right?

Yes, we did, and in a perfect world we would not try to "walk away from our obligations." But when wedged between the "proverbial rock and a hard place," we have to choose which of sometimes conflicting obligations we need to honor. We have rent to pay, our families to feed, utilities to pay, taxes we owe, and more. Where do credit card debts rank in these priorities?

If you are past the "point of no return," behind on your bills, and now being hounded by bill collectors, then your state of mind is critically important. They will use your fear and guilt against you in every way they can. They routinely break the law by threatening to "put you in jail," seize your assets, and will use many tactics of harrassment. In short, they will wage "psychological warfare" against you, so you must be prepared.

So don't let them convince you that you are all to blame. You're not. They share the responsibility.

Don't let the situation force you into a "poverty mindset." "Being broke" is a condition, poverty is a state of mind. Remember that many successful people have been "broke," even bankrupt, but have bounced back. You can too, if you can avoid being sucked into a place of hopelessness and poverty.

Finally, be prepared for a fight. Overcoming debt is a challenge, but having the will to fight, the determination to succeed and not give up, and the strength to defend your rights and protect your assets is the key.