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  • Writer's pictureKel Galavan

The Psychology of Debt: Why are you working for everyone else?

Debt is a funny thing.

I'm talking funny strange here and not funny in the humorous sense of the word.

In today's world, debt has become an ingrained part of our daily lives. A normalized thing, bound tightly to how we think and make financial decisions.

I think of each debt as a leech, and leeches should be removed with immediate effect if the host is to stay healthy.

It is assumed that every person has at least some, and many more have plenty of it in every colour and style available. We carry it in all its forms, from mortgages, loans, credit cards, overdrafts, and all its other hidden guises. We sometimes take on debt like we buy clothes or food. Treating it as a basic essential in our lives.

I've worked with many amazing clients over the years, but a common thread regularly emerges. Debt is taken for granted, a sign of being a regular part of modern society. It's what everyone does. So, it must be ok, mustn't it?

It's not.

I want to take a moment to give debt a different spin, maybe pull back the curtains and let the light in, even if it's just a beam or two.

When did debt become normal?

Why is it accepted as a regular part of society?

Why do we willingly indenture our future and the future of our loved ones so easily?

To help figure this out, I am going to break open some deeply held assumptions on debt and money.

The first place to start is right at the very beginning…..

What is debt?

This is a question that rarely gets asked. Debt is something that tends to be blindly accepted and assumed as the norm (and just as often consumed) rather than being questioned for the interloper that it is.

Debt is like fast food, expensive, temptingly sweet, and slowly killing you one paid delivery at a time. It might be offered at every checkout, lending institution or offered in every second email in your inbox. It might be what everyone else is doing, but that does not make it good. It does not make it healthy and most certainly will not lead you to your 'best life' or whatever that means.

Debt looks like money.

Debt acts like money.

But I can assure you that debt is not money.

Debt to you, the person who borrows it, is a millstone around your neck, draining your future earnings and weighing down your ability to grow your wealth.

Debt is income to the person you got it from. Credit is extended to you on the promise that you pay it back with interest, fees and charges.

People don't like when you mess with their income, and that is why it is essential to only take out debt with your eyes wide open and have a plan to replay in full and fast.

Is all debt bad?

Before we go any further, I want to differentiate here. There are times when taking on debt is exceedingly helpful, like buying a home, for example, or a car to get you to your job to earn money or for a course that will increase your income. If you do need to take out debt, this is the acceptable type of good debt because it gives you back more than it takes.

If credit or debt does not fall under this category, then it is most likely bad debt. Bad debt is easily spotted. Its telltale sign is that it sucks at the lifeblood of your future. It holds you back and drains your money.

Things bought on credit, such as clothes, consumables, and something that will either end up in a landfill in a few months or that you soon forget you even bought them.

The Nature of Debt

When we think of money, we view it as a sort of swap. A tangible representation of the value that can be used to buy goods and services. You earn money that is yours to buy what you please. A simple transaction, money now in exchange for things and experiences now. A straight, well-balanced mathematical sum. Simple and easy to understand.

Debt is a different story altogether. It represents an obligation, an IOU, a money millstone owed to someone else. When you borrow money, you are essentially promising to repay the lender with interest, fees and charges at a future date.

This simple but fundamental distinction between money and debt is too often ignored as we are so focused on getting that 'thing' at all costs at the moment, not realizing that we have stepped outside the realms of money earned and into the crazy upside-down world of manufactured Salvador Dali surrealism that is credit.

Debt is a Profit machine. You are the cash cow.

Another way to look at debt is to see it for what it is and not assume that it is money in the same sense that we earn money each day at our jobs.

Contrary to popular belief, debt is not just an obligation, a drain on your money. It is an obligation. Debt is the other person's paycheck; it is their income.

When you borrow money, the lender liberally lashes on interest, which is their thank you for extending you that extra money in the first place. This dynamic creates a symbiotic relationship between you, the borrower and them, the lender, where your debt becomes their source of income.

Special note here: People don't like when you mess with their income.

Once you get your head around this, understanding this debt-income relationship is the key to seeing why it is important to be smart when planning for the future.

The Psychological Impact of Debt

It's not just about the money. Debt runs much deeper.

The presence of debt in our lives can have profound psychological implications.

First and foremost, debt creates a financial burden and can lead to stress and anxiety. Knowing that you owe money to someone else is heavy to carry, like that millstone I mentioned earlier.

Secondly, it can affect your overall well-being and mental health.

Thirdly, the constant need to repay debt every time you earn a paycheck can dishearten even the best of us. That makes it harder to believe that we can get ahead, and anyone's confidence can take a beating if shot at long enough.

Over time, even the best of us will want to throw in the towel and give up trying, and this is one of the key triggers in overspending, putting us in a worse position than ever before.

Consumer Culture and Debt

It's never been harder to stay out of debt.

In today's consumer-driven society, debt has become normalized. We are told it's ok to lean into debt to buy that must-have item. We are constantly bombarded with advertisements and societal pressures to buy now and pay later, a personal pet peeve of mine.

This contemporary culture of instant gratification has fueled the rise of consumer debt, as individuals often succumb to the temptation of spending more than they earn. As a result, the line between needs and wants becomes blurred, and debt becomes an easy, socially accepted way of satisfying immediate desires rather than making it ok to plan the slow game and make grown-up final decisions.

The Illusion of Wealth

Affluence is killing us.

Debt creates an illusion of wealth. When you borrow money, you gain access to funds that you do not currently possess. This can give the impression of increased purchasing power and a higher standard of living.

However, as with all illusions, they are short-lived, as the borrowed money must be repaid with interest. Which, in reality, makes you poorer over the long term taking you further away from that dream life. Over time, excessive debt can lead to a cycle of borrowing and repayments, trapping us in a perpetual financial struggle. No one wants to be there. It's disheartening and stressful.

The Role of Credit in Debt

Not all debt is bad.

Credit plays an essential role in the money ecosystem. It represents lenders' trust and confidence in borrowers, allowing them to give credit and allow financial transactions.

Debt used properly can move you forward, find your forever home or fund the education you need to do a job that you love.

Debt needs to be handled with care and used in a way that pushes you forward and helps you to build a life that you love and not one that lines company pockets because of a catchy advertising jingle.

Final Thoughts

To break free from the cycle of debt, it is important to plan and think clearly about the type of life you want and create a healthy relationship towards money and credit. This begins with learning about money and debt, increasing financial literacy, and understanding the true implications of borrowing.

If you do this and adopt a more mindful approach to spending and saving, you can reduce reliance on debt, crush existing debt, and prioritize long-term financial stability. Do this, and you have won the game of life.

I share money-saving tips and money mindset tips weekly in my private email list. It's free to join, so make sure you are subscribed to the Smart Money Times Newsletter and get your hands on my new ebook From Out of Control to Cruise Control, 20 Simple Things to Completely Transform Your Money Life.

Disclaimer: This is information – not financial advice or recommendation. The content and materials featured or linked to on are for your information and education only and are not attended to address your particular personal requirements.


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