A new study shows that many people go into debt because they disregard that the money is not really theirs.
January 22, 2020 | by Drew Calvert
In 2019, U.S. consumer debt reached an all-time high, surpassing levels last seen during the 2008 financial crisis. Such debt takes many forms, including mortgages and student loans. But credit card debt alone exceeded $870 billion, and most of that is the result of discretionary spending. Why are so many Americans needlessly putting themselves in the hole?
The answer might lie in the psychological profile of the debtor, according to Stephanie M. Tully, an assistant professor of marketing at Stanford Graduate School of Business. In a recent paper, Tully and her coauthors found that not all consumers feel the same way about available financing.
On one side of the continuum are those who perceive borrowed money to be entirely their own, and thus are more willing to spend it freely. On the other side are those who perceive such funds as decidedly not their own. This latter group is more likely to see the money as belonging to the bank, and thus more conservative about how they spend the money.
Robert Kiyosaki, the author of Rich Dad; Poor Dad, likes to say that, “Assets feed me, liabilities [debt] eat me.”
If you have to borrow money, it means you can’t afford what you want to buy. Even though, by the way, that’s not true, right? It’s not true. I
You can and probably should definitely use debt to buy real estate when it makes sense. Or, you can use debt when it makes sense to buy a business. Be smart with money such that money doesn’t leave me. And debt is a way for money to leave you and enslave you.
References:
- Drew Calvert, That Money You Borrowed? Remember Who Owns It, Stanford Graduate School of Business, January 22, 2020. https://www.gsb.stanford.edu/insights/money-you-borrowed-remember-who-owns-it