How many times have you promised yourself that you’d get out of debt? If you’re like a lot of people, you fail at that most of the time. It isn’t that you’re weak, but more that you have one bad habit, and lack another that’s good. Before getting out of debt, you first have to go from having a debt habit to having a savings habit. Think of it as breaking the savings barrier. Until you do, getting out of debt is an uphill struggle.
Life is all about habits
We often think of success as something that comes pretty suddenly. Landing a good job, getting an inheritance, a strong run in the stock market—the winning lottery ticket! Sometimes those things do happen. But more commonly, success in any endeavor isn’t nearly so dramatic.
Unless we get lucky, our lives will be defined by our habits. Good habits will land us in a good place, bad habits will set us solidly in a less generous position.
This is true of virtually every aspect of life. If you overeat, you’ll eventually gain weight. If you don’t take care of your health you’ll eventually lose it. If you cultivate good relationships, they’ll follow you and bless you all of your life. But if you perpetually have no time for people, loneliness will eventually be the result.
If you want anything good in life, it will come as a result of the habits you engage in. Habits are the “little” behaviors we put into practice each and every day. Put another way, slow and steady wins the race.
We might want to believe that one day we’ll find a secret of success, but alas it isn’t so secret. It’s all about habits.
The debt habit
As we’ve said, habits can be bad as well as good. Debt is a bad habit. And it’s vitally important to realize that debt is a habit! Thinking that it’s somehow a one-time event misses the mark and makes it impossible to overcome.
It starts the first time you borrow money to pay for something you can’t afford. Credit cards play into this nicely, one swipe, we get what we want, and we’re on our way. This can happen with car loans, mortgages and student loans too. There may be no choice as far as taking them, but there’s always a choice as to the degree that we take them, or more particularly their size.
Debt is easy and that makes it even easier to get into the habit. That’s much the same as over-eating or not exercising. They’re bad habits to get into, but they’re also easy. Most bad habits are. If they weren’t we wouldn’t get into them—we wouldn’t want to.
In fact, we can think of bad habits as default settings. Human nature is that if there’s an easier way to do something and a harder way, we’ll generally choose the easier way. It doesn’t matter much that the harder way will lead to a better outcome; at the moment we’re making a decision, the easier way is more comfortable. Bad habits are also rooted in comfort.
Once we get a battery of loan types going—credit cards, car loans, student loans, mortgages—the debt habit is cemented by its seeming inevitability. Borrowing is how we get what we want, “earning a living” is merely the way we pay for the debts to get what we want, and we settle into a disturbing sort of normal that does nothing but reinforce the debt habit.
At that point, the habit has become a financial lifestyle.
Creating a savings habit
Early in life we face a choice. Borrow to pay for what we want—the bad habit. Or delay the purchase, save up the money needed for it, and pay cash on the barrel. That’s a savings habit and it’s a good habit of the highest order.
The savings habit creates a positive mental reference for having money. Even though there’s self-denial (delayed purchases), saving money is seen as the way to get what we want. It becomes a financial habit. We may start by saving to buy what we want, but that converts easily to saving to have extra money when we need it, and also for investing for a more solid financial future. It’s a habit because it builds on itself.
Breaking the savings barrier: life on the other side of debt
What if you missed the boat on the savings habit early in life? Maybe you adopted the debt habit instead—is there a way to move from a debt habit to a savings habit?
Yes, but doing it is a major obstacle, especially if you’ve been in the debt pattern for a very long time. It’s like scaling a very high wall—or breaking a barrier. And that barrier is very real. It will be even more difficult if years of living with a debt habit have left you with a substantial amount of outstanding loans.
The savings habit is easy if you’re used to doing. Not only that, if you have and always have had a nice savings cushion, it isn’t hard to keep doing what you’ve always done. It’s second nature. And you have a savings cushion to use in the way a debtor uses credit cards.
But if you don’t have that savings cushion, you’ll have to sacrifice to build one. That’s a major part of the savings barrier. It involves self-denial. Not only that, but you’ll have the added burden of needing to pay off the debt overhang you’ve probably run up.
The good news is that you can do that, and it’s even easier once you adopt the savings habit. Once you have money saved, you’ll be able to wean yourself off of credit. And once you do that, you’ll be free to concentrate your efforts and money on getting out of debt. The self-denial you’ll have developed from building up your savings will make that easier.
You’ll have broken the savings barrier—that point where you move from being a debtor to a saver. Once that happens, you can expect to see good things happening with your finances.
Do you consider yourself a saver or a debtor? Have you had to make the transition from debtor to saver?