Goodbye to Debt
The new American status symbol and how to achieve it
That's why consumers are drawing a distinction between unsecured debt like credit cards and secured debt like mortgages. The latter is pretty much unavoidable and is deemed OK. "A home holds value," says Thomas Stanley, coauthor of The Millionaire Next Door (Longstreet Press, 1996, $22). "You are living there and you are going to get something back out of it." Stanley says this new legion of debt-free consumers is on the right track, and he draws a lesson from the spending habits of the people he studied for his book. "Millionaires don't carry debt on things that depreciate," he says.
Most debtors don't get snowed under on purpose; many say the debt sneaked up on them. "It's kind of delusional," says Anna Christian, a graphic designer in New York City who is paying down $45,000 in debt with the help of a local credit counseling service. "You just feel like you have $5,000 mad money to spend because you have a $5,000 credit-card limit."
Many debtors cling to an unrealistic view of future income, pinning their hopes on a bonus or raise. "They really believed that when they made these credit-card purchases they would be able to handle them," says Lauren Locker, a financial planner in Totowa, N.J. "Instead, the debt grew like an insidious cancer." Typically, a catastrophic event--the death of a spouse, divorce, the loss of a job--was the catalyst for change, provoking the debtor to seek counseling or file for bankruptcy.
Fortunately, many of today's debt fighters aren't waiting for disaster to strike. The need to save and invest for retirement--which is nearly impossible when you're struggling--is prodding many. With the advent of self-directed retirement plans like the 401(k) and a questionable future for Social Security, the onus for financing retirement falls on the individual. "They are looking down the road at spending 30 to 40 years in retirement," says Pat Jennerjohn, a financial planner in Oakland, Calif. With that realization, having the hottest electronic toy fades in importance.
Despite a vibrant economy, corporate layoffs still have some consumers worried; just last week, Intel decided to cut 3,000 jobs. "I don't want to be stuck with a credit-card payment if something happens to my job," says Steve Wallace of Lewisville, Texas, who recently transferred his $4,200 credit-card balance to a card with a lower interest rate to pay if off quickly and more cheaply.
The overwhelming and often unendurable stress that accompanies indebtedness is motivating many to pay off their bills. "It gives one a sense of futility, hopelessness, and despair," says Jerrold Mundis, author of How to Get Out of Debt, Stay Out of Debt & Live Prosperously (Bantam Books, 1990, $6.99). Debt can be pervasive, subtly infiltrating every facet of life. And it doesn't just ruin credit records; debt can destroy marriages, families, careers, and self-esteem.
Debt leaves many people distracted and vexed. "I was just miserable worrying about how to pay my bills from month to month," says Linda Pickens of Greenville, S.C. "I would much rather have peace of mind than a new pair of shoes." In extreme cases, stress results in depression, embezzlement, even suicide.
advertisement
