Thoughts on advice

I recently watched a video concerning advice given to a young lady, recently married, and facing a household debt of over 1 million dollars with a generous household income of over 200,000 per year.   While I always aspire to live a debt-free life, I was bothered this particular discussion dispensing advice for how to become free of debt.   The advice was solid, it answered the questioned asked and I agree that the advice would achieve the desired result.   My complaint is about not exploring more about the original reasoning behind the debt in the first place.

The monthly credit bills are the obvious manifestation of the debt.   As debt accumulates, this payment will limit spending options for new things or experiences.   Eventually, this payment may completely cut off any new expenses or even demand reducing a standard of living to reduce costs.   Budgetary discipline is necessary to service the debt.   One strategy may be to pay off the debt, become debt free, and devoting the rest of one’s life never committing to any long-term debt.

Payments for debt is payments for past expenses.  The seeking of advice about debt management always focuses on the debt payments themselves, and the obvious way to answer this is to focus on ways to reduce those payments, primarily about paying down the debt.   This direct approach implicitly assumes that the debt itself was a mistake so that the current action is on atoning for that past mistake.   In the discussion in the video, the past mistakes were over-committing to student loans, personal loans, and credit card balances.   Now is the time to fix the mistakes of the past by severely cutting back on expenses.

Before committing to the goal of achieving debt free status, or even of accelerated pay-down of debt, there is a need to understand why the debt is there in the first place.   In the video, the debt resulted from the combining of debt of two single people who now as a married couple need to live with.

Missing from the discussion is the fact that this particular marriage would never have happened had they not been in so much debt.   Their individual debt burden enabled them to meet each other.   Their college debt made it possible to get well-paid jobs.  Personal and credit card debt impress each other through spending on entertainment or luxuries.   It wasn’t discussed in this video, but I can imagine that debt was not a major point of concern leading up to and including the wedding itself.   I imagine that the expectation of the marriage is that they would continue to enjoy themselves as much as they did prior to the marriage.

The debt served a purpose.   Certainly, there has to be some budgeting to keep the payments affordable, but it seems unlikely to me that severe budgeting to get debt to zero is the best option.   Even bringing up this as an option could be disastrous to the marriage.  The marriage was built on a foundation of debt.  The continued viability of the marriage may require a continuation of significant debt, debt that is just at the edge of affordability.   The advice given is to drastically cut living costs to maximize the amount of money to pay down the debt.   To be fair, this advice was accompanied by the need to approach this spiritually, to negotiate the marriage to accept this change in plans.

Even during the first view of the video, it felt awkward that the wife was having this discussion in the absence of the husband.   Optimistically, perhaps they already discussed the problem and agreed on the general outline of the solution.   The pessimist in me imagines her springing this discussion after this advice gave her to confidence to do so.   I would hate to be the husband side of that discussion.   This is fundamental change in the marriage contract, and that is to continue to live a lifestyle enjoyed during the courtship and engagement period.

Perhaps unstated, but a debt-laden lifestyle is what they agreed to on the wedding date.  That debt was a feature that made the marriage possible.   Changing the impression of that debt as a mistake implicitly charges the marriage itself as being a mistake.

Setting the marriage aspect aside, a big portion of the debt was college loan debt.   Individually, they did have a large loan burden that financed their years devoted to studies (and campus residence) to earn their advanced degrees.  Before starting their education, each individually would have been aware that they could choose more affordable colleges.   In addition, they could have decided to live more frugally during their college years, using spare time to work part time, or taking more time to postpone their completion in order to earn money to finance their studies.

In each of these decisions, there were tangible benefits of taking on the student loan debt.   Going to a more prestigious school enhances the post-graduation career prospects.  In addition, the ability to spend money and time to keep up with classmates strengthened networks that will pay off later, in terms of both career prospects and lasting relationships.    Accumulating large student loans is a choice, and it could be a very rational and justified choice.    That choice included the acceptance of living with that loan post-graduation.

My point is that the debt in financing college or in financing a lifestyle was a choice and charitably we may assume that that choice was not a mistake, even though the consequences would be burdensome.

The discussion about the debt needs to first address the question of whether the debt itself was a mistake.   The burden of servicing that debt is undeniable, but there are multiple solutions to this problem.    Immediately deciding at this point of high debt that the solution is to pay off the entire debt as possible presupposes that the debt itself was a mistake.    In this particular scenario, declaring the debt was a mistake implicates the education and marriage were also mistakes.   More affordable education and marriage outcomes may have been achieved with more frugal choices, ending up with completely different spouses and careers.

Given the recent timing of both starting the carriers and starting the marriage, the presumption should be that the debt was a brilliant choice.   The appropriate path forward would be continuity of a debt-financed lifestyle with budgeting to keep the payments at the current state of barely affordable.   Given their age, they are likely to see salary increases that they could choose to divert to paying down the debt.   Also, they may pursue modest budget savings for that purpose.

In either case, the solution is to accept a continuation of a high but affordable debt burden.   There needs to be a lot more justification for a more radical goal of living debt-free.   A debt-fueled lifestyle has succeeded getting them this far and their futures are promising.

The advice would change if there were an adverse change in their lives.   They could be facing a large uncertainty in their ability to continue their employment, or they could be considering starting a family that will cut the ability to earn income from at least one of the partners.   Even in these cases, the past experience of success based on debt needs respect.   The better solution is to re-calibrate the debt to match the new prospects.   The alternative of converting to debt-free living needs a lot more justification because it is contrary to all their experiences and habits to this point.

Debt free living may be beneficial, but it needs to be approached as a deliberate choice to change, and a deliberate choice to reject the previous choice of debt-financed life.   Such a radical change needs careful consideration that would be hard for a single person, and even harder for a couple who married under a different understanding, especially if that marriage just started.

I am drawn to such discussions due to my own preference of living debt-free.  When I do encounter debt, I reduce spending as much as possible to get that loan paid off as quickly as possible.   In that way, my life is the opposite of the one above.   I am accustomed to living without debt.   This choice of self-financing definitely impacted my life outcomes, the education I achieved, the jobs I have had, and the marriages I never had.

In this mirror-world, I have often considered the option to set aside my aversion to debt.  I could not only take on more debt but also plan on maintaining a steady-state of debt by replacing principal payments with new expenses.   It is not hard to imagine that I would live a more affluent lifestyle.   The improvement would be even more noticeable to me because I have lived so frugally for so long.

In contrast to the first example where reducing a lifestyle would obviously make life less rewarding, my choice would be in increasing a lifestyle that may make life more rewarding.   Yet, I find myself as reluctant to move to a constant debt life as they might be to move to a debt-free one.

There is the same justification for that reluctance for both opposites: the way we have lived up until now has benefited us in many often subtle ways.   I suppose it is easier to see the hazards of the couple living at the edge of their means changing to a more frugal lifestyle.   The opposite also has its hazards of accepting future commitments to pay a past debt.

Living a more extravagant lifestyle financed by debt comes at the cost of committing to paying that debt off in the future.   It takes some time to think this through to observe that the reason I am the way I am is because I owe nothing to each and every yesteryear.  Similarly, the opposite decision needs some serious thinking to recognize that the current circumstances would only be possible by the choices to accept the debts to yesteryear.

Making a choice to change in either direction is a very serious choice and more likely than not it would be a mistake.   I put myself in the chair of the host and hearing someone ask me what they should do about their huge debt.  I hope I would have the strength to hide my thankfulness of not being in their position, and instead look at their core condition.   Debt is a fact of their existence.   The worst advice is to say they need to get that debt to zero.   The advice instead is to identify the non-zero level of debt that they could sustain and then work toward reaching that.   Given what I heard that above discussion, that acceptable level of debt may be very close to exactly what they have right now: painful enough to say no more.   Don’t pay off the debt, but don’t add any more to it.

The above discussion serves as a case study of my earlier discussions about dedomenocracy, or government by data and urgency.  In those discussion, I emphasized the importance of gathering fresh data on a system as free from government interference as possible, something I described as punctuated libertarianism.  The only time for government interference would be at time of urgency.   The above illustrates this as the urgency to confront a debt problem.   However, the intervention is to do as little as possible and complete that as quickly as possible.

Implicitly such a government makes the judgement that the circumstances leading up to the current predicament are valid.   This only solution is the slightest course-correction necessary to return to the point where there was no reason to complain.

This is contrary to current Western thinking and of democracies in particular that strives to find a fundamental value assessment: if things are bad now, then it is because we made mistakes that led to this predicament.   To address such fundamental mistakes, democracies strive to make radical changes.    This becomes part of our culture so that we approach every external request for advice as a need to judge the validity of the choices that led to the current problems.

Adopting a different strategy of governance that treats every problem as a very recent and minor choice that once corrected will return everyone to the point immediately earlier where there was no problem, no matter what that point is.

The couple got to where they are because of the choices they made to live under debt.   The best solution is for them to make minor changes to get back to that level of debt where they felt comfortable.   The worst solution would be for them to change their lives radically to eliminate all debt.   It is very unlikely to work for them.


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