[…continued from January 29^th’s post…]

As we have done (and will do) regularly around here, we are coming back to the real key to financial bliss, and ultimately, to using debt wisely: being a conscious consumer.

This is where Martin Lewis really hits the nail on the head, I think: the root of the problem of massive, expensive, “bad” debt is that consumers are facing off against a multi-billion dollar advertising machine that exists solely to convince us that wants are needs, that bigger is better, that promotions are really bargains, and that it’s alright — even positive — to live hundreds or thousands of dollars beyond our means. Advertisers have years of training and of research to help them hone their pitches to push our buttons. Consumers, on the other hand, often have no training in how to be critical consumers. We’re conditioned to respond to advertising, peer pressure (as though supermodels and I will ever be “peers”!), and to spend uncritically.

What does this have to do with debt? Everything.

“Good” debt tends not to be the type of thing that one can enter into spontaneously. Mortgages, student loans, even intelligent car purchases are not things that we do because of a counter display at the mall. “Bad” debt, on the other hand — the high-interest, not-an-asset, uncritical purchases that we make — is often spur of the moment, regularly unconscious reaction to the values taught to us by people trained to part us from our money.

So, what if you pay with all your impulse purchases with cash? Does that make them “okay”?  That depends on what’s on your credit card. Do you pay your utility bills, or buy clothing, or groceries, or pay for other necessities on your credit cards? Do you carry a balance?

If you do both of these things, then your impulse purchases are still causing you to incur debt, by causing you to “use up” available cash with the unnecessary stuff, and putting necessities on credit. Beyond being “bad” (that is, expensive) debt, this should be a big, red flag that you are potentially in (or headed for) real financial trouble.

The punchline: We are taught that debt is bad, but we end up incurring debt because it is necessary to do what we want/need to do in the world. Believing that debt is bad leads to believing that our debt is a source of shame, rather than a tool to be employed constructively. So, we don’t talk about debt. Therefore, we don’t learn about debt.  Add to this the billions of dollars in advertising that exists solely to make us believe that wanting something is the same as needing something, and you can see how problems happen. Overspending is compounded by poor, uninformed borrowing choices, which eventually make the hole deep enough that it’s easy to justify continued overspending on the basis that “it’s not much more. It won’t make much of a difference.” This, folks, is what is known as a debt spiral.

Say it with me: Not all debt is bad. In fact, for most of us, some debt is inevitable. But make sure to be smart about it: make it as inexpensive and affordable as possible, and get rid of it as quickly as possible.

Now you can have a crush on Martin Lewis, too.