Debt is not usually discussed in terms of set points, but it should be. Our culture is pretty much built on debt. It goes from a currently skyrocketing national debt through corporate, banking, state, county, city, and down to the individual. We use credit cards. We take out car loans, student loans, home loans, and home equity lines of credit. For most of us, debt is as ubiquitous as breathing.
Looking at our debt set point levels can be excellent information for us to add to our financial awareness. And given how easy it is to end up owing more on credit cards after trying to pay them off, we think it’s important information.
So exactly how much debt am I comfortable with? Some of us aren’t comfortable at all. We pay in cash. We save up for what we want. But even those of us who live that way will have to borrow if we want to buy a house. Others pull out the credit card or sign on the loan papers without even thinking about it. They figure: well, as long as I can make the payment, I can afford it.
The truth is, if you have to make a payment, you can’t afford it.
That is not to say taking on debt is the wrong thing to do in all circumstances. But it is to say being aware of how willing you are to do so and what consequences you’re willing to risk will help you to make more conscious decisions.
Today, do a combination of the upper and lower limit exercises you completed the past couple of days, but for debt.
- Since it’s common not to look at the total number on our “owed” columns, but rather the payments we make, it’s important to look at total numbers. What do you owe, in total? How much more than that could you go before you hit the “NO!” reaction in your body?
- Review your lifestyle. What do you have or do that you absolutely would not borrow money for? Anything? If you say “nothing,” then you definitely will need to work on that set point. Another way to look at it is to ask yourself “What do I regret having bought on credit?”.
What insights did this exercise bring you? Can you see ways to reduce the level of debt you’re comfortable with? Set the intention today to work on that.