Spending, Debt and Our Mental Health

A good friend of mine, John Mathews, who also happens to be an experienced mental health professional, recently penned an article on his website blog about the psychological benefits of saving money instead of spending it (i.e. taking on debt). Here are some brief, yet insightful excerpts:

Experiences Over Things, But Should We Be Buying at All?

“Research on the psychological impact of saving versus spending is surprisingly scant (if you know otherwise, please let me know). An oft-cited survey about the benefits of saving comes from an upstart bank. The bank, conveniently, found that depositing your money in it makes you feel good! Not exactly an unbiased source. Still, I tend to think they are probably right.

Elsewhere, researchers at Beyond the Purchase have found that people who manage their money tend to be happier than people who don’t, though saving is one aspect of many that is attributed to the broader activity of ‘money management.’ Warmer, but not quite there.

With all the interest in the science of well-being, and all the cash we have spent on happiness elixirs, self-help books, and wellness retreats, it seems we have forgotten to consider what happens to us when we simply stop trying to buy happiness in the first place . . . even happiness-by-way-of-experience. This appears to be a huge blind spot in the study of well-being.”

I must admit… I am one of the people who is comfortable lingering in this blind spot. After a few years of practicing law, I have become a bit cynical and clinical in my approach to current and prospective clients. By my nature and my preference, I don’t like to pry into people’s personal motivations any more than necessary. And I never, EVER pass judgment on the decisions that have led people to their financial predicaments. I remind myself – my job is not to dissect a person’s life and improve their well-being.

On the other hand, I don’t stop people from voluntarily offering up their personal circumstances and decisions. One reason that I rarely charge clients an hourly rate, and never charge for initial consultations, is because I want people to feel free to bend my ear without worrying about how much money every sentence is taking out of their pockets. Especially when they are already so worried about the money they have been spending and the debts they have accumulated, which is why they are talking to me in the first place.

Recent statistics from the Federal Reserve show that credit card debt exploded by $11 billion in November 2016, while car and student loans accounted for another $13.5 billion that month. Talk about a holiday spending spree! In total, Americans are in about $3.75 trillion of debt for these consumer or educational purchases. These are all-time highs for the country, and one look at these mind-boggling numbers should remind us about our addiction to spending and debt. But, like all addictions, there are real people with real problems and stories behind the statistics.

A few days ago, a gentleman called me looking for legal advice. It took him a little while to really convey the nature of his legal issues, because he was so ashamed of how much debt he had racked up. Aside from his $25k+ in unsecured debts (loans not secured by collateral), he had mortgage and child support payments that he was just barely keeping up with. His rapidly deteriorating finances were making him feel like a dead-beat dad, even though he was still current on child support. When he started to talk about his credit score, he apologized for cursing in advance and said “it’s just totally F’ed up”. He had a hard time even saying the word “bankruptcy”, and when he did, it sounded like he was expecting me to think he’s insane… as if he was talking about some nutty conspiracy theory.

I tried my best to normalize the conversation about bankruptcy and explain how much sense filing for it would make in his situation, but unfortunately, after all his expenses, the gentleman didn’t even have enough to start making payments towards my fee. Regardless of the details of any particular case, the anxiety, fear and stress is unmistaken in the voices of people who are speaking with me about settling their debts or filing for bankruptcy. Many times I can hear the pain and heartbreak of the people who, even a few short months ago, had never imagined they would be talking to a lawyer and declaring that they spent too much money and now they are bankrupt. It’s a conversation most people, understandably, want to avoid.

Unlike the participants in the studies cited above, these are people who no longer have the choice of whether to spend or save their dwindling money. They are left with more staggering choices – whether to keep their car or start catching rides and taking the bus to work, to keep their apartment or home in a decent neighborhood or start looking for low-income housing and shelters, to pay their credit cards, medical bills and student loans or clothe and feed themselves and their families. At this point, it’s not about what makes them feel happy or satisfied, it’s about what allows them to survive.

My friend John Mathews sums it up like this,

“If the idea of saving for a rainy day is just too droll, or if ‘anti-consumption’ gives you chilling visions of anarchistic soirées , then here’s another way to look at it: Every time you squirrel away some cash, you’re spending that money on your well-being.”

Exactly. Or put yet another way, you’re spending that money on a future without so much anxiety, stress and emotional devastation. You are reclaiming your ability to have a choice about what to do with your current possessions and how to allocate your savings as the years go by. And as your circumstances or priorities change, you can too.