Don’t Live with Credit Card Debt (Please)
In a one-click-to-purchase world, it's easy to fall into the trap of instant gratification. Whether it's the latest trendy piece of clothing, a delivery meal with major markups, or “little treat”, as we like to joke about on social media, the temptation to tap our cards and enjoy now (and pay later), is everywhere. But as a financial advisor and adult financial literacy educator, I promise you: credit card debt is a trap. The key to long-term financial stability lies in embracing delayed gratification. Let’s talk about why conscious spending and financial planning are crucial, especially for younger people just starting out.
Consumer spending is looking… like a crisis
Even with record inflation, credit card debt is still on the rise. At the end of 2023, it hit an all-time high, with the average debt per borrower at $6,360 – 10% higher than 2022. Not to mention this debt exacerbates the already heavy burdens of education and healthcare debt, two of the largest contributors to negative net worths for today’s working Americans. This high debt is unsustainable, and creates a seemingly never-ending cycle of financial stress and instability.
Our society's tendency to spend beyond our means is not just a personal issue; it's a collective one. We’re constantly comparing ourselves to our peers on social media, and the allure of immediate rewards leads many of us into a spiral of debt that can take years to escape. Many consumers don’t even realize they’re being charged an average of 27.89% in interest on credit cards – wow, that’s high.
Delayed gratification is a skill for life
When you consciously practice delaying gratification, you’re able to resist the temptation of an immediate reward in favor of a later, larger one. You may have heard of The Marshmallow Test, a psychological experiment which studied delayed gratification in children in the 1970’s. It offered kids a choice between eating one marshmallow immediately, or waiting 15 minutes to get two marshmallows. Researchers followed the participants of the study throughout their lives, and found that those who were able to wait tended to have better outcomes in academic performance, health, and social skills.
While delayed gratification can be hard to practice on a daily basis, it’s a muscle you can build over time in favor of retiring early, being able to afford family vacations, pay off your mortgage, or reach other long-term goals you’re hoping for.
How to spend more consciously
When I teach seminars on financial literacy to adults, we talk through how to make mindful decisions about where our money goes. It involves prioritizing needs over wants and considering the long-term implications of our financial choices. I like to remind my students of the many reasons why conscious spending is important:
Financial stability: Avoiding unnecessary debt and focusing on saving helps build a financial cushion that can protect us during emergencies and provide opportunities for future investments.
Mental well-being: Financial stress is a significant source of anxiety. By managing our finances wisely, we can reduce stress and improve our mental health.
Long-term goals: Conscious spending allows us to focus on long-term objectives like buying a home, starting a business, or retiring comfortably, rather than short-term pleasures.
Sustainability: Reducing consumerism and spending consciously can also have positive environmental impacts by decreasing the demand for goods and reducing waste.
It's time for all of us, regardless of our age or what we’re earning, to rethink our approach to spending. Here are some practical steps to embrace delayed gratification and conscious spending:
Set clear goals: Define what you want to achieve financially in the short-term and long-term. This could include paying off student loans, saving for a down payment on a house, or building an emergency fund.
Create a budget: Track your income and expenses to see where your money is going. Identify areas where you can cut back and redirect those funds toward your financial goals.
Avoid impulse purchases: Before making a purchase, ask yourself if it's something you really need. I tell some of my classes to consider keeping a note in their phone of all the times they feel tempted to buy something for the month - then review it and see how many of those purchases feel silly or frivolous with hindsight. It’s a great reset on their perspective!
Practice mindfulness: Be aware of your spending habits and the emotions that drive them. Are you buying things to fill a void or because you genuinely need them?
Celebrate small wins: A little treat everyday is no longer a treat: it’s a routine. Instead, reward yourself occasionally once you achieve a financial milestone. This makes the reward more meaningful, and keeps you motivated.
Remember, the joy of financial freedom far outweighs the fleeting pleasure of the latest trendy handbag or Instagram-friendly vacation. By embracing delayed gratification and spending consciously, you can build a future that is not only financially secure, but also fulfilling. For more advice on breaking the cycle of debt and creating a brighter, more secure future, subscribe to my newsletter, The Ambitious Amiga, for every day advice like this.
The photo used in this blog is by Jacek Dylag.
