Debt Is Bad: Insight From Franklin and Gandhi

   

Having a debt on your name means you will personally responsible to repay that amount of money to the lender. This is a responsibility that you cannot avoid unless you declare yourself bankrupt which carries a lot of severe consequences. (Trust me, you don’t want declare yourself a bankrupt!). So, in other words, Debt is Bad. But there is also a psychological factor that might prevent you to reach a happiness if you engage yourself into the world of debt.

Between Franklin, Gandhi and Debt

Benjamin Franklin on his famous quote mention “There are two ways of being happy: We may either diminish our wants or augment our means“. If you have $2000 monthly income, but wants a luxurious lifestyle of $10,000 a month. If don’t do anything about it (augment your means), I can bet that you are not happy. But the other way also true, if you observe some of the people live in the rural village for example, most of them are happy with their life although there is no broadband internet, flashy car, or even electricity. Why ? Because they don’t have to many ‘wants’ (diminish their wants).

“Happiness is when what you think, what you say and what you do are in harmony” This is a famous quote from the great Mahatma Gandhi. It’s so wise that even without any convincing most of us will agree with that saying.

Having a debt on the other hand, is a breach of those 2 principles. If your income is not enough to buy that plasma TV for example. Then that TV maybe can be categorize as outside your means.  But if you then take $3000 debt just to buy that TV, then you’re saying to yourself  “Your income is too low, I pity you. But, I don’t give a damn anymore, I show you how cool to have that TV”. So, you are in conflict with yourself.

In other words, by taking that debt, you are declaring to the world that you are not satisfied with yourself for having such low income that make you cannot afford to buy what you want outright and also that you don’t have enough patience to actually do a saving and wait until the saving is enough. When you’re in conflict with yourself, Gandhi said it will be hard for you to be happy.

So how you do it, then? As you can see, Franklin have shown you the way: you may want to diminish your want (“Actually, I don’t need that TV” and move on) or augment your means (“I’ll find a job that give me double the salary!” or “I will do extra shift 2 times a week and save my cigarette money until it’s enough to buy the TV”)… Not that hard isn’t it ?

So, Why Debt is bad?

1. Psychological aspect as I illustrated above
2. The interest that you pay to lender is a waste – it’s income for the lender but you don’t get any additional value. I mean your repayment will have principal and interest component. The principal pay for the good itself (in this example the TV), but the interest that you will pay for the next 5 years only account for your instant gratification habit, there is no additional value.
3. The false sensation of achievement. For example: after you actually buy that TV in the example above, you might feel proud and feel that you have achieve something. Which is not, you did not achieve anything worthy. You made yourself in worse condition (by having yourself to pay additional expense as the interest) and that’s not an achievement in any standard. The problem is that false sensation is so real and felt by anybody. This is not a good condition because it will lead you to addiction to debt. (Want to feel that false achievement by having more debt)
4. Distance you apart with the good habit of Budgeting – where you actually plan first what you want to buy

The only exception that a debt is not a bad thing is when the debt is used for investing/business purposes. I explain this in detail in this article: “Debt is Good: Only for Investing & Business Though”. Have thorough read to get good understanding. In short, try not to get into debt for getting anykind of lifestyle products.

Hope this helps for understanding debt better !

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Denis Kristanda  

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