Financial Suicide: The Death Cycle of Credit Card Debt

Our brain is a complex piece of meat (some call it an organ) that has a way in either directing us to smart decisions or sending us off a cliff.

And sometimes we don’t know where our choices will lead until we are deep into the consequences (or rewards) of those decisions. It is like we live life blindfolded and then abruptly realize we walked off a cliff.

For years I racked up credit card debt. We paid off about $50,000 in credit card debt last year, and I’ve always wondered “why do I keep going into this credit card death cycle, even when it causes so much pain and suffering?”

I’m no medical expert, but I’m learning more about how the brain works. There are two sides of the brain: the more logical/rational side (prefrontal cortex) and the part of the brain that is less rational (limbic system). I know this is a simplistic view of our overall mind, but there is wisdom in understanding these generalizations.

Let’s first take a look at how these two sides of our brain affect our choices.

Rational Brain: Prefrontal Cortex

Prefrontal Cortex – By Polygon data were generated by Database Center for Life Science(DBCLS)[2]. – Polygon data are from BodyParts3D[1], CC BY-SA 2.1 jp, Link

This part of our brain helps us make smart decisions. It often considers the future, and which choices are good and bad.

This section is the “smart” part of our brains that helps us avoid major financial mistakes. It helps us work towards our goals, and it also prevents us from doing stupid things in social situations (which sometimes doesn’t work well for me).

If you are looking at a chocolate covered thumbtack, for example, this is the part of the brain that would go “even though that chocolate looks yummy, it would be a bad decision to eat that!” If only all our financial problems were that obvious.

Non-Rational Brain: Limbic System

Limbic System – CNX OpenStax [CC BY 4.0], via Wikimedia Commons

The limbic system is a complex network of brain cells that are less concerned about the future, and more about satisfying what we want right now. Some of it taps into our emotions, in what will make us feel better in the current moment.

The “amygdala” is part of the limbic system. This part of the brain handles emotions such as fear, pleasure, and anger. In other words, this side of the brain responds to feelings.

Fight the Beast

When we focus on making decisions based on our current emotions, this can cause us to ignore the long-term ramifications of those choices.

In other words, when we separate our choices from consequences, this makes it easy to become a financial idiot. There are times when we need to pay attention to what we are currently feeling, and part of that is what makes us human. But it becomes a problem when our primary goal is only to pursue things that will make us feel good right now.

What I want right now is not often what will push me towards financial freedom.

And the exciting thing about this concept is making smart financial decisions right now about money, often will lead to positive emotions later. Think about when you see your investment accounts increase in value — or being able to cover a major emergency with your long-term rainy day fund.

You Can Make Both Sides of Your Brain Happy!

It isn’t that our short-term pleasure mindset is terrible. But it often doesn’t consider the future consequences of those decisions. We need to place these choices into the broader context of our whole lives.

It isn’t like we always have to sacrifice the short-term for our future goals. When we start getting the positive wheel of financial choices turning, that often will bring on positive emotions in the present.

When we get rid of the financial mistakes that will destroy our future, we start to have a positive outlook on money. It no longer feels like anything regarding money is negative. Our income and how we spend starts bringing up good feelings!

I made a simple graphic that describes this flow of choices between short-term and long-term decisions:

You Don’t Need More Crap

Hyper-consumerism has become so common-place, that sometimes people are surprised when they see someone not buying as much stuff as possible.

But more stuff is not going to make you happy. There is always something I can find that I didn’t know I “needed” that I could easily justify buying. The stupid side of my brain wants me to think that making these purchases is going to make me happy. And they might bring me some enjoyment temporarily. But this will not last, and I will move onto the next item my heart desires.

I don’t need more stuff that ends up sitting in my garage or basement unused. I’ve spent too much time and money on things I don’t utilize, that have drained our income.

There is a place for “stuff” in our lives, but only if they are used and bring us value.

I already have so many things I want to use, but don’t use as much, because of the following:

  • I forget I have that item
  • My time is filled using or doing other things
  • I can’t find the item amongst all the other shit I have

Pain Avoidance

Looking at my life and how others are destroying their financial future, I’m often reminded about how we spend money to numb our lives.

Instead of facing the pain and stress that comes with being human, we ignore those feelings and use money as therapy to get through our lives.

Money can’t and won’t solve our core issues. By avoiding the real problems, and using our money to feed the temporal side of our brains, we are making the problem worst.

The only way to deal with these painful situations is to tackle them head-on, which is why it is so easy to continually go into debt by purchasing things you can’t afford.

This is how the debt death cycle has played out in my life:

  1. I either am stressed out about my problems or get bored and look for relief
  2. My temporal brain says “you need to look for something to buy so you can feel good now.”
  3. I buy an item that I can’t afford
  4. This purchase might give me enjoyment for a brief second
  5. I then realize how much more credit card debt I took on and how much longer it will be to pay it all off, which causes more pain and suffering and leads me back to step #1.

I talk more about this credit card death cycle below in “The Death Cycle of Credit Card Debt” section.

Stuff Doesn’t Lead to Happiness

My temporal brain wants me to believe that purchasing a brand new $5k UHD HDR TV will make me happy.

But the logical side of my brain knows this is BULLSHIT!

Granted, having this TV would be amazing, and if you can afford this purchase and still pursue your long-term financial goals… great! But the idea is we cannot buy anything that is going to make us “happy.” Owning physical things at best can do the following:

  • Make our lives more comfortable
  • Bring us a level of enjoyment
  • Provide utility (like saving time/money or being able to make something new with it)

Wouldn’t it be great if there was something out there that we could buy, that once attained we would magically be 100% happy all the time? This type of item will never exist.

We are willing to sacrifice our financial future on purchasing things we can’t afford, for something it can never give us!

Focus on the Consequences

The more we can trigger our rational side of our brains and keep our temporal side in check, the more likely we are to make better financial decisions.

You can do this by slowing down and asking yourself questions when these situations come up:

  • Will I regret this purchase tomorrow?
  • Does this item hurt my chances in reaching my long-term financial goals?
  • Do I “think” I want this item, but in reality will it end up collecting dust in my garage?
  • Will the future version of myself want to punch me in the face for making this purchase?
  • Am I setting a good example for my children?
  • Will buying this product start additional purchase cycles that will be expensive to maintain?

Sometimes you might answer no to some of those questions, and still decide the cost is worth it. But if you answer “no” to ALL of those questions, that might be a sign purchasing that item is a bad move.

More Stuff Increases Complexity

I’m a PHP web developer, and I’ve learned over the years that the more features and options you add to a plugin or module, the more complex the code base becomes. Added complexities mean that maintaining this code becomes harder and testing takes longer.

Our lives are similar in that when our goal is to accumulate as much stuff as possible, the complexity of our lives increases if we are trying to utilize what we own.

Most of the debt I’ve accumulated in the past has added to my collection of crap. The number of things I own and use regularly is way less than the total amount of stuff I own.

Not only does this mean these unused purchases were a waste of money, but now I have to manage how and where to store this stuff. Usually, it gets placed in a random spot and doesn’t see the light of day until Spring cleaning.

If we can iron out what purchases we will use regularly in our lives, this does the following:

  • We save money by purchasing less shit
  • Preventing going into debt becomes easier because we are more critical on what we buy
  • Less stuff to store, which could mean being able to live in a smaller house and save crap tons of money
  • We become less gullible from product advertisements
  • The items we do end up using, get used more
  • You are less likely to have something you purchased but don’t use

How does this relate to consumer debt? Because it can have a drastic effect on what we consider purchasing and can disrupt the whole death cycle of credit card debt.

The Death Cycle of Credit Card Debt

I’m a recovering credit card debt addict. In fact, I became the dream consumer for credit companies.

This is the cycle I found myself repeating for 15+ years:

  1. Getting exciting about a purchase, which meant hours researching a product
  2. Buying the item with future income (credit card debt)
  3. Regretting the purchase
  4. Getting motivated and excited to pay off the debt and become credit card debt free
  5. Repeating the full cycle

Why the hell would I continually put myself in this painful credit card death cycle?

The “why” behind this behavior is disturbing and eye-opening. You see steps #1 and #4 tapped into my naturally driven nature. I love to get excited and motivated to pursue SOMETHING. That something, in this case, was 1) focusing on what I wanted that I didn’t own and 2) trying to get out of debt.

It is like I was caught in a credit card debt vortex. If I could stop entering this death cycle at step #1, I could destroy my credit card debt habit for good.

During steps #1 and #4 it’s like I was injected with a potent drug. In both cases, I got excited and motivated. I justified either spending more than I made or cutting costs to try to eradicate my credit card debt. When the high ended, I wanted a refill from my drug dealer. The credit card company had no problem refilling my needles for another hit!

I know this is an extreme example, and I am not trying to downplay drug use, but it illustrates the process I was caught in for so many years.

Fighting Human Nature

Most of us have a propensity to want what we don’t have.

If a friend drives up in a luxurious car, my first thought is “man, my car sucks ass compared to what he has!

Shiny objects that we don’t have can become appealing to us, even if we wouldn’t use the item. It is like when I throw a tennis ball in my backyard. My dog can’t do anything but focus on chasing the ball.

But humans are more complicated than dogs. If we dig deep into what is happening here, often we will find that it isn’t the object we desire. It is the status that comes with owning that object we want!

The luxurious car might be cool, but it pales in comparison to the perception the person portrays by owning that car. It is almost as if the value of the person increases because of what they own. We may even find ourselves thinking “I bet people look up to that person. I wish people looked at me like that.

When we try to pursue purchasing things that don’t bring us value but increases our status, it becomes easy to justify racking up consumer debt. We should avoid these status symbol purchases, as they waste money and we pursue things that only provide temporary relief.

Have you been caught in the credit card death vortex? How have you broken the cycle?

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