Is it good to have debt during inflation?

Financial Advisor, Wealth Management,
Posted by Matthew Grishman
· 22 August, 2022

Holding a lot of low-interest fixed-rate debt is actually a strong financial position to be in right now, assuming you can easily make the payments after making sure you pay yourself first every month through systematic savings and/or investing. As long as inflation continues to run high, it can be smart to continue paying your low interest debt as you are without trying to pay it down faster.

However, accumulating more debt, or relying on credit cards to make ends meet during high inflationary times can be very dangerous to your overall financial wellbeing.

I am a recovering spendaholic who had his back up against the wall with debt three times before I finally learned my lesson and chose to live life with some financial sobriety.

If you find yourself accumulating some bad debt, like high interest credit card balances, and managing that debt has become overwhelming, you may want to consider cutting up your cards and committing yourself to a cash-only way of life.

My third (and final) venture into bad debt left me feeling completely hopeless. I had reached a level of indebtedness that helped me finally find my bottom – a feeling of incomprehensible demoralization. I was completely stuck and out of options, other than to declare bankruptcy, lose my securities licenses, and contemplate ending my life.

Instead, I sought out counseling to understand my behavior on a much deeper level. I was able to learn more about the incredibly gaping hole in my soul I was desperately trying to fill up with spending money on meaningless stuff. As I learned how I was going to be able to fill that hole up with things other than swiping a credit card (by finding clarity on the people, places and experiences that truly meant the most to me, and hiring the right financial advisor and coach to help me keep my finances in alignment with those things), I began to see a way out.

Hopefully you have not blossomed into a full blown spendaholic and chronic debtor like me, especially in these times of uncertainty and high inflation. But whether you’re feeling the pressure of debt accumulation for the first time of you are a chronic spendaholic like me, here’s an idea to consider to help minimize the amount of new debt you accumulate going forward from a very common problem I see in so many people; impulse spending.

Impulse spending is my personal drug of choice. It was one of the temporary solutions I used to help me deal with my feelings. More money than I can count was wasted on meaningless stuff, simply to help me feel better in the moment. The impact on my finances was devastating until I learned another way.

Today I use a concept called 10-10-10 to help me when I’m faced with an impulse purchase. Despite being a recovering spendaholic who has a much healthier relationship with money today than I’ve ever had, I still have moments where an impulse purchase seems like a good idea. “OMG I need that right now” is still a thought I get every so often.

But as soon as I have that thought, an alarm goes off in my head. “TEN TEN TEN” is what I hear. And it’s a reminder to put the thing down for 10 minutes and walk away. After 10 minutes, whatever emotion I was feeling that caused me to consider the impulse purchase, softens. Sometimes it completely goes away. But at least after 10 minutes, I have the wherewithal to consider this purchase and what it may mean to me in 10 days vs. 10 years.

If the purchase will wind up being another item that sits on a shelf or in a closet somewhere 10 days from now, I really do not need it. But if it could be a worthwhile purchase that I will enjoy 10 years from now, perhaps it’s something worth gong home and budgeting for over the coming weeks and months. The key is that first 10-minute pause; time for emotion to leave the decision-making process. If emotion is present when a financial decision is being considered, you’re in danger. Give yourself 10 minutes for that emotion to at least soften. That creates the space to make a much more intentional financial decision and possibly avoid another debt relapse.

10-10-10 is one of many tools I have learned over the years in my journey called Financial Sobriety that have helped me become much more intentional with how I use my money.

Now is not the time to look at your bank account at the end of the month and wonder where all your money went. Nor is it the best time to ignore those growing credit card bills. Become intentional with your money decisions; especially your lifestyle purchases in times like these.

Despite rocky markets, rising interest rates, historic levels of inflation, global conflict, and the temptation to spend money continuing to lurk around every corner of my life, I remain financially sober and relapse-free since 2017 – and I am more prepared to financially weather whatever might lie ahead for us in these unbelievably uncertain times than I have ever been in my entire lifetime.

book cover of financial sobriety
Financial Sobriety: Rebuilding Your Relationship With Money One Step at a Time

Have you ever had challenges in your relationship with money? Have those challenges affected your relationship with the people in your life? Have those challenges affected how you feel about yourself?