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Tony Quatman

Dean Leonard

English 1201

March 29th, 2020

How Much Debt Is Too Much?

Debt is not a new aspect of life. For many, including myself, Americans get swallowed

up into debt without realizing just how difficult it can be to get out from under them. From

school loans to get a degree and a “good job”, to credit cards, many Americans are encouraged

by various factors to indulge in a superficial “rich” lifestyle that they cannot afford. It can cause

adverse financial and psychological effects by obtaining debt that can carry long term negative

effects. Debt is something that affects most Americans.

There are many different opinions on debt, and if it is a good or bad thing. Many beliefs

contradict one another. It seems that there is too much data to cipher through, and depending on

whom is giving the answer, and you can get vastly different answers. Debt can be a scary idea,

and it’s easy for citizens to overlook and pay the minimum to honor their contract. Debt is also

on the rise, according to Reade Pickert’s article US Consumer Debt Surges on Jump in Credit-

Card Balances “The surge in borrowing indicates Americans, supported by higher wages, were

feeling confident enough about their financial situation to continue borrowing and spending.”

This idea makes sense. When you have more, you can spend more. As wages go up, we can see

spending go up, which gives way to the idea of inflation in the economy. Many other factors can

dictate the economy, but it has grown considerably in the past 30 years. The problem with debt
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is that there is no right answer on how to handle it, and everybody’s situation is different. Also,

people have differing views on debt as a means to live or an undesirable habit Americans have

grown accustomed to.

Debt is not a new idea, but it had to start somewhere. The concept of credit cards became

a reality in the early 1950s. In the documentary “Maxed Out,” there are excerpts from a video

discussing how credit works. One of the scenes, used as sarcasm, depicts “Mr. Credit” to state

that the use of credit is to be taken seriously and responsibly. It holds excellent truth to it, and

those who obey it can manage their debt. Unfortunately, debt is difficult to manage for many

others. Too much debt can cause serious issues financially and mentally. The rise and use of

technology make it more difficult to manage debt. Since smartphones have been around, the

idea of paper mail has diminished. With paper mail, you have to hold the mail physically, and it

becomes harder to ignore. With the increase of emails that Americans receive each day, it is

easy to click through or immediately delete. Interestingly enough, it is not the younger

generations who have the most debt but preferably their parents.

Dave Ramsey is an American radio host who rose to fame in the early to mid-2000s by

preaching a straightforward phrase “Live like no one else so you can live and give like no one

else.” This catchphrase is based on the idea of paying off debt as fast one can so that they can

build wealth. The design is simple: live as basic and cheap as possible while paying down debt.

Dave Ramsey’s radio show is listened to by millions of viewers daily. His team focuses on debt

and everything associated with debt. In the article “The State of Debt Among Americans - from

Ramsey Solutions Research,” data is compiled using Harvard statisticians and organized to

gather just how much debt Americans are in. As a whole, the study states that the average
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American consumer debt is almost $35,000. The article also goes into detail about generational

age. Generation X, followed closely by Millennials, are the generations with the most debt.

The idea of debt does help make sense in the concept of inflation, and the value of a

dollar grows less and less. The most astonishing piece of data in the article is the bell curve that

appears as income increases. There is a significant jump in debt when looking at credit cards by

households. In the 75k-99k range, debt peaks at $11,314 from just under 8k in the 50k-74k

range. In the “Guide to the Markets, Q4 2019,” there is a jarring graph shown. This graph

represents the spending of those based on income as a percentage of income. In the US, the top

10% of income spend less than 70% of their net income. Those in the bottom 90% spent on

average 101%. This is an alarming statistic. This data tells consumers that they are spending

more than they are making. In doing this, they are allowing the debt to grow.

The numbers provided from the article may seem daunting when you look at the average

American debt and notice that it is almost eight months of the gross pay of an average American

salary. Many people who have gone through Financial Peace University work on paying off this

debt and learn how to live the Dave Ramsey lifestyle. In Dave’s radio shows, he will usually

have a couple who have paid off their debt. Some of the numbers seen of debt paid off are

astronomical, some even up to 6 figures. By using various strategic plans, a household debt can

typically be paid off in 18-36 months. One of the most popular methods is called “debt

snowball.” The idea is simple: make a budget to fit one’s needs. Focus on one debt and put as

much income to that debt while holding minimum payments on other debts. Once the debt is

paid off, transfer the recently budgeted amount into the next debt. At this point, the snowball is

starting to grow. Dave Ramsey takes the idea of the debt snowball and builds off it. Dave has a
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seven-step system called the “Baby steps,” These baby steps have helped thousands of couples

become debt-free.

Sometimes emotions can have a similar but opposite and negative snowball effect, and

debt help grows that snowball. Debt can be associated with depression and anxiety. There is a

direct correlation between how much debt and the severity of anxiety and depression. Another

emotion that can come out of debt is resentment. Many couples marry into debt in one way or the

other. The idea of paying for debt and paying for something that was not their doing can cause

emotional strain. This debt can lead to divorce. Until the turn of the 21st century, marriages and

divorces are correlated both increasing over time. It could be expressed that the increase of debt

over the years and correlations of weddings and divorce can be directly connected. Other

emotions are involved with debt. These emotions include regret, shame, and embarrassment, and

companies can take advantage of these emotions.

There was a time before the 2008 Recession that this emotion as fuel for some credit card

companies. In the documentary Maxed Out, there are scenes shown by debt collectors that feed

on the fear of those that owe them money. Their “best” clients are those with the most debt,

which only pay the minimum payment. Paying the minimum payment allows credit companies to

add on high-interest rates, late fees, and low minim payments amount that applies just as much to

interest as it does to the principal. This is the idea of how the “rich get richer, and the poor get

poorer.” By adding on these additional fees, the credit companies get to keep that extra money

without ever having to pay it back in the form of credit. If 100,000 people all own the same

credit card and they have, on average, one late payment a year, and each late payment is $38, the

card company will rack in $380,000 without ever having to provide any service. This is how the
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rich get “richer.” Now, on top of the interest paid and late fees, you are looking to pay between

1.2-1.5 times the balance used on the card. The $500 set of clothes now turns into $600 or more.

Using numbers like these will help understand just how scary debt can be. However, there is a

way out. There is no better opinion on debt than someone who deals with it personally. In an

interview with John Stevens, an avid Dave Ramsey fan and financial advisor, he explained that

“debt is not to appear as a negative thing.” He went on to explain that the reality of debt is that

many people are going to acquire debt at some point in time. John prefers to think of becoming

debt-free as a method of freedom. “Think of debt as a cold. When someone is sick with a cold,

they have to stay inside and rest up. It is not fun, and they can end up missing out hanging with

friends. However, once they are healthy, they have the freedom to do whatever they want within

limits. The same idea goes with debt. The less debt someone has, the more freedom to do what

they want with their money.” This idea of a debt-free lifestyle has allowed John to be listed as

ELP or “Endorsed Local Provider” by Dave Ramsey. The label of the ELP is guided by Dave

Ramsey to help with saving money and investing wisely.

Debt is an odd idea in that more often than not; it is a number on a screen. One way to

look at debt as the physical idea is to think of the human body as it consumes food. Debt is your

cake, cinnamon rolls, ice cream, more unhealthy food. It’s delicious and can bring short term

satisfaction, but once eating unhealthy is abused, the body starts to build fat. This fat can be

associated with interest and late fees. It’s much harder to burn and lose fat once you have it.

However, if you cut back eating bad, and start eating healthy and possibly even start working

out, you may notice you will lose some of that fat.

The issue with eating healthy and working out is that not only is it difficult, but it is not

always enjoyable. There is a reason why most Americans cheat or quit their New Year’s
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Resolution within the first month and why obesity such a significant issue in America. Eating

healthy can also be expensive. As science advances, Americans find more straightforward and

cheaper ways to make things. We are programmed to be lazy and to fit in.

For this reason, pure sugar is changed to corn syrup, and fillers and preservatives are

added into foods to make them last longer or taste better. The natural food incurs more cost to

make sure it is safe to eat and therefore costs more since the supply may not last as long as

manipulated foods. Being healthy requires discipline, and becoming debt-free is no different.

Cutting out the debt and instead, cutting back on spending on wants and putting more towards

away in debt. For anyone who has gone on a weight loss journey, it’s hard. There is a reason

that only 10% of Americans live truly debt-free, according to Dave Ramsey.

Some believe that debt is not a massive factor in the amount of debt aggregately.

According to Rex Nutting, the debt level is growing upwards of $14 trillion coming in at $13.86.

Nutting, although states this number is rather high, is the only victim to increasing inflation. This

idea is logical, and virtually everything we own has gone up in value. He explains that these

large numbers are used as scare tactics to help other businesses thrive.

Newspapers and journals use these statistics and scare tactics to help drive business to

their station or channel. When a viewer turns on the news, more often than not, it is

overwhelmed by negativity. The negativity of the news promotes a reaction, and doing this

keeps ratings and numbers up. Other companies, such as those based in personal finance, may

use debt as a moral issue and that debt is a bad idea, and it can seem to be greedy. Others

encourage debt as an idea of investing for the future. Think of a banker or a mortgage company.

Not many Americans are able to purchase a home in full. Instead, they get a mortgage. Going

back to the interview with John Stevens, debt can hinder the business of a financial planner.
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This is because when a client has a lot of debt, they are not able to invest. When a client cannot

invest, they aren’t able to make money.

Debt is something that some people believe is the only way to make money. This may be

true. There are many starts up companies that require more payment than they have to get

started on a business. With all the difficulty that comes with a start-up company, it is hard to see

actual profits in the first couple of years. Some of that comes from the mistakes of a business

owner, learning the correct way of doing things. Another part comes from the many factors that

require a company to be successful, such as equipment and employees. By acquiring loans, a

company can grow and make more money, but it can come at a price. Now, more than ever,

those loans can come back and hurt those businesses and the government is creating a solution of

giving out more loans to keep small business doors open.

There have been few times in the United States when the economy has taken a severe

downturn in the past few decades. When these bubbles pop, there are many consequences to

follow. Unemployment and bankruptcy increase dramatically, and many families suffer.

At the turn of the 21st century, Americans were faced with the “dot-com” bubble. This bubble

was caused by the rise of technological advances and over-investment into unstable markets.

Although this bubble was a significant downturn in the market, it was nearly as devastating as

the bubble that was to pop only years later.

In 2008, there was the housing market bubble that crashed. This crash had devastating

effects. Many layers caused the bubble to burst. Incomes for homeowners remained steady while

the price for housing soared. During this time, anyone was able to get a housing loan, and these

loans were disastrous. The idea of sub-prime mortgaging was a big reason as to why this

crashed. In short, subprime mortgages gave introductory interest rates and allowed those with
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poor credit scores to purchase more than they could payback. The market crashed once

homeowners were not able to pay on their mortgage and many foreclosed. The housing bubble

burst of ’08 is a prime example of how debt can negatively impact people.

The next bubble that seems to be on the rise is the student loan bubble. The student loan

debt is the highest debt held by Americans. It has surpassed credit cards, car loans, and even

mortgages. In 30 years, the cost of tuition has jumped almost 220%. In doing this, student loan

debt has jumped considerably as well. In 2008, banks were able to reclaim some of their losses

by foreclosing and reselling homes. If the student loan bubble is to burst, there is no physical

object to prevent disaster.

Now, America is faced with a multi-generational phenomenon. The Coronavirus

pandemic has brought most of the world to a halt. Schools have resorted to online-only, business

is forced to either shut down, work remotely, or provide minimal services, and people are

required to stay at home. This has an interesting effect on the world we know. Many companies

are offering rebates and discounts for housing, insurance, and other necessities. The economy

has shifted violently repeatedly, and there is a lot of uncertainty. When relating this virus to

debt, there are two interesting sides of growth and decline. It is estimated that many small

businesses will not be able to continue and succeed once this pandemic is over. This can create a

significant strain on the American economy as many companies become insolvent or unable to

pay their debts. In doing this, they will have to file for bankruptcy.

In comparing restaurants, we can see an interesting shift in deliveries for these

restaurants. Using Uber as an example, they may see an interesting change as passenger

transportation is down while food delivery is up. This is how Uber has the opportunity to

succeed during this time that the restaurants do not.

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As a consumer, there are a few factors in terms of how the coronavirus has affected them.

For those that are laid off, they have applied for unemployment to help cover costs for their

family. In doing this, they have to take a pay cut, typically 30%, of their actual pay. This is

intended to keep families above water until things return to normal. Unfortunately there are

many who that is still not enough to survive on and therefore sacrifices are made in order to

survive. It may mean not paying an electric, or gas bill, others could go without food for a time

or forfeit their home.

Other employees can work from home and, therefore, can make a comprehensive income

on top of possibly saving money from not driving to work. Finally there are those who are still

working in office and life, for the most part of their day, has not changed. These groups of

workers are able to live moderatly normal lives with little to know change in income and

lifestyle. With the stimulus checks and small business loans being handed out, it will be

interesting to see what long term effects this can have on the economy.

Unfortunately, no number states if someone is in too much debt. Debt is a subjective term

and here are many factors, and each person has a separate and complicated situation. Income,

cost of living, and family size can cause drastic changes in the amount of debt to rack up. Debt

becomes too much when there are two things that are presented: major sacrifice, and emotional

issues. If one is having to cut back basic needs to survive, the debt is too much. If debt is

causing strain or emotional issues, most often, there is too much debt. There is good news.

Anyone can pay off their debt. John Stevens mentioned one last piece of advice that can help

overcome personal debt. “Becoming debt-free is not a cruise down the highway. It is a long,

difficult road with twists, turns, bumps, and construction. Everyone has a unique situation. It is

important to create an income that fits your budget. There are many ways that people can go out
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and earn extra money to help pay off their debt. The problem is people can be lazy, and it’s easy

to be lazy.” He stated, “the best way to pay off debt is to budget just as you are by being

reasonable. Be mindful of your purchases, and cut out the unnecessary but allow yourself to

live. It is a journey to change the habit to more sensible spending and eventual investing.”

Whether you believe that debt is a way of life or if you are against it, debt is something

that will not be going away anytime soon. Debt is a part of the American lifestyle, and it is all

around us. You see it in commercials, Social Media advertisements, and even by friends and

family. Debt is not all bad, and in today’s world, some of it necessary. Whether we like it or

not, debt is most likely to be apart of all of our lives at some point in time. Debt is subjective.

Some people see debt as terrifying, and some accept it as part of their lives. The unfortunate

answer is that debt is emotionally stressful. However, there are ways to get out of debt, as long as

they are willing to work for it. It is important to remember what is a need and what is a want.

There is a very bittersweet emotion when you buy something you have worked hard to save and

paid it all yourself. This is something many young Americans have not had the opportunity to

achieve.
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Works Cited:

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www.thesimpledollar.com/credit/manage-debt/the-emotional-effects-of-debt/.
Lane, Carl. Understanding the National Debt: What Every American Needs to Know.
Westholme Publishing, 2016.
Nepomuceno, Marcelo Vinhal, and Michel Laroche. “The Impact of Materialism and Anti-
Consumption Lifestyles on Personal Debt and Account Balances.” Journal of Business
Research, vol. 68, no. 3, 2015, pp. 654–664., doi:10.1016/j.jbusres.2014.08.006.
Nutting, Rex. “Consumer Debt Is Not a Ticking Time Bomb That Will Kill the Economy.”
MarketWatch, 17 Aug. 2019, www.marketwatch.com/story/dont-believe-fake-news-
americans-debt-burden-is-actually-at-the-lowest-level-in-years-2019-08-15.
Pickert, Reade. “US Consumer Debt Surges on Jump in Credit-Card Balances.” Bloomberg.com,
Bloomberg, 9 Sept. 2019, www.bloomberg.com/news/articles/2019-09-09/u-s-consumer-
borrowing-surges-on-jump-in-credit-card-balances.
Scurlock, James D, director. Maxed Out. Maxed Out, 10 Mar. 2006,
https://www.youtube.com/watch?v=8nzwXXOcGtA.
Stevens, John. Personal Interview. 27 Feburary 2020
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americans.
Walker, Carl, et al. “Locked into the System? Critical Community Psychology Approaches to
Personal Debt in the Context of Crises of Capital Accumulation.” Journal of Community
& Applied Social Psychology, vol. 25, no. 3, 2014, pp. 264–275., doi:10.1002/casp.2209.