You’re in debt because the time taken during your purchase decisions doesn’t appropriately scale with the time invested to earn the money to pay for it.
If every time you made a large purchase, you brooded over it, pondered, and included an appropriate cost-to-labor-time-spent ratio into your decision making process, you wouldn’t be in debt. The time spent thinking about it would let you appropriate WHY or IF you should make the decision, and even if you still come to the same purchase conclusion, the time spent will reduce other poor choices.
So many buying decisions are made poorly because their instant – jump into Best Buy, see a $2k flatscreen, throw it on the credit card. If you sat, pondered, and reflected on the real esoteric benefit of buying the TV versus the sweat equity you’ll have to pour out to see the ~$2.5k in total cost+interest, you would make far fewer poor purchasing decisions.
Plus, you would spend more time researching your product to locate the lowest possible cost. If you make $20 an hour, it’s pretty ridiculous that you wouldn’t spend an extra hour scouring the internet/craigslist/locally for a potential 5x return on your time investment for any significant purchase.
Yet we don’t do it. We buy instantly. The first store with our product, we add to the shopping cart. We don’t care. We’re impulsive. We’re in the now, not the later.
Debt happens because of the “now” mentality. If you better picture every purchase decision as a similar reimagining of your own labor time, you’ll better appreciate the value an extra hour or two spent can improve your decision making process, and reduce, if not eliminate, debt.
Price of Purchase / Labor Wage Per Hour
Time in Dedicated Minutes Researching Purchase
This is the equation I (approximately) use. It scales efficiently because the larger the decision, the more time you have to spend. If you make more money, each decision should take less time. As the purchase gets larger, and the time intensifies, it should take a real time commitment to ever justify purchase. Hopefully, past a certain time commitment, it should become obvious to an intelligent human being that the decision is misguided.
This equation doesn’t factor in things like assets and net wealth prior to purchase, as it is very possible that you could be extremely rich but have a horribly paying job. Let’s keep things simple, though, and assume some approximate, natural ratio of wage to assets.
If you use this equation as a guide and have some semblance of intelligence, I can gaurantee that you’ll make far fewer poor purchase decisions. Cash can sometimes burn a hole in our pockets, so when it does, its immensely important to remember those same times our desk chair burnt us the hell out.