“Whenever expenses become greater than income, it is inevitable that liabilities will become greater than assets.” ― Hendrith Vanlon Smith Jr., Banker and Businessman.
Growing up, I spent a lot of quality time with my grandparents. In doing so, I learned many things about living and loving just by being in their company and listening to their conversations as an often-curious little boy.
One of the things I remember was my grandfather’s real-world advice when it came to money.
He said, “Pay off debt sooner rather than later. Number one, why give a penny more to the banks than you have to, and number two, you never know what the future holds. Challenging times are made easier without liabilities.”
For my grandparents and even my parents’ generation, they believed debt was a burden that should be paid off as quickly as possible, no doubt a result of the incredibly high interest rates of the time and living through societal struggles most of us learned about in history class.
I was incredibly fortunate growing up and required very little from a needs and wants perspective. While I wouldn’t categorize myself as spoiled, my good fortune conditioned me to develop a somewhat unhealthy relationship with money.
For me, you earned money to attain materialistic possessions, which would assign you some status in a superficial and judgmental society.
In my early 20s, not unlike others my age, I tended to live in the moment, not wasting time worrying about the “what ifs” of the future and, inevitably, how I was going to pay for my purchases later.
But that all changed as I entered my mid-20s when I met a well-informed and financially responsible young woman who would later become my wife.
Coming from a family of well-informed and financially responsible individuals, she had a much different relationship with money than I had growing up – logistical, purposeful, resourceful – never allowing materialistic tendencies tied to status to influence her decisions.
Our mindsets were drastically different regarding money, and had I not fallen completely in love with her, it could have been the demise of our relationship early on.
Instead, through her education and patience, I became a more financially responsible adult, allowing us as a couple to live the life we desired while balancing the needs and wants so many of us struggle with.
There are many schools of thought when it comes to paying off loans of any kind, and I don’t believe one approach works for everyone’s financial situation.
Some say only pay off the loans with the highest interest rates, as investments often yield higher returns on your money. In contrast, others believe there are tax benefits to retaining some loan types and are encouraged to pay them off in their agreed upon duration.
But what many financial gurus (and instant gratification addicts) often fail to consider regarding personal liabilities are life’s unanticipated challenges, for as my grandfather said, “You never know what the future holds.”
We often take for granted the normalcy in our lives until that normalcy is heavily disrupted by unforeseen circumstances often beyond our control, such as unemployment, health issues, and even death.
When such life-changing events invade our day-to-day existence, our liabilities can overwhelm us and exacerbate what is already a difficult time to navigate.
Even for those with a resilient mind and spirit, liabilities, compounded with personal challenges, can quickly deteriorate one’s mental health, leading to depression and anxiety while dramatically impacting your relationships and quality of life.
Author Ron Hall writes, “Most people want to be circled by safety, not by the unexpected. The unexpected can take you out. But the unexpected can also take you over and change your life.”
And that is typically what happens when your liabilities collide with a childlike naivety that your current normalcy will remain as prosperous as it always has been.
I’m not sure if my wife’s clairvoyant or perhaps her financial upbringing inspired the mindset to be prepared for anything. But when unexpected challenges recently came knocking at our front door, the trauma was incredibly lessened by the forethought of paying off our debts sooner rather than later.
The overwhelming stress many feel about possibly losing their home was a non-issue for us.
Cars would not be repossessed because of late or inconsistent payments, leaving our credit scores intact.
There were no credit card balances with heavy interest rates, and an ample savings account was already in place for emergency situations.
My wife and I aren’t savvy investors, high-income earners, or the benefactors of sizeable inheritances. What we are is mindful of spending and constantly evaluating our needs vs. wants while living with gratefulness rather than materialism.
This has enabled us to eliminate our debt for the betterment of any unforeseen hardships that come our way, and unfortunately, at some point, they often do.
The financial gurus of the world would disagree with our logic for paying off debt sooner rather than later, for “what if” scenarios are rarely considered.
As I said, I don’t believe one approach works for everyone’s financial situation. However, it’s not until you find yourself face to face with unexpected challenges disrupting your normalcy that you genuinely appreciate your liabilities not making a bad situation even worse.
As writer and teacher Rory Miller so plainly and accurately says, “Here’s a rule of life: You don’t get to pick what bad things happen to you.”