Debt is like salt: you would probably die without it but too much of it will kill you, literally & figuratively. The invention of the modern economic system, driven by debt, is arguably THE reason for post-renaissance societal development. For better or for worse, debt has provided the necessary capital for the industrial revolution, the information revolution, our infrastructure and so much of what we take for granted in modern society.

Leaving aside the debt that fuels our lives at the institutional level — and the wars it has fueled & caused — thinking more personally & practically, we need debt for so many things that are so taken for granted that we rarely think about them. Whether to fund our education, buy cars, houses and even avoid the need to carry around cash or a checkbook, ready, broad access to capital is the lifeblood that sustains our society. Because I’ve been working in lending the past 10+ years, talking about debt is something that comes as second nature to me, but I’m more the exception than the rule. As a recovering psychology major gaining increasing experience in the industry, it has fascinated me that money and debt are stigmatized subjects that are so rarely discussed. When I worked at Marcus by Goldman Sachs, we tried to de-stimatize debt and occasionally bring humor to the absurdity of the avoidance of the topic through light humor in our advertising. For example, we found through research that most people would rather undergo a painful & invasive dental procedure than have a real discussion about the state of their debts with a close loved one and posted statistics highlighting this absurdity on Valentie’s Day to our Social Media accounts. In addition the launch campaign has headlined “Debt (or I used to joke another four letter word) Happens” with the tag line “what you do about it is what matters.” The whole point of which was the highlight that the things that we need to fuel debt happen all the time, are normal and shouldn’t case shame.

And it’s not in research where I’ve found this to be true. I have a close friend who cancelled plans on short notice to join on a group trip but was super cagey about the reason for doing so. Even after the fact, he apologized and explained, it still wasn’t the real reason! It was only months later when we had a 1:1 dinner that he confessed that he had been hiding his debts from his wife and after she found about it, insisted he cancel all non-essential spending.

When you maintain moderate debt and employed, it’s no big deal. Most people don’t think twice stressing about their mortgage, car payment or student loans. Typically, we live in a budget tied to our income and plan accordingly. But if there is an interruption of income or spend beyond our means and start to fall behind, debt can become quite a stressor. As I’ve alluded to in the past, I am divorced and have since remarried. When I first separated, the financial implications were profound. During my first marriage, my ex-wife and I generally lived within our means, were saving for retirement and had an emergency fund to in case of anything unplanned. But within a very brief amount of time, I had to use the bulk of my half of the emergency fund to move out and hire lawyers. My monthly budget also ballooned because of child support payments and rent for my own, separate apartment large enough so my kids could stay over. The math didn’t add up. I had to outperform well in my job, and pray all would go OK with my company so I could get a big bonus enough bonus to replenish my emergency fund and justify a raise to cut the gap between my regular paycheck & ongoing needs. As my savings dwindled, I started resorting to debt products, in particular extended credit card payment plans with $0 fees and balance transfer credit cards to tie me over. For years, I’d get my bonus, pay some debt, be OK for a few months and then retart the process anew.

Eventually, I was able to land a job with higher pay, but it still took two years of bonuses to free myself of credit card debt while keeping up with my expenses and paying for a wedding. It’s a little embarrassing to admit this, but as I think about it, I shouldn’t be embarrassed. Debt served a valuable purpose; getting me through a hard time instead of requiring that I turn to friends, family or raid my retirement. When I finally paid off the last of these bills it felt like a huge weight was lifted off my shoulders. It shouldn’t have because I knew the terms, had a pretty good idea of my future cash flow and followed a plan. But I still felt a personal sense of accomplishment.

I don’t think I’m alone and I don’t think it’s just about how we feel about ourselves. Debt in our society creates a sense of stress in our political discourse, even if the interest rate of our national or local debt levels is low and well-managed. But was we run deficits in difficult times and our debt rises, a pervasive and collective sense of anxiety tends to rise.

But practically speaking, there are things you should do to manage your debts and your mental health around them:

• Be honest with your loved ones: Any lies or deception in a relationship lead to stress and distrust. There is no shame in not being able to make ends meet. Talking about issues honestly and openly isn’t just a stress reliever, it also leads to better decisions when you can make a plan as a family

• Be diligent in good times: Be careful about taking on too many cards too quickly or taking Buy Now Pay Later (BNPL) loans when you don’t need them. Also be disciplined about paying your bills on time — consider autopay if you need to — so your credit score doesn’t get dinged because you were careless. All of this is to say, when times are good, you need to build up good credit so you can give yourself options. It’s really important to set up and manage to a budget that includes saving for retirement & an emergency fund if you don’t have one as well. The best way to avoid getting trapped in debt is to give yourself the cushion to give yourself some optionality

• Be proactive when you see trouble coming: Letting debt pile up, particularly through credit cards is a bad idea. When you fail to pay the entirety of your bill, not only will you end up paying high interest as you get into debt, but your credit score will start to decline, limiting your options and making those that you have more expensive. It may sound self serving given my career, but it may be prudent to take debt you don’t need at 0% or low interest rates (particularly if there aren’t upfront fees) to have some extra funds on hand whether you see trouble coming, like the unexpected loss of a job or run up against a block of expenses that requires that you tap your savings. Once you take debt, the credit bureaus will be aware and by extension, so will lenders. In this vein - leaving aside student, auto & mortgage loans — the system punishes those who need it most. So if you think you will need money, it’s better to get more than you need at more attractive rates when it’s easier. Most financial products don’t have prepayment penalties so you can always give the money back for whatever fees and interest have been incurred to that point without any further cost.

• Know your options: There are a lot of ways to bridge you debts but you have to know the terms and conditions of each. Banks & non-bank lenders make a ton of money — despite regulatory pressure — by people who don’t understand what they’re doing, whether by omission or commission. Here are the key options for unsecured debt (i.e. you don’t have to put up collateral like your house or your car):

  • Revolve on your current credit cards: Credit cards are three features rolled into one product: a convenient, secure way to pay, a 30 - 60 day interest free loan for those who pay their bills in full and a revolving line of credit for those who do not. Generally speaking revolving or not paying off your balance in full at the end of the month is among the worst financial decisions you can make, because the rates are among the highest among all options for uncensured options. But for a month or two, particularly when you can pay off a good chunk of your bill, the convenience makes it an option to consider. One sign you need to take drastic action is if you can only pay the minimum balance. In many cases, this can cause your balance to actually grow over time as interest compounds. This is how “the cycle of debt” happens. At minimum, make sure you pay off at least the amount of interest charged to service your debt and if considering revolving, it doesn’t hurt to call your company to ask if they can lower your rate. Sometimes just asking can do the trick and companies may offer periodic “rate sales” or other promotions that you may not know about

  • Take a balance transfer (BT) card: There are many cards offering 12 - 21 months with 0% financing. These products typically have a balance transfer fee of 3%-5% so it’s important to be proactive so you can get the best terms & build your debt on the card, where the cost is 0%, rather than paying a balance transfer fee. But when taking a BT, bear in mind that the revolving rate is generally higher than the rate on a cash back card at the end of the introductory period so it’s important to make a plan to pay down a good chunk or all of your balance before your rate resets higher

  • Consider a plan on your credit card: Most leading issuers now offer payment plans in lieu of revolving your debt, similar to a personal loan, often at lower APR’s then revolving. On one hand you’ll have to pay more down more as you pay your principal in addition to interest payments but going on a payment plan puts you in control. The challenge with these products is that they are fee-based so the math isn’t very straightforward. Most people aren’t Excel nerds like me who don’t blush at using the IRR function but knowing the underlying math here is a blocker to many for using these products, even if in their best interest

  • Proactively take a personal loan or use one to consolidate your debts: Personal Loans compete directly with BT plans & card plans but generally offer longer terms (up to 7 years), higher loans amounts and lower APR’s. Though you may pay a higher amount of interest over the term of the loan, your monthly payment may be lowest of all options if you can get personal loan with a long repayment period. One thing to watch are origination fees, which most Personal Loans feature and are often deducted from loan proceeds. In the case of income interruption, I often advise proactively looking for a no fee personal loan (Lightstream and AMEX are two of the biggest lenders) to get money in your pocket and get more than you think you need. In the worst case scenario, you’ve got money at a reasonable rate to get you through a tough time. In the best case scenario, you can pay it back, all at a very low cost, but it can be an annoyance to have the debt hanging over you. For example, I’m still paying off a loan from a move with my ex-wife 5.5 years ago. I’d rather not be doing that right now

  • As a last resort: Call your lender or card issuer to work something out. It may surprise you, but your bank IS on your side. They want to get repaid and they know that if you don’t have the means to pay on their terms, they’ll lose money. Forbearance plans are usually available but they’ll adversely impact your credit. Alternatively, you can work with a debt settlement agency. It will relieve your debts and save you money but at a very harsh cost, putting you in default of your loans and perhaps into bankruptcy, which will make it even more difficult and expensive to get credit in the future. But sometimes you have to do what you have to do. The worst thing to do is run away from your problems or duck your debt entirely. Sure you may save in the short term but in the end, your credit will be hurt severely and you’ll create a more adversarial relationship with your lenders where they’ll be less inclined to try to work with you’d

• Avoid Buy Now Pay Later (BNPL): I don’t understand well how anyone makes out in a product where payments are made in large installments over a short term. Retailers do well by getting sales and perhaps saving on the interchange costs of card acceptance, but I have yet to see any lenders make money in this business and I don’t see how the math works out well for borrowers. I suppose BNPL is a viable option people with poor credit and have the means of paying out of their future paychecks. But that’s rarely a winning formula