By Mark E. Smith
As a volunteer credit counselor, I routinely work with people who are $50,000, $60,000, and $70,000 in debt, while earning take-home pay of $30,000 to $40,000 per year. Any debt notably detracts from one’s life, but what I’ve witnessed is that when it’s as much as twice one’s annual income, it’s financially devastating at best, emotionally devastating at worst, where it eventually destroys families, from the loss of a home to causing a divorce.
What’s intriguing is that when I initially meet with those in debt, they always strive to justify their debt: I needed a new car to get to work…. We didn’t want to pull our kids out of the school district, so we held onto that house we couldn’t afford…. I had to take out loans to get through college…. My ex-spouse was a shopaholic…. I had to use my personal credit to keep my ailing business afloat…. And on, and on, and on, where they always end with the same statement: If I just had more money, and bad things didn’t happen to me, I wouldn’t be in this mess….
In my counseling role, I take a fairly tough-love position to begin: Lack of income and unavoidable circumstance are usually only about 20% of the factors toward racking up large amounts of debt, while 80% of debt is usually tied directly to behavior, whether it’s someone simply not paying attention to finances, making impulsive decisions, or flat-out irresponsibility. After all, buying a $30,000 car when you only make $35,000 per year, or buying a house with a payment that’s 50% of your monthly take home pay, then living on credit cards to cover the monthly cash-flow shortage, aren’t based on poor finances – they’re based on poor decisions and impulsive, irresponsible behavior. The biggest factors that credit counselors address, then, are more behavioral than financial, where the start of the solution becomes: Are you ready to start taking control of not only your finances, but also your entire life?
For those ready to change their ways, we work through a 9-step plan, which takes disciplined behavior, but is financially summarized in one sentence: Living within your means. Through the national organization that I work with, the average family that lives by our common-sense steps is out of debt within 2-1/2 years, has 6-months of savings in the bank, they’re putting away money for their children’s college and their own retirement, and they have money left over to tithe to church or charity – that is, they’re not only debt-free, but also prospering and giving to others. Most importantly, they’ve transformed themselves from feeling like victims of debt to living as victors of their finances – they’ve found control and peace in their lives.
Interestingly, I run into the overlapping theme of debt in the disability world, as well, where many of our peers are heavily in debt. Make no mistake, disability can be costly – from staggering medical bills to outrageous equipment prices. However, there’s still a line that we must draw, where we must assume accountability for our actions, and live a responsible financial life, regardless of how taxing disability proves.
When we talk about debt and disability, it’s most often linked to “necessity,” as in needing some sort of equipment or service relating to disability, usually at great expense. But, what we must ask ourselves is, do I really need to take on debt, or am I merely justifying a poor financial decision in the name of disability necessity?
A great example of using disability to justify debt is seen in how quick many are to take out huge loans on accessible vans – again, all in the name of necessity. A $750 per month auto payment would be viewed as extremely irresponsible for the average family in America making $48,000 per year – it’s Mercedes money on a used-Chrysler budget. However, it’s not unusual for those with disabilities to pay $750 per month – often on “fixed incomes” – for a fully-accessible van, justifying it as a “necessity.” What’s more, because accessible vans can be so expensive, and fixed incomes so low, 10-year financing is increasingly used (which is all but unheard of in traditional auto lending because it’s a financial disaster for consumers), but it’s again justified out of “necessity” for those with disabilities. In fact, I’ve talked to many consumers with disabilities who are paying half of their monthly income toward an accessible van – buried in debt for years and years to come, with zero money left in their accounts by the end of each month.
Similarly, I meet many consumers with disabilities willing to assume debt to buy the latest-greatest wheelchair via a bank loan or credit cards out of “necessity,” even though they already have a perfectly good wheelchair. Still, others take out home equity loans to make their homes more accessible, though they’ve gotten by thus far. And, yet others go to the tipping point, wracking up debt on completely over-the-top items like ATVs – again, all out of “necessity.” A gentleman recently told me, “You can’t put a price on any type of convenience when you’re stuck in a wheelchair.”
However, you can put a price on debt – from overwhelming stress to financial ruin – and, at what point do we assume accountability, and stop using disability and “necessity” as justifications for having debilitating debt in our lives?
From my perspective, the answer is entirely clear-cut: Immediately. Debt shouldn’t be considered as an acceptable option for those of us with disability, ever.
Now, I’m not suggesting that we can always help “incurring” debt, as with unpreventable medical bills. However, we should never “choose” debt, as with a van purchase. In fact, assuming debt to buy an accessible van is the prime example of how we need to change our thinking from viewing debt as being a “necessity” of disability, to recognizing debt as a burden that slowly unravels our lives.
None of this is to say that there’s not a way for some to try to justify debts like a van loan – but, they’re ultimately specious arguments, sounding right while proving wrong. For instance, a seemingly logical thought process is that in order to transport someone with a complex disability, in a power wheelchair, an accessible van is needed. New accessible vans cost between $40,000 and $50,000, so to afford such a costly, needed vehicle, most people must take out a loan. Therefore, a van seems like a rightful debt out of necessity – that is, if you need an accessible van, but don’t have $45,000 in the bank, then you have no choice but to take out a loan.
However, why is it in any way acceptable for someone living on, say, $2,000 per month in disability benefits to pay $750 per month, for 7 years, for an accessible van? Where’s it written in the rule book of life that while it’s incomprehensible for an able-bodied household making $2,000 per month to have a $750 Mercedes payment, it’s justifiable for a household of someone with a disability?
It’s not. The literal financial rule – regardless if you have a disability – is that the value of one’s vehicle should not exceed half of one’s annual income, so unless one earns $90,000 per year, a $45,000 wheelchair van should be out of the question. And, if one on a limited or fixed income borrows to buy such a van, it will typically prove a haunting financial decision for years – one will likely never get out of the financial hole, and statistically risks the vehicle in the end (repossessed accessible vans are not uncommon).
The question then becomes, with wheelchair vans so expensive, and the incomes of those with disabilities often lower than those in the mainstream, how does one ever get an accessible van without going into debt unless one is fortunate to have cash on-hand?
With creativity whenever possible, sacrifice when needed, or never in some cases – that’s how.
For veterans, college students, and those who are employed, there are grants available for accessible vans, ranging from the Veterans Administration to state Vocational Rehabilitation. For those with incomes, but who don’t qualify for grants, there’s a large used market of more-affordable accessible vans, which are a much wiser cash investment than taking on long-term debt for a new van. Of course, reaching out to the community for donations, as long as one has helped others along the way, is yet another way to raise funds for an accessible van. And, lastly, the fact is, if one doesn’t have the financial means to buy a van without taking out an irresponsible loan, then one shouldn’t buy a van, period – paratransit and buses serve millions well, and are a transportation solution.
Some will continue to argue that debt is necessary toward an accessible van because while anyone without a disability can drive a $1,000 beater car, it’s impossible for one to find a reliable, super-inexpensive accessible van. But, again, it’s a specious argument – it sounds valid, but it’s not. Lots of responsible, accountable low-income families don’t have cars because they can’t afford one, where they take the bus as needed – and the same standard applies to those with disabilities: If you can’t afford a vehicle, you don’t buy one.
Still, many with disabilities state that quality-of-life outweighs concerns toward debt no matter the financial and ethical considerations that suggest negative outcomes. Some argue that taking out a loan for a new accessible van, wheelchair, home renovation, or ATV is entirely justifiable, that “necessity from disability” dictates an entitlement to debt, as in, I can’t get my power wheelchair into my spouse’s $6,000 car, so it’s OK if I take out a $45,000 loan for an accessible van. However, how does having a disability ever make debt any better than for those without disabilities? Or, more aptly, who has ever ultimately felt good about being in debt in the long-term, with or without disability?
No one in his or her right mind. It may feel great having that shiny new van in the immediate, but two or three years down the road, when you’re still saddled with a $750 per month loan payment, with no end in sight, how do you suppose that feels? Worse yet, how do you suppose it feels when you or your spouse lose a job, or other catastrophes hit your family, and you still have a van payment to cover? Or, even worse yet, if you have a progressive disability, how do you suppose it would feel to leave your family with a mountain of debt – the van, the home renovations – at your passing?
And, that’s the crux of debt: Its stresses, negative affects, and consequences don’t discriminate or offer leniency because one has a disability – one merely needs to turn on the nightly news to see how the destructive nature of debt doesn’t draw lines based on age, race, gender, status, or abilities. What’s more, the fact is, disability can be hard and unpredictable on its own – and adding debt to the equation simply makes life exponentially tougher and more risky in the long-term. In this way, it’s our obligation as accountable, responsible adults with disabilities to not justify debt, but to avoid it, period – we owe such accountability to society, our families, and ourselves.
I don’t know your personal story, but if you’re already in debt, buckle down and start making changes – don’t merely accept your debt as the status quo or feel powerless to pay it off. Start by making bold lifestyle changes, vowing to never use credit again; then, focus on paying off your debts, smallest to largest, having the self-discipline to make sacrifices along the way: Cut-off the cable TV, sell the Xbox, live on Mac ‘n’ Cheese, earn extra income wherever you can, and prove to yourself and your family that you’re adult enough to vow, Regardless of my disability, I got myself into this mess, and now I’m assuming responsibility to get myself out of it, with old-fashioned hard work, ethics, and sacrifice.
If you’re not already in debt, but are pondering if a loan for a van or home renovation will make your life easier, remember this golden rule: Assuming debt is an effortless decision in the immediate that usually takes a cruel turn, burdening your life in the long-term. However, while forgoing debt in the immediate often requires personal sacrifice, it all but guarantees that your lifestyle will be more secure and peaceful in the long-term. Don’t burden yourself or your family with debt and shortsighted thinking; rather, understand the consequences of debt – undue stress, financial risk, and a lower quality of life – and have the foresight to get creative, make sacrifices, and forgo any so-called disability “necessities” that you simply can’t afford, all in a wise effort to live a secure, peaceful, debt-free life.
Disability and debt – many assume that they go together. But, math and everyday life prove otherwise. The fundamental rule is that if you can’t pay cash for something, then you truly can’t afford it – and there’s no harm or shame in not owning what you can’t afford – you’re just proving your financial wisdom. However, when you get to where you can afford to pay cash for something, then you’re making headway in life because not only do you then own what you wish, but you never have payments or risk, where all future income remains your own – that’s financial peace and empowerment. Rid your life of debt, and your life won’t just improve in peace-of-mind, but it will afford you the opportunity to truly prosper, where you’ll set yourself on the right track to thrive in the long-term, disability, finances, and all.
3 thoughts on “Only When You Can Afford It”
Wonderfully put. The one word you didn’t mention enough was entitlement, that someone has a right to something without consideration or responsibility for the cost. On one hand, I see this in my younger students (late teens) who have not had to deal with the relationship between finances and their lived experience. Anyone who has not had the benefit of actually learning how the financing of life works can get out of kilter, and the later in life the problem happens the worse it is. On the other, I see that any time someone is sufficiently disrupted in terms of their expectations, the balance between needs and desires, and capacities can get confused. The feeling of being out of control causes people to act out of control. There’s almost a logic to it. For some, the solution is experience, and others education. But in the long run, people need to have a sense that being able to manage their lives in some meaningful manner is useful, possible, and necessary. IF they can’t see the value in it, what is the point of seeing it as an achievable goal?
I found myself faced with having to buy a wheelchair accessible van when I became ill and in an electric wheelchair…the only way to and from my job was to get this van. And, I had to get it quickly. A bit over a year later, I’ve learned so much more about life in a wheelchair…and I’ve learned so much more about vans. So, now I see that my need was taken advantage of by that dealer…so, now I’m in debt. Luckily my only debt is that van and my mortgage, but it’s going to take forever to pay off that van. I wish I had slowed down and researched more than I did….I felt such in a hurry so that I could get back to work, having already been out for several months.
Mistakes and 20/20 hindsight.
Mine was winding up on a shift that started before the buses did, and believing I’d never find a job that paid an equivalent amount. I already had sizeable medical debt from my mom, so I couldn’t take a lower paying job, so I let my roommate convince me to purchase a van that I couldn’t afford (I’d previously not spent more than $3K for a vehicle, and usually less than $1K). The van loan was $15K used, not $45K but still sizeable. And when you add in that my mom’s medical bills are over 80K and she’s living on less than $600/mo in SDI payments (so I’m paying those bills), I end up paying $3 out of every $4 towards debt.
I live frugally, I don’t incur new debt, I *do* eat mac’n’cheese and PBJ, and I’m renting a single room in a friend’s (ground-floor accessible) basement, but it’ll still take me another 15 years to climb out of the hole. I don’t have what it takes to earn additional money; with my health issues, I barely make it through my (12hr/day) FT job and crawl to bed after my shift. But I’ve been with the same company for over five years now, with several incremental promotions, and any increases have gone straight towards the debt. I’ve had some help from friends which has also gone straight towards the debt. I’ve never considered bankruptcy – I fairly owe the money and I’ll fairly pay it off.
I’ve never considered CCCS because I can’t thrash my credit — if my mom comes up with a true emergency I *would* re-access credit.
The one thing I resent is that the credit cards have tripled my interest rates, simply because I owe a lot of money.
This offends me not because they don’t have the right; I acknowledge that I signed an agreement giving them that right.
It offends me not because I’m not “a poor risk”; I acknowledge that their “debt to income” calculator tells them that I am one.
What offends me is that I am no MORE of a poor risk than when they agreed to give me the loans — in fact, I’ve steadily become a *better* risk, over time, as I’ve slowly paid things down.
And yet as I slowly make headway, they steadily make it harder for me to do so, arranging things so that less of my payments go towards reducing my debts and more of them towards their interest.
I’ve never been a single day late with a payment, ever.
I’ve never been a single dollar over a credit limit, except where they’ve either lowered my credit limit retroactively (without providing advance warning) and/or increased my interest rate, in either case having my interest take the account overlimit for a single billing cycle. In each case I’ve complained and had *that* corrected, and never had to pay any overlimit *fee*.
But I’ve never been so much as one single solitary day late with one single solitary payment, ever, in my entire twelve years of owing money, no matter how much I’ve owed – and yet in the past four, they’ve changed my interest rates from single digits to nearly thirty percent.
*That*, I resent, and mightily. But – I will simply keep paying, until they’re gone. Smallest amount first, roll that payment to the next, etc.
(Can’t do highest interest first, because that’s one of the larger amounts.)
Anyhow. Thank you for your article. It (obviously) struck quite a nerve; I sincerely hope it warns others away from the mistakes I’ve made.