The Art of Making Dumb Money Mistakes on Purpose
By: Rocco Pendola
Tags: Money, Credit Cards, Personal Finance, Debt, Budget

The credit card example works best, particularly when you consider the rationale most (or, at least, many) people apply to using credit cards.

We often view credit cards as part of our personal finance arsenal. This is mistake number one. Convenience. Luxury. Status. Rewards. Spending power. Credit becomes part of our budgeting process (if we can even call it that with a straight face). This is mistake number two.

This mindset dooms us before we even accrue a meaningful melange of credit card balances. We normalize credit card use. Mistake number three. Minus the rare breeds who methodically pay their balances each month, we make spending more than you earn part of the cost of doing the business of life. The monthly credit card payments we make soon become thoughtless line items in our budget. Mistake number four.

It’s sort of like car ownership. We’re socialized to start from the premise that we need a car. From there, many of us believe we require a certain kind of car. We roll from one car lease or loan to the next. We bake a car payment into our budget. We don’t think twice about it. We go through the personal finance motions. For many people, car ownership is really a discretionary cost we treat as fixed. We do something similar with the servicing of credit card debt.

Once you get into the habit of using credit cards to help facilitate all or part of your lifestyle, you’re fucked. This is the slow burn of financial recklessness that morphs into a series of habits so deeply embedded in our day-to-day, we hardly even recognize them as deleterious.

We don’t necessarily see it as it’s happening. Because most of us don’t run out and charge $5,000 (a common credit card limit) over a weekend. We let the debt and attendant line item expense in our budget grow slowly over time. We give it a chance to feel at home. To become part of the family.

You charge a few hundred bucks a month consistently, only making the minimum payment. You’re managing it well. In fact, you don’t even feel the monthly minimum payment. You don’t notice it reducing your checking account balance. It feels insignificant. Because, at this juncture, it is. Until it isn’t.

This apparent comfort level with credit often leads to even more deficit spending.

We hardly flinch when that big expense we don’t have the cash flow to support comes up. A new mattress or television set. A trip to Europe. Throwing a shower for a friend. Whatever. We have done so well maintaining a couple thousand in credit card debt and the accompanying $75 minimum monthly payment, it doesn’t seem like a big deal at all to tack on another couple grand. We make enough money to clearly manage the new $135 minimum monthly payment.

Mistake number five. You’re not making art here. You’re flailing, except you’re not aware of it. You’re following the crowd. The crowd sucks with money.

You see where the story’s headed. This is the trajectory many of us set ourselves on. Before we know it, we’re in over our heads. We truly didn’t see it happening. It felt so gradual and natural. A personal financial sneak attack.

In my twenties, I went on this very path. I write about it here and here. And I completely write credit cards off here. It’s these experiences and subsequent anti-credit card mindset that make me wonder if a calculated failure with credit cards — or any other aspect of money management — makes sense.

Will you blow less money by being purposely (and purposefully) reckless in a fell swoop or two than you would taking the more conventional slow burn route?

Charge $5,000 today, all at once, on a credit card. Take on the $800 Tesla payment rather than the $300 Honda Civic obligation. Sit with the carnage. Treat it like a one night stand you can’t seem to shake. Use the consequences of what you got yourself into as all the proof and motivation you need to never do it again. Like, okay, I see how this works. Fool me once. I’m not doing this again!

This isn’t to say using credit cards, buying a Tesla, or having one or more one night stands is “wrong.” Given the personal nature of personal finance and life in general, there’s no universal truth. No clear-cut right or wrong, good or bad. No value judgments. One size does not fit all.

That said, there’s something objectively not okay about going into any of the above without critical thought. If you normalize behavior before thoughtfully considering if it will work out for you in the end, you run the risk of waking up to:

Insurmountable credit card debt.

Guilt that the extra $500 a month you spend on your car could go to better use. And maybe a tighter than necessary budget to add to the personal financial guilt.

The accumulation of feelings that years of meaningless sex can bring.

However, if you go into these situations with a clear mind, with the goal of experiencing how they feel, you might accomplish something. If nothing else, you’ll have a better understanding of how you function practically and psychologically under a $5,000 credit card balance, an $800 car payment, or a casual tryst.

Practically speaking, here’s the math on a $5,000 versus $40,000 credit card balance:

Of course, it’s not going to play out quite as neat and tidy. And you can clean up your $5,000 mistake in considerably less than 220 months by upping the minimum payment and way more quickly than you’ll handle $40,000 of debt.

The point is that you can save time, hassle, and money by educating yourself via experience on potential money pitfalls.

It’s easy to participate in an exercise such as this with the luxury of a rear view mirror. I know this approach would have helped me. However, I only know this because of the trouble I got into using the uncritical, slow burn approach.

I would have saved myself a ton of time and money had I simply racked up a significant amount of credit card debt in a short period of time as opposed to amassing an out-sized amount over a decade or so. Had I gone into the situation with a better understanding of myself and my relationship with money, I could have more thoughtfully considered the role of credit cards in my life. I could have made the relatively informed decision to test the waters of debt, suffer a little, and never go back there again.

Instead, I erred on the side of socialization. Looking back, this feels more reckless than throwing caution to the wind.

Don’t let society and what has become the personal finance norm dictate how you introduce yourself to something as potentially addictive and debilitating as credit card debt. Don’t let it effectively develop your relationship with money without giving you a say.

Because that’s how things shake out for some of us. We let bad habits we’re socialized to consider sane and standard operating procedure introduce us to aspects of personal finance we might be better off experiencing as one-offs we can’t wait to put behind us.