When It Comes to Debt, Ignorance is Not Bliss
Casey Hynes — Up Close & Personal Finance
It was 3 a.m., and I couldn’t sleep. I had woken up in a panic, my brain running on a constant loop. Oh my god, I’m in so much debt. I’m behind on my taxes. My student loan payments are more than I’ll make in a lifetime. How am I going to pay rent next month? How am I going to live?
For years, I had kept the fears at bay. Sure, they would flare occasionally. But with enough willpower, I could push the panic to the back of my mind, reassuring myself that I would “figure it out” someday. Of course, when it comes to personal finances, “figuring it out” only becomes more daunting (and more terrifying) the longer you put it off.
Unlike my meltdowns of the past, however, this attack was different. There was no shaking it off or falling back asleep. I would have wept if I wasn’t paralyzed with terror. I was nearly 30, and my financial life was in total ruin.
I was living in Chiang Mai, Thailand, at the time, renting a room in a guesthouse for about $200 a month. My expenses hovered around $1,000 a month, though I could spend less if I cut back on dinners at Western restaurants and bottles of Thai rum when out with friends. The cost of living was at least half of what I would have been spending living in a major U.S. city. I was self-employed, and had the flexibility to travel around Southeast Asia whenever I wanted. By many metrics, I was having the time of my life. But my financial situation had hit rock bottom.
A few months earlier, I had been robbed while on vacation in Koh Phangan, Thailand. My laptop, DSLR camera, and external hard drive had been stolen, which is a professional disaster for someone who relies on those things to make a living. I emptied my bank account to purchase a replacement for my laptop and hard drive, but put off purchasing a new camera. I was in no position to replace $1,500 worth of property, so I returned to Chiang Mai and scrambled to find enough work to cover my expenses.
It took months to recover financially, and the robbery drove home how tenuous a grip I had on that aspect of my life. With no emergency savings, I was lucky to have what little money was in my bank account when my laptop was stolen. I realized I needed to learn how to manage my finances, and fast.
But that realization brought other, harsher revelations. I had stridently ignored the fact that my credit card accounts had long gone delinquent and that my student loan payments were piling up more every year. For what I owed, I could have traveled the world several times over and bought myself a very nice house upon my return. Instead, I was becoming increasingly frantic about how I would ever alleviate this growing burden.
To make matters worse, I had operated on a fuzzy understanding of expat tax requirements, which resulted in me falling behind on my returns. I had no savings, no investments, not even enough money for a plane ticket back to the United States.
Determined ignorance, that’s how. Debt.org describes several emotional responses to overwhelming money problems, including stress, fear, panic, depression, and anxiety. I’ve encountered them all, but my denial was textbook. Debtors in denial “simply find it too difficult to face the frightening financial facts, so they continue to spend compulsively while ignoring their deteriorating economic condition,” according to the site. “They put off dealing with their problems until some outside event … forces them to change their lifestyle and begin making some long-overdue decisions.”
I didn’t move across the world to avoid my money problems, but the physical distance between me and my creditors helped push the debt from my mind. When I first moved overseas, I was a teacher at a private school in South Korea. My salary was unremarkable by U.S. standards, less than I had made working for a newspaper in Washington, D.C. But my employer covered my rent, and I could make payments on my credit cards and even occasionally on my student loans.
When I later pursued freelance writing full time, my income became less consistent and I skipped paying some of my bills out of fear that I wouldn’t have enough work to sustain myself the following month. Rather than work out payment plans or study money management, I told myself it wasn’t a big deal.
I had no intention of moving back to the U.S. in the near future, so what if I had bad credit back home? Cash was serving me just fine overseas, and why would I want to tie myself down by buying a house or car anyway? I didn’t have anywhere near the amount of money I needed to pay my student loans, so what was the point of trying?
Sometimes I wish I could go back in time and shake myself out of this delusion. The truth is, I was avoiding dealing with my debt because I was scared. I had no idea where I would ever get the money to make headway, and it was easier to “live in the moment” and not worry about my spending than to make difficult choices about getting my debt under control.
What I didn’t know then was that taking action is the only way to keep money fears at bay. The U.K.’s National Health Service recommends people seek help with debt management and attempt to pay their bills even when they’re struggling with financial anxiety. There’s good reason for that. Action is the one thing that helps quiet the hysteria when I’m in a negative spiral over my finances.
After that literal dark night of the soul in Thailand, I knew I couldn’t live like that anymore. I realized the stress and fear had settled so deeply in my chest that it felt like someone had wrapped a fist around my heart and was squeezing all the time, a constant reminder of the predicament I’d created for myself.
I finally began the work of rectifying my mistakes. The first step was working with a tax accountant in the U.S. to bring my filings up to date and arrange a payment plan for paying my back taxes. That alone brought immense relief. I also started an income-based repayment plan for my student loans and paid off all my delinquent credit cards within the next three years.
The initial phone calls to the accountant and collection agencies were nerve-wracking and tedious, but it also gave me a sense of control. I started to feel hopeful about the future, finally believing I could create financial abundance and stability in my life after all. And while I’m still learning and occasionally making money management mistakes, I’m never going back to that place of terrified ignorance again.