According to a recent study done by a group of sociologists, young adults (aged 18-34) can actually benefit and improve their self-esteem by carrying debt. Debt has the ability to give them a feeling of “mastery” – or the idea of being in control of something. And the more debt you have, the bigger the boost you seem to get. That’s the good (?) news. The bad news is, this false sense of confidence only lasts until you’re 28 – when, as you can imagine, it starts to have the opposite effect. The study found that debt boosts self-esteem because it allows you to live large. Being able to rent the apartment all your friends are jealous of, buy nice clothing, go to those fancy restaurants, or attend that expensive University – it is all attainable to you, as long as you’re willing to sign on the dotted line and live beyond your means. Sound familiar? That’s how I lived for quite a few years.
The study goes onto talk about how young adults might “experience debt as an investment in the future,” regardless if it’s student or consumer debt. Once young adults reach the age of 28, the good feeling associated with carrying debt tends to wear off. They might start to realize that they overestimated how much money they thought they were going to earn at their jobs, and/or that paying off their debts is not as easy as they had anticipated.
But what I found most interesting about the study is how debt affects young adults is dependent on what other financial resources they have available to them. If they come from a wealthy family, they might receive no self-esteem boost whatsoever from carrying debt. However, those that come from a family in the bottom 25% of household income got the largest psychological boost from having debt. Spending beyond their means might make them feel better about themselves – but the drawback is that in doing so, they are making it much more difficult on themselves to overcome their debt (and potentially their low-income status) in the future.
I started to feel guilty about my debt when I was 24. In the 5 years previous, I had racked up $21,000 in debt. So if I hadn’t decided to do something about it, my credit card and student loan debt could have easily doubled by the time I turned 28. It’s kind of a scary thought.
Did your self-esteem improve by carrying debt and living beyond your means? At what age did you start to feel guilty about your debt?