Are We Financially Irresponsible?

Many of us may have the financial goal to pay off our personal debits.  We may have accumulated debt from attending college, getting married, buying a home, or purchasing a new car.  We may also have accumulated debt from a major purchase or excessive spending.  Regardless of how we accumulated our personal debt, does having debt make us financially irresponsible?

Some finance professionals agree that accumulating debt is a sign of financial irresponsibility, but it all depends on how we accumulated that debt.  If we accumulated thousands of dollars in debt because of excessive spending on material goods and other unnecessary items then we are financially irresponsible.  I disagree with this theory.  Sometimes excessive spending is a sign of financial irresponsibility, but sometimes it is because we lack the financial knowledge to know any better.

We should always learn from our mistakes because insanity is often described as performing the same action and expecting a different result.  If we accumulated unnecessary debt when we were younger we will learn from our mistakes and better manage our money when we are older.  This doesn’t make us financially irresponsible because it was a learning experience.

Some people agree that being financially irresponsible is spending and living beyond our financial means.  If our expenses outweigh our income we may be financially irresponsible, or we may be mismanaging our money.  Anytime that we spend money we don’t have I believe that we are being financially irresponsible.  We must learn to cut expenses and live within our fixed income.  If we have a fixed monthly income, then we should also have fixed monthly expenses.

My Dad always says that how we got ourselves into a bad situation is not important because it is in the past.  What is important is how we get ourselves out of the situation, because that will determine our future.  I think that learning how we got into a bad (financial) situation is important so we don’t let it happen again.  However, effectively managing our money and creating a budget along with a financial plan to improve our situation is far more important.  Fixing a bad situation shows financial responsibility.

Think about your financial goals for 2011.  Is one of them to pay off your debt? Now think about why paying off debt is so important to you.  Is it because paying interest on our debt is expensive, or is it because you think that having debt makes you financially irresponsible?

Let’s answer these 4 questions to determine if we think that having debt makes us financially irresponsible:

1. People who are in debt are usually ______________
2. I will never go into debt for _____________
3. I ____________ my debt
4. I don’t have debt because ____________

Kristina Tahnyak

Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.