Hey,

I don’t think the world is doing well financially at the moment, except a certain few people (their financial status begins with a ‘B’😑). So, the financially educated (and uneducated) gurus are out there giving us advice on how to make the pennies stretch further. But it’s the same advice time and time again, so why are we not listening?

Honestly, I think it’s just genuine fear of the unknown. And even though logic says 1 thing, if logic is contradictory to the fear response, humans will hesitate following the logic.

So, let’s say you're in a situation like me. You have job and bills, and an annoying amount of credit card debt (specifically 4 figures - that can round up to £5k, excl student loans). You also have a little bit in investments (less than your debt amount) and accessible savings (slightly more than your debt amount). There are inaccessible savings, so we aren’t going to include those, since the faff of having to withdraw from that is unnecessary for anyone.

The debt is earning 29% interest, because credit cards do that, and your savings are earning 4%. Because of this disparity in interest on your debt to the one your earning on your savings. The financial (and recommended) approach, is to use your savings to pay off the remaining debt.

But in doing so, you empty out the majority of your savings, let’s say it leaves you with £200. This is recommended because you are no longer paying that extra interest amount. Which is great! But the annoying thing about doing that, especially in uncertain times like now, you now only have £200 to deal with an emergency, if it happened.

And with rising costs, because of the financial climate right now, that £200 won’t cover a lot of emergencies. So what do you have to do? Rely on taking on debt. Then you are left with minimal to 0 savings, and still a high interest debt. Especially since, when inflation goes up, the value of your debt becomes less. So why rush to pay off the debt in uncertain times, and lose that little safety net, when the value of it is not as bad, because of what’s going on?

With that scenario, I hope you can see why people don’t listen to the logical financial advice given. Because it’s not a logical thing that is driving a person to do that, it’s an emotion. Which are not known for their ‘logicalness’.

Gurus whether they are properly qualified in their education or not, are not you. You have whatever financial lessons that have come with you from childhood. As humans we can train ourselves to detach from emotion, but that’s not effective all the time. So you find the balance that works with your emotions.

It’s not easy, and it’s definitely a pain, but it’s better than the stifled emotion causing further harm to you (whether you notice that harm or not). And it’s better than hiding from the debt that needs logic to be applied to pay it off.

I am not nor have I tried to be known as a financial guru. However, I am a person also navigating adulthood, and finances is a pain to manage and figure out. I am just bringing to light somethings that our brains might naturally avoid addressing. I know for sure not using my savings to pay off my debt is illogical, especially with interest rates right now. But I know how I will be so unsettled, knowing my savings doesn’t have enough to even get me through 1 month of bills.

In a world riddled with turmoil that is out my control, I will not add to that by my own hand, if I can help it.

Have a lovely weekend,😊😊

Rue

Adulting For Life