On Debt, Value, and Time

Earlier this week, Seth Godin wrote a post about debt:

The simple but hard to follow rule is this: Only borrow money to buy things that go up in value.

He lists some examples of “bad debt,” such as going into debt for a wedding, but my immediate response was well, aren’t you having the wedding because you want the relationships to go up in value?

And sure, that is a different kind of value (and credit card companies won’t accept it as payment) but, arguably, you have a wedding to bond with both your partner and your family/friends/community (unless you have one of those weddings that also serve as goodbye parties for people who won’t be following you to the next stage of your life) and those are the people who are likely to provide support, including financial support, when you need it most.

My other thought, after I read Seth’s post, was I wouldn’t have my current career if I hadn’t been willing to go into $14K of credit card debt.

As you might recall, if you are familiar with the Nicole Dieker Life Story: I got into freelancing in 2012, while I was in Los Angeles trying to make it as an indie musician. I didn’t want to get a job that would prevent me from taking every terrible gig that came my way, so I searched Reddit.com/r/beermoney which led me to Amazon Mechanical Turk which led me to the content writing site CrowdSource, at which point I started throwing all my spare time into writing and editing articles and quickly became the fourth-highest earner in CrowdSource history. (I have no idea if that record still stands; it’s been years since I last wrote for them.)

I balanced writing and music for another year or so, until it became so obvious that the writing career was the only one of the two that was actually taking off, and then I went all-in on writing.

But I also accumulated $14K of credit card debt in the process (starting with my initial move to Los Angeles and ending when I left Los Angeles for Seattle because, at the time, Seattle was significantly less expensive).

I swiped my credit card for a lot of stuff that didn’t increase in value. The groceries were consumed immediately; the train tickets I bought so I could go play background music at a steampunk festival didn’t help me get a better-paying gig; the vacation I took with the guy I was dating didn’t lead me towards a long-term relationship.

However, the debt bought me time — first to founder at my music career, and then to build my freelance one.

Here’s another story I’ve told before: when I graduated from college in 2004, I moved to Minneapolis for an internship that ended up falling through. Since I needed to earn money right away and did not want to go into debt, I did the usual new-college-grad flail at finding something “in my field” and ended up working as a telemarketer for the Minnesota Orchestra.

Later that year, I transitioned into an admin position at an insurance office (that I got primarily because I went to a temp agency and aced the typing test) where I spent most of my work hours either filing envelopes in an empty room or pushing boxes of copy paper around the buildings to refill all the copiers.

I was trying to save up $500 so I could rent a black-box theater for one night and put on a show, since I’d read about people doing that kind of thing in the 1970s, but even though I could have put the $500 on a credit card and gotten it over with and learned from what I would have undoubtedly considered a mistake, I told myself no debt.

So I worked, and saved, and waited, and nothing happened, and then I went to grad school. If I’d been able to test my artistic theories right away, instead of spending three years in an educational environment that prevented me from learning whether they had any value in the marketplace, which is what I had to do, on my own, anyway, well… who knows what might have happened.

Yes, it is a privilege to be able to have the kind of credit score that lets you get into five figures of debt, but it’s not the kind of privilege that’s exclusive to the very few. If you don’t have poor credit to begin with, and if you always make your $25 minimum payments, you can run up a lot of debt and maintain it for a very long time.

Which is what I did.

And it bought me the time it took to establish my freelance career, which will probably gross six figures this year.

Technically, I did exactly what Seth Godin advises. I went into debt for something that increased in value, and paid it off four years later.*

But I couldn’t have predicted any of this back in 2012.

So did I do the right thing financially, or not?

And if I hadn’t built a successful freelancing career, would the answer to that question change? ❤️

*In the interest of full disclosure: at a certain point in my debt repayment process my parents said “we don’t want to see you paying interest on those credit cards” and wrote me a check for the remainder of the debt; I paid back my parents in installments. I didn’t request their financial help but I did accept it, and that was where the privilege part of this story really kicks in. However, I am 100% confident that I would have been able to pay off the debt without their help; at that point I was living on 50% of my income in order to maximize my credit card payments, and planned to continue until the debt was completely gone.