Covid Pandemic Lesson: Borrow Less To Live Freer?

WSJ notes that while Uncle Sam’s pandemic spending spree incurred historic deficits, it at least got some debtors out of their financial black holes. Might Covid-induced fear of bankruptcy help all practice better financial discipline aka approach borrowing more conservatively going forward?

The newspaper article cites by way of illustration one 35-yr-old family man with two law degrees who faced the possibility of unemployment when the Covid pandemic broke and lockdowns ensued, while he had a credit card debt, a massive student loan debt to pay off and worried about big medical bills should he, his wife or the kids get sick. Like any responsible adult, the worried parent who works for a non-profit, “dramatically” cut his spending. “Travelling internationally, going out to eat with friends and getting a haircut became, for a time, impossible. The pause in his student-loan payments [totalling $200K] freed up $500 a month … [he] was able to save consistently for the first time in his adult life. He put away between $300 and $500 some weeks, eventually building up an emergency fund from about $2K to about $109K. He also paid off $2K in credit-card debt, which boosted his credit score.”

“It was such a sigh of relief,” he told the WSJ. “As a person who grew up poor, there’s not a day that goes by when I won’t check my bank account.” Funny, this man sounded a lot like me when in between jobs with 4 young kids to feed during an economic downturn decades ago. Only big difference was I worked my way through law school & was not saddled with this man’s massive student loan debt. But, for the Grace of God, there’d I’d have gone.

Davd Soul