Debt and Borrowing

Debt may purchase a home, useful training, or the equipment by which a living is earned; it may also purchase display which has lost its charm before the final payment is made. The purpose and terms deserve to be distinguished before either kind is undertaken.

In the households I served, debt was spoken of the way one spoke of illness: quietly, privately, and only when absolutely necessary. A gentleman might carry a mortgage; he did not carry a balance on his tailor’s account if he could avoid it, and if he could not avoid it, he did not speak of it at dinner. The obligation was between himself and his creditor, and the rest of the world had no business knowing the particulars. This was not secrecy for the sake of vanity. It was discretion for the sake of dignity, and the distinction matters.

Your era has abandoned this entirely. Consumer credit has made it possible to purchase anything at any time regardless of whether one possesses the means, and the result is a generation of men who own things they cannot afford, displayed in homes they are renting from the bank, photographed for the consumption of strangers on the internet. The watch was financed. The holiday was charged. The automobile is leased. The appearance of prosperity has been entirely severed from the fact of it.

Debt differs by purpose, though a respectable purpose does not guarantee a sound loan. A mortgage may acquire a useful home and an asset which rises in value. The same house may lose value, require expensive repairs, or become difficult to sell while interest, taxes, insurance, and transaction costs continue. Education may improve future earnings, but the result depends upon its cost, completion, the field of study, and the work available afterward. Whether either debt is rational depends upon the figures and the likely result.

Borrowing for display is another matter. A holiday charged to credit continues to demand payment long after the traveller has returned, while watches and clothing bought upon monthly terms often cost more than their value before the account is cleared. The pleasure has passed and the obligation remains.

Borrowing may be justified where it acquires a suitable home, a useful skill, or equipment which produces income, provided the full cost can be met without distress and the risks have been considered. A modest monthly figure does not improve a purchase which will depreciate, amuse briefly, and then require storage.

A gentleman’s relationship with money is private. He does not discuss his income at the table. He does not compare his salary with his friends. He does not announce his investments or lament his obligations to people who did not ask. But in the privacy of his own accounts, he knows exactly where he stands: what he owns, what he owes, and the distance between the two. He keeps this distance manageable, and when it narrows, he adjusts his habits before adjusting his borrowing.

There is little glamour in the calculation, though there is considerable comfort in knowing the exact balance, interest rate, and date upon which an obligation will end. These figures are much easier to examine at the desk than at three in the morning.

Further guidance

• Paying back your debt, Financial Consumer Agency of Canada
• Limiting future debt, Financial Consumer Agency of Canada