5 Stages of Debt: Where Do You Stand?

Your most essential wealth building tool is your income. One of the fiercest adversaries your income will ever face is debt. Debt is a thief hiding in plain sight, camouflaged as supposedly “affordable” monthly payments. The more outgoing payments you have, the less flexibility you’ll possess with building a solid financial future. Debt is the most marketed product in the United States, so much so that we have formed routine paradigms about it. What is a paradigm? Glad you asked! A paradigm is “a typical example or pattern of something; a model.” Some of the most common debt paradigms you’ll hear is that “debt is normal” or that you “can always pay it off later.” If we’re not careful, we can allow the societal norms of debt to keep us from acknowledging reality with our finances.

Elisabeth Kubler-Ross and David Kessler wrote a book “Of Grief and Grieving,” outlining the 5 stages people tend to encounter when faced with a loss. Believe it or not, being in debt (reminder: the borrower is servant to the lender) mirrors this experience of mourning. Examining these stages (Denial, Anger, Bargaining, Depression, Acceptance) will help us become more self-aware and provide us a call to action to help others in process with debt. Paying off debt is more than the practical operation of budgeting and negotiating with creditors; it’s incredibly emotional. Remember, personal finance is indeed “personal.”

Stage 1: Denial – “This isn’t happening to me!”

You think you can handle it. It’s really not “that” bad. You think you have time on your side. Invoke the will to act. Time is of the essence in this stage. Do not allow the Wall of Ignorance (willful) to put you in a state of indifference with your debt.

Stage 2: Anger – “Why is this happening to me?”

You’re angry at your circumstance and the creditors. Blame is placed everywhere but yourself. You might have feelings of guilt. Look at your shortcomings as learnings, not failure. Learnings should lead to improvements.

Stage 3: Bargaining – “I promise I’ll do better if…”

Feelings of helplessness and vulnerability. Attempts to reclaim control are made through statements like:

“If only I had listened…”

“If they gave me extra time to pay…”

You start believing there’s something you could’ve done differently.

Stage 4: Depression – “I don’t care anymore.”

Drowning in debt. Feeling of loneliness and isolation. Don’t know where to start. You lament the loss of the life you wanted to live – spending with no consequence – and realize to practice good stewardship your habits must change.

Stage 5: Acceptance – “I’m ready for whatever comes.”

You’re positive. Hopeful. Ready, willing, open, accountable. You start crafting a spending plan to create margin in your life. Open communication with your spouse/significant other. Resolve never to go back to old habits.

Action Plan: Which stage of debt do you find yourself in? Why? What steps do you need to take to clean up your finances? If you’re doing well financially, how are you helping others around you in need? What can you do to impact the community right in your own backyard? Oorah!

2 thought on “5 Stages of Debt: Where Do You Stand?”

  1. Tammy Perry

    Description is excellent! Not something I usually see described in financial planning.

    I met you briefly at DR Enrichment 2 years ago

  2. Jason Davis Post author

    Thanks Tammy. The mental/emotional/psychological aspects of money matter just as much as the tactics and strategies. I’m trying to explore more of this.

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