Our family home was lost in the midst of the early-'90s recession.
Interest rates had grown to about 17% and, with a sick mum, a new baby in the family, and my dad's rapidly declining business, the onslaught was all too much.
My parents sent me away to stay with relatives while they tried to figure out how to cope; I returned home to a 'For Sale' sign, and walked inside to find many of our belongings had been sold.
I was 10 years old, and the seeds of a lifelong fear of debt were planted.
Fortunately, my husband and I were able to use my fear productively when we bought our home in the Melbourne suburb of Belgrave; with a combination of strategy and sacrifice, we used half my income to make additional mortgage payments.
Seeing that balance fall month after month gave me enormous satisfaction, although the downside of my fear is that it thwarted any hopes my husband had of buying an investment property.
A country move to north-east Victoria further reduced our mortgage and, two years ago, at the age of 35, I was mortgage-free. It was only then that I could breathe easily into the joy of owning a home, knowing that no one could ever take it away from me.
Debt deserves a healthy fear
Experts suggest that a little fear of debt can be a good thing. "A little bit of a fear of debt is not a bad thing but, as a nation, we have become a bit too comfortable with large amounts of debt," says Natasha Janssens, founder of Women With Cents.
Sydneysider Andrea Michelle is another who is naturally cautious about the debt she signs up for. "If you can't pay for it outright, don't buy it – that's my general philosophy," she says.
There are some simple strategies for living within this mindset. "I keep my credit card limit low and pay it off in full each month, cars are bought outright for cash, and home loan repayments are based on worst case scenarios," Michelle says.
Janssens agrees that these are good habits to establish: "These are financially savvy things and I wouldn't encourage someone to overcome that fear."
When the fear holds you back
James Nolan* has rented various homes in a Melbourne suburb for years. But, while his wife is desperate to buy for greater stability, he is terrified of the debt that will pile on them.
"I've never felt comfortable with buying a house," Nolan explains. "I was raised to be cautious with money, and I worry about committing to repayments we can't maintain if one of us loses our job or gets sick."
Debt is risky, and some of us are more comfortable with risk than others. "Some people are naturally born to be cautious, others were raised that way, or perhaps they've witnessed something terrible happening to someone else and that's left a permanent mark on them," Janssens says.
"But if that fear gets to a point where it's crippling and stopping you from taking steps that are going to propel you forward, that can be an issue."
How to overcome a fear of debt
There are steps you can take if a fear of debt is holding you back.
- Get to know why the fear exists. "Write down exactly what you're afraid of – for example, 'I'm afraid of having a mortgage because I'm worried that interest rates will go up and I won't be able to afford the repayments'," Janssens says.
- Identify and write down how that fear is holding you back. "You can identify whether it's a fear that's serving you well or stagnating your financial development," Janssens says.
- Find ways to mitigate the risk you fear. "You might look at the repayments you can afford on your current income but with higher interest rates; then make those repayments now so you're building equity before interest rates rise," Janssens says.
* Name has been changed by request
This article was originally published by the Sydney Morning Herald on 1 May 2017. It represents the views of the author only and does not necessarily reflect the views of AMP.
Remember, no matter how you pay for purchases, at some point the money comes out of your hip pocket.