Save it for a rainy day

“There’s a great deal of variety in people’s attitudes toward savings and debt,” says Will Wilkinson:

Both sides of the ledger are morally valenced for many people. I’m a weirdo who reads too much economics, so I see my accumulated human capital as serving much of the insurance function of money savings. So, despite the fact that I remain a net debtor in money terms (student loans!), I feel well in the black.

For the inverse of this, I need only look at myself. My balance sheet is actually in the black, though the comparatively-low liquidity of the assets will tend to make the liabilities look that much frightening.

And I’d hate to try to place a dollar value on my “human capital” beyond the numbers available on Form W-2.

Some people are ashamed of debt, because it’s debt, and hasten to wipe it out. Others act like credit is free money and run up debt until it explodes in their face. Then they go bankrupt. And then, later, they do it again. Some Spockish types will make minimum payments on debt indefinitely, as long as the interest rate on the debt is lower than the interest rate on investment or the value of present consumption. Some people require a cushion of savings for minimal peace of mind. Others are happy as long as their checking account doesn’t dip below zero before the next paycheck. Etc. So I think it’s probably hard to draw a really useful generalization about the intrinsic utility and disutility of savings and debt.

I am not persuaded that these are all separate reactions: indeed, I myself have managed to run the gamut of them, sometimes two or three of them more or less simultaneously. I’m old enough to have been brought up in a milieu where debt was considered a Bad Thing, the inevitable consequence of the cardinal sin of envy; this attitude, however, has not kept me from putting debt to use, and occasional misuse. Perhaps I can blame this on being a weirdo who has not read enough economics.

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