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Tackling Debt

Understanding the 5 types of borrowers and knowing which one you are

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Before tackling the rules of debt and how to win with credit it is important to understand the psychology of debt. What are the motivations that lead to debt? Why are some people consistently unable to manage debt? What is the relationship between self-esteem and debt? reports that the total U.S. consumer debt is at $13.51 trillion. That includes mortgages, auto loans, credit cards and student loans. With a number like this, the question is, why are we racking up debt like there is no tomorrow?

In my experience there are five types of borrower profiles:

  1. Wishers

  2. Wasters

  3. Wanters

  4. Whiners

  5. Winners

The first three profiles tend to overlap, as we’ll see. The last profile, the winners, have either survived and moved past the difficulties of the first four categories, or were credit winners to begin with.


Wishers are credit optimists. They have the sunny perception that they deserve the good things; that they are meant to keep up with the Joneses, and can easily afford it all. In their happy dream world of credit optimism they focus on the monthly payments, not on the overall debt. They see a $20 payment here and a $75 payment there as doable, never focusing on the thousands of dollars of overall debt, at crushing interest rates, they have incurred. They are convinced that they can easily pay the bills as they come due.

Such false perceptions of what can be managed are extremely problematic during the Christmas spending season, especially with the sense that the bills are due next year. Wishers, as optimists, see a brighter next year for themselves, a better job, with more income, a future whereby all money issues will be resolved. Unfortunately, not all wishes come true.


Wasters spend money as an escape. With low self esteem issues, they use the money to purchase things in order to feel better, relieve stress and escape their problems. In a society where massive and pervasive advertising can easily manipulate behavior, there is nothing like the feel and sense of something new (or so the advertisers would have you believe.) A new car or truck or television or vacation can end the emptiness inside – for a time. When that empty feeling returns there are still bills to pay.

Wasters, however, will continue spending. With a credit card industry that encourages, indeed programs, people to buy now (for wasters – feel now) and pay later, wasters will sign up for more credit. They will find themselves locked into a life of revolving debt. With low self-esteem they will more often declare bankruptcy and they will more often go back to their unsuccessful money management techniques of short-term retail relief and long-term debt woes.


One of the more interesting studies in annuals of psychology is the Stanford Marshmallow Study. Begun in the 1960s, it was conducted by Walter Mischel, a Stanford University psychology researcher, and studied the importance of self-discipline on future success.

A group of hungry 4-year olds was offered a choice. They could have one marshmallow now. But if they waited fifteen or twenty minutes while the researcher ran an errand they could have two marshmallows.

A third of the children immediately ate the single marshmallow. While some waited a little longer, another third of the children waited the full 15 to 20 minutes for the adult to return.

Later, when the children graduated from high school, a follow up study provided interesting information. The quick and single marshmallow eaters were less self-confident and couldn’t put off immediate gratification to reach long-term goals. Their impulses were life long, resulting in bad marriages, low job satisfaction and lower incomes.

The resisters, who delayed immediate gratification to receive two marshmallows, were more productive and positive in life. By being able to delay gratification in pursuit of their goals they had higher incomes, more lasting marriages and better health.

The problem in our society is that immediate gratification is actively encouraged. “Have it your way.” Eyeglasses - or whatever - in under an hour. “Buy now, pay later.” These are just some of the constant messages we receive. Is it any wonder that those with lower self-discipline are lured into the indulgences of immediate gratification?

The wanters want it now and the credit industry caters to that desire. The issue of paying for all of it later inevitably becomes a problem.


They may read lots and lots of information about credit and personal finance but instead of taking action, they continue to spend their time focused on the negative. When a solution or answer is presented to them, they will go into detail about what’s wrong with it.

Whiners may rail against FICO, creditors, the banks—or all three. While they may have legitimate concerns about the fairness of the credit system, they spend all their time trying to fight the system, rather than working toward a solution.


Believe it or not, for all the criticism of the credit industry we have just offered, there is room for huge winnings to be realized using credit to your advantage.

The winners know this, or have learned it through their own education. However the wisdom was arrived at, the formula can be very rewarding.

To understand how to get out of bad debt once and for all, and to learn how to use good debt to your advantage, read my book The ABCs of Getting Out of Debt: Turn Bad Debt into Good Debt and Bad Credit into Good Credit.

Original publish date: September 04, 2019

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