Note: This article explores the emotional and mental effects of a mortgage from a mainstream POV, totally set aside from the financial realities of the debt instruments themselves, which I am well aware of. That is for another article, and/or episode of Mystery Paper.
Being in debt is so commonplace – in fact it’s the norm – that many people probably don’t consider the impact it has on our mind state and thought process.
Asking someone what it feels like to be in debt – for many – is like asking what it feels like to live indoors or to eat breakfast or to have a hot shower at night. Debt is so pervasive and everpresent – it’s the water that we’re swimming in – that we rarely stop to consider what it would feel like to NOT be in debt.
Most would recognise that the feeling of being indebted is not a particularly pleasant one. If your friend has hosted you for dinner five times and you have yet to host them once, you may have some twinge of uncomfortable obligation. If a Hare Krishna or charity hawker on the street gives you a small ‘gift’, you may feel like it would be rude to not give them a minute of time to chat, and so on.
While we may be consciously aware of those small social ‘debts’, large scale debts issued by institutions may seem to be just “the way things are” – they they are just facts of life, inherent to the world we are born into.
When everyone you know works 9-to-5, Monday to Friday, it doesn’t feel so weird for you to be getting up every morning and doing the same. Likewise if all your friends are locked into 30 year debt contracts just so they can live indoors, it too can feel ‘normal’.
The rich rule over the poor, and the borrower is slave to the lender
Proverbs 22:7
Despite the warnings of ancient wisdom, most of us (75% of households according to a study in Australia in 2020) have taken on debt of some kind, and – I would argue – are being impacted psychologically as a result, both consciously and subconsciously. But how?
The relative perceptive of value
You’ve probably heard of studies showing that people are much more sensitive to price variability on smaller items than on larger purchases. For example, a ten per-cent saving on a hundred dollar pair of shoes – ie. ten dollars – seems like it’s worth walking down the street for, but people would not do the same to save $10 on a $20,000 car. Why not? $10 is $10, right? Apparently not.
Similarly, people are much more open to paying (objectively) larger sums for things when they are ‘addons’ to an already substantial purchase. For example, it would seem crazy to spend $500 or $1,000 for a few pieces of plastic, unless they are cupholder upgrades to a car purchase which already runs $30,000. You get the idea.
Along these same lines, there is a certain insidious effect that arises from being committed to a long term (arguably life-time length) debt relationship. To appreciate this, we will first need to explore the contrary.
Note: please excuse the apparent childish simplicity of the following examples, but I feel like it’s necessary for logical completeness.
The independent plumber
Let’s take a (simplified) hypothetical example of a man – Peter Plumber – who earns $500 a day as an independent plumber. If he goes out and plumbs, he earns $500 that day. If instead he sits around at home reading a book, he earns $0. Whatever amount of money he accumulates over time (minus what he spends on living expenses) is what sits in his bank account.
If Peter day-to-day earns more than he spends, then his ‘savings’ will gradually increase. If he knows it costs him $5,000 a month to survive, and he can see $60,000 sitting in his account, he can have some satisfaction in knowing that he can probably sit around for close to a year before he needs to rush out and unblock some peoples’ toilets.
Conversely, he can look at that $60,000 and weigh up whether he might want to spend some of those funds on a holiday or a second-hand car or some other substantial purchase. Mentally, he is comparing the satisfaction or utility he may get from those purchases, versus the effort he spent in acquiring those funds in the first place – and the effort that will be required to re-acquire those funds in the future to replace his financial ‘safety cushion’.
He may like the idea of buying a car to cruise around on the weekend, but prefer to take a 6 month sabbatical from his work and travel the world, for example.
Let’s now compare this with the thought process of a mortgage-holder.
The employee mortgagor
Note: For our counter-example I am going to conflate two things which ARE separate, but that DO tend to go together: that of being an employee (rather than an independent contractor) and that of having a mortgage (rather than renting). Commonly speaking, it’s more difficult for independent business owners to obtain mortgages (a topic for another time) and often they choose not to in the first place, since their income may be less consistent or reliable.
That said, let’s now take Eddie Employee, a man who has a permanent position at a plumbing company, earning a salary to work at head-office sending out independent plumbers like Peter to jobs. Eddie earns a fixed annual salary (paid into his bank account every month) and he works a standard 9-to-5 40-hour week.
As long as Eddie does his job sufficiently, he gets his paycheck every month like clockwork. If he seems to be doing a good job – and the business is doing okay – he can also probably expect a payrise or promotion every now and again.
This apparent predictability means Eddie can make longer term arrangements like leasing a car or getting a mortgage, because he can (somewhat) assume that he will have a certain amount of money showing up every month to cover these on-going payments.
The flipside of this ‘security’ is that Eddie loses a degree of freedom in deciding how much work he wants to do on an ongoing basis. There will be certain terms of his employment contract which determine how many days of leave he can have every year, and he will need to get the timing of that leave ‘approved’ by a superior beforehand. Of course, Eddie can always quit (probably after a month’s notice) but there is a certain gamble associated with that – what if he loses this job and can’t get anything comparable? Remember – he has monthly expenses he needs to hit, no matter what, or else bad things happen.
Where am I going with all of this?
Money as freedom ‘credits’
As mentioned previously: for Peter, $500 is a day’s work. For Eddie, however, even if he ALSO effectively earns $500 a day (ie. 20 work days = $10,000 a month) the money does not have the same practical application in the context of freedom.
While Peter can take a month off or decide to take less jobs that month, Eddie does not have that flexibility. He is essentially locked into a dynamic with two choices: you obey your boss, or you quit. When looking at older legal dictionaries, the term ’employee’ is defined as the equivalent of ‘servant’, but for operating on ships – just as ‘master’ is the land-based equivalent of the nautical ’employer’.
This is why full-time positions are referred to as ‘permanent’ – that is traditionally what they were. You took a job as a servant for someone, with the expectation that you would continue to work for them indefinitely. This is why there are BENEFITS associated with those positions, which do not extend to ‘contractor’ roles – the master is obligated to take care of his life-time servants.
Getting back on track, we can see how Eddie – by virtue of the nature of his situation – has essentially committed to the long-term servitude of his employer. Any decision Eddie makes ultimately needs to fit within the confines of the terms of the contract he has with his employer, unless he wants to branch-swing to another employer (who will likely have similar terms) or just quit and somehow try to cobble together enough cash to cover his monthly expenses.
Realistically then, given that Eddie has committed to a 30 year mortgage for a house, he is in for the long haul and has to play ball every month for the forseeable future. So, relatively speaking then, what does $500 really mean to Eddie?
Money as something else
If – practically speaking – Eddie can’t use that $500 to buy units of freedom (ie. days that he doesn’t need to go to work) what CAN he do with it?
Firstly, he can spend the money to enhance the days that he does NOT have to go to work – ie. weekends and pre-approved holidays. If he has $10,000 in savings, and he has 20 days of holiday leave per year, he can spend $500 a day living it up over the course of that trip, before coming back to the office on day 21.
Conversely, Eddie can spend those savings on items that he can enjoy WHILE at the office (clothing, jewelry, mobile phones, gadgetry) or during his downtime (large television, gym membership, yoga sessions, and so on).
You may be thinking, so what?
Well, there is another somewhat insidious aspect to Eddie’s situation, and it connects to the broader concept of debt itself.
$500 as a percentage of $1,000,000
If Eddie has a 30-year mortgage for $1,000,000, he has essentially committed to full-time employment – presumably doing the same job (or similar) that he is doing now – for the next 30 years.
Knowing that he is on the hook for a million dollars, his day-to-day decision making is no longer about WHAT he should do with his life (that is already effectively decided) but rather WHAT he should spend his money on, and what he should do with his spare time (evenings/weekends/holidays).
Remember that once you owe a million dollars, the banks make it very easy to INCREASE and tack on more debt to that existing million. This is known as the ‘smart’ way to borrow, since the interest rates are lower than credit cards or personal loans.
From Eddie’s point of view, then, if he wants a new car for $50,000 – what would be the point of scraping and saving for two years like Peter would need to do, when he could just get it now and tack the 50k onto the 1 million dollar mortgage? $1,050,000 is only 5% more than he owes now, and who cares if it takes him 31 years to pay it off instead of 30, he’ll be an old man anyway. At least he can enjoy that new car smell, and blast through a few amber lights while driving into the office that he has no choice but to go to.
Likewise if Eddie wants a new playstation, a road bike, a rolex, or whatever. It’s all miniscule compared to the scale of the debt, and he has to keep going to work indefinitely (30 years+) anyway, so might as well get some enjoyment in the cracks where he can.
Multiply this by 30 million
The obvious result of this (on a population-wide scale) is an economy made up of millions of people who are all locked into a life-path with minimal deviation, where their only real freedom of movement is through consumption. This consumption – their respite from their work – ironically increasing the debt load that is the source of their predicament in the first place.
In England in 1910 only 10% of people ‘owned’ their own homes (as opposed to renting), in 2024 it was 50% (down from a peak in the 1990s of 69%).
As we all know, nobody consumes like those who are unsatisfied with their life situation, so this has the (unintended?) flow-on effect of boosting economic activity and consumption. The mass-adoption of mortgages also creates a climate of across-the-board social compliance. If the powers-that-purport-to-be say that everyone needs to get an injection to go into the office, an people need to go to the office to get their paycheck to pay their mortgage and not default on their home… then most people are going to comply with that ‘mandate’.
Since banks penalise people for trying to pay their mortgages off faster (I wonder why that is) most people, then, will go through their life, with their behaviour, decision-making and thought processes subtly shaped by a debt burden that they never particularly thought twice about taking on.
