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Debt and Compliance

Individuals in debt find their choices severely restricted. Don’t put yourself in that situation — always make sure you can walk away if you need to.

Most graduates leave college in debt. Then, a few years later, they incur more debt in the form of a mortgage. For decades, maybe even their whole lives, professional adults live with significant debt hanging around their necks. The recent fall in property prices may mean that a lucky few will pay less for their homes but others will see their quality of life put into ever more precarious jeopardy by interest rate rises.

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What does all that have to do with talent and careers? My biggest concern, as I watch what is happening in the stock and property markets, is that we are witnessing the creation of the most compliant workforce in our lifetime. Individuals with hundreds of thousands of dollars of debt may not think of it this way, but debt severely restricts choice.

Faced with a boss asking you to commit unethical or illegal acts, it can be hard to refuse. Harassment, racism and sexism are the manifestations of toxic cultures but goodwill and personal principle are sorely challenged when your kids’ home, schools and lifestyles are at risk. I’ve met more executives than I can name who put up with behaviours they abhorred because the cost of fighting them was simply too high. They know what they’re doing and they’re intensely apologetic. But in these cases, everyone is damaged: those doing active harm and those witnessing harm they are too afraid to stop.

One financial services executive sticks in my mind. A Wharton graduate, bright, enthusiastic and highly determined, he was disgusted that the boys’ night out at his bank usually meant going to a strip club. He didn’t want to join in but felt he’d jeopardize his career if he refused. He did all the right things. He consulted the employee manual which said that company policy forbade this. He talked to HR who confirmed the policy and asked for names. He wanted to provide names but feared repercussions. “I like to think,” he told me, “that if it had just been me on my own, I would have named names and taken the consequences. Even if it meant losing my job. But I had to think about my life as a whole: my kids, my house, my wife who’d just been laid off. What would happen to all of us if my principled stand left us out on the street?”

Staying with his firm turned out not to be the answer either. His inability to change his environment made him angry with everyone: his colleagues, his boss, and most of all himself. “I just spent years,” he recalled, “being angry. And before — I used to love my job!”

The best antidote to this I’ve come across came from another banker, Pamela Matthews. She has carefully paid down a great deal of her debt, while also stockpiling what she calls her FU money. But most importantly, she tailored her lifestyle to give her the choices she cherishes. “I live so if I lose my job it is okay. I didn’t over buy on my house or our cars. We drive a ’95 Honda. We live modestly — we don’t belong to country clubs, we don’t send my daughter to fancy private schools. We keep our expenses low. Our “FU money” is cash for one or two years. When I was mistreated at my first company, they really did think I wouldn’t leave but I knew I could — and I did.”

What Pamela calls her “FU money” is what I’ve always called my running away money. I used to dine with a business colleague who was immensely smart and charming and but sometimes drank too much. When he did, he became tyrannical and abusive. He’d made many friends with his charm and lost them with his bullying. But we got on fine. Why? Because I always took my coat and cab fare. He knew that I was always prepared to walk away. And that meant that I never had to.

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It’s immensely important, no matter how much debt you carry, to know that – somehow – you can afford to walk away. Not because you want to, not because you will, but because otherwise you’ll get no joy from your work. Whether you gain this freedom by restraining your lifestyle or by eschewing debt doesn’t matter. What does matter is understanding that part of the pleasure you get from work involves knowing that you choose to be there. It’s okay to owe the bank money; it isn’t okay to owe them your life.

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