Why Personal Debt Matters More Than Government Debt: A Story About Control

Every so often, someone asks me, “Is government debt going to hurt the stock market?” It’s a fair question. When headlines talk about trillions of dollars as casually as pocket change, it’s hard not to wonder what it all means for the future.

My answer is always the same, maybe, but that’s not the part any of us can control.

Washington operates under rules the rest of us don’t get to use.

They can:

• Run deficits indefinitely
• Print money when things get tight
• Push difficult decisions into the future

Even states cannot do that, most are required to balance their budgets annually.

And that’s why, whenever the topic comes up, I try to refocus the conversation on something far more practical, our own financial lives. Because while we can’t fix what happens in Congress, we can decide how much debt we take on, how we manage it, and how it affects our future.

Debt shows up everywhere. For many families, it looks like:

• Credit cards
• Student loans
• Car payments
• Home equity lines
• Second homes

For business owners, it often includes

• Lines of credit
• Equipment loans
• SBA financing
• Private equity notes
• ESOP related debt

Debt is not automatically negative. It's a tool. It helps families buy homes, send kids to school, and build businesses. The real question is whether the debt fits your income and your long-term goals.

Some debts are simply more expensive than others

• Credit cards can be the costliest
• COVID era mortgages were some of the cheapest money we will ever see
• Business loans can accelerate growth or add pressure, depending on timing and cash flow

When someone asks how much debt is “too much,” I usually offer a few simple guidelines. Many families tend to feel more stable when

• Housing costs sit around 28 to 30 percent of gross income
• All debt combined stays below roughly 43 percent of gross income

Go much past those levels and financial pressure tends to build quickly.

Business owners face a slightly different question. Before taking on new debt, we walk through things like

• Can the business comfortably make the payments
• Is the debt supporting growth, or covering gaps
• What will this debt do to the business’s value if it is sold

For example, a business with 2 million dollars in debt and 200,000 dollars in cash will see sale proceeds reduced by that entire 2.2 million dollars. Many owners do not see that clearly until they are already in negotiations.

Personally, the math works the same way. Your net worth is simply what you own minus what you owe. Borrowed money can feel like breathing room, but it does not belong to you, and when income tightens, that becomes painfully clear.

When people say, “Well, the government doesn’t seem worried about overspending,” my response is straightforward.

We do not have the government’s flexibility.

They can delay reality.

We eventually have to face it.

Another question I hear often is, “How does someone who’s stretched thin actually change?” And the truth is, they change when they decide to. Not when a spouse nags them. Not when a friend points it out. Not when an advisor lays out a plan. Real change sticks only when someone becomes emotionally ready to move from survival mode to intentional planning. The mechanics are simple, earn more, spend less, and create a plan for the difference, but implementing it takes discipline.

Something that concerns me lately is the number of people under saving. A statistic I read recently really stuck with me.

Fewer than one in six Americans aged 45 to 54 are maxing out their 401(k).

It is not because people do not care. Life is simply more expensive

• Higher housing costs
• Higher interest rates
• Childcare
• Insurance
• Groceries
• Medical expenses

And yet, retirement still comes. Social Security will face pressure. Healthcare costs are not reversing. These realities require preparation, and the sooner someone starts, the better.

That’s why we encourage families to focus on things like:

• Increasing retirement contributions when possible
• Using Roth or Backdoor Roth IRAs
• Building cash reserves
• Reducing high interest debt
• Tracking net worth after debt
• Improving the long term probability of retirement success

In our financial planning work, an 80 to 99 percent probability of success is considered strong. It does not mean life will be perfect, just that a family is on solid footing.

At the end of the day, we can’t control government debt, tax policy, inflation, or market cycles. But we can control

• How much we borrow
• How much we save
• How much we spend
• How we respond when things change

Those small decisions, made consistently, shape a family’s financial future far more than anything happening in Washington.

This is not meant to scare anyone. It is a reminder that while we do not have unlimited borrowing capacity, we do have the ability to make thoughtful choices that create stability over time. And often, that is exactly where financial confidence begins.