Most of us don’t understand the devious nature of debt until it’s too late. We believe debt helps us get what we want—when we want.
In reality, debt is sucking life from our souls. The more debt we have, the more we are tied to our jobs, lifestyles, and cities.
Today, I want to get to the bottom of our debt-filled society. Make no mistake; we must defeat debt at all costs if we’re going to live the life of our dreams.
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How do we get into debt? Think back to your elementary, middle, and high school days—when did you lose your passion for being creative?
This is the first step towards becoming an employee or an In-debt-ured Servant. The education system teaches us to work eight hours a day, enjoy our few breaks, and listen to the boss (or teacher).
As they suck our creativity, we begin to want “stuff” to give us that ping of joy. I was in high school when I started to want Jordan shoes.
I worked at McDonald’s for $4.25/hour, netting me $300 in bi-weekly paychecks. And sure enough, I would spend a large portion of this money on shoes.
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Of course, when I joined the military in 1999, I bought a car within a few months. I earned $1,000/month, and my car expenses totaled $600. What a mess.
The illusion of independence. School robs us of our creativity, but society pushes us to be independent. Being independent is the worst thing we can become.
Our thirst for independence is driving our personal debt levels through the roof. How can you save and invest when every responsibility is on your shoulders?
If you earn $5,000/month in a small city, how much can you afford for housing? You can spend $1,000/month, including all utilities. This means that you need to rent a room from someone else.
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However, in our society, this young person will attempt to rent their own apartment for $2,000/month. When you add other expenses (car, food, loans), they almost exceed their spending limit.
Remember that this person lacks creativity. The only fun they can envision is going to nightclubs, buying expensive clothes, and eating at fancy restaurants.
Living in debt. Of course, our young employees can’t afford to live alone and have a great nightlife. Something has to give, and it’s usually their budget.
Here’s the rub; the early years are crucial to our lives. Becoming wealthy is primarily a function of time and compounding intelligent choices.
When we live in debt, we are hurting ourselves in two ways: our poor spending habits compound and prevent our good money from growing.
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Let’s say we spend $1,000 on clothes with our credit cards. At an interest rate of 20%, we pay a ton of adverse interest over a couple of years.
What if we invested that $1,000 in a Series “I” Bond at an average of 4% (over 30 years)? That would give us $3,243.
Debt vs. your lifestyle. Yes, getting $3,000 after 30 years isn’t that exciting, but that was only one choice of many.
Success in America is not about starting a huge company, becoming a ball player, or climbing the ladder to CEO.
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Financial freedom is simply making the best choices possible, given the current circumstances. It means prioritizing time over money.
Life has many ways to get you into debt and keep you there. At every age bracket, there are new ceremonies, achievements, and lifestyle changes that arise. And each carries some form of a financial burden for you to shoulder. Let’s look at a few.
1) Turning 18 and moving out from your parents: renting an apartment, new car, nightlife, buying furniture.
2) Going to college: new furniture, nightlife, peer pressure.
3) Getting married: wedding, new house, honeymoon, wedding rings, baby shower.
4) Having kids: a bigger house, private school, vacations, new vehicles.
Decide your debt philosophy now. The list continues until you die. Even in your 40s, there will be peer pressure for you to spend money. Social media keeps everyone’s spending habits on your radar.
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You must decide your debt profile now—today! If you never determine who you are as a spender, you’ll fail to achieve financial freedom.
I am 42 years old, have a wife, two kids, and three houses; I have been through the wringer financially. Luckily, I always knew I wasn’t a big spender. I married someone who works with me.
We didn’t have too much debt when we finally got our finances together. We had $77,000 and cleared it in two years.
We could have easily been in debt over $200,000 between student loans, credit cards, cars, and personal loans. Debt is a function of the past, so always remember to think of the future.
Will there be times you have to assume debt? Yes. All kinds of things happen, so don’t beat yourself up for adding $3,000-$5,000 in debt.
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However, debt is a balancing act. If you add some debt, you must sacrifice a little to pay it off quickly.
Conclusion. This is where your creativity needs to shine. If you planned a $10,000 vacation and had to assume some debt, lower your trip to $5,000.
Can you take a family of four on vacation for $5,000? Of course, you can. In fact, you will have a better time by staying on the new budget.
Life is about these choices. You don’t have to be a hermit; just balance your past, present, and future.
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Once you value your time above money, you’ll easily avoid debt. You’ll understand that a $60,000 car will keep you in the workforce for another five years.
You’ll decide to get a $15,000 car and invest the difference. School takes your creativity and skips over how to create good spending habits.
It’s incumbent on you to figure out what you value. It’ll be tough to go against the grain. However, as I retire at age 42, I can say it is worth it.
I lived in debt for 20 years and out of debt for four years. Which were my better years? I write to help convey these feelings and choices because the information is lost. You must write your own story, but having debt will always focus on the past. Good Luck!
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