Let's Talk About Debt - You Can't Afford It

How in the hell did we become so accepting of the idea of indebtedness? When did the word usury - which is referred to as a sin in many religious texts - shift from the practice of lending money and charging any interest to lending money and charging too much interest? How did we build a society in which people decide to purchase goods and services without even checking how much money is in their bank account? That's like saying I'll trade you this cow for that lumber but you don't even know if you have a cow. That's insane, and the fact that no one thinks twice about it is even more insane.

These questions and a 1000 of their closest reincarnations fly through my mind in dizzying fashion. I'm afraid we could spend the rest of our lives talking about how we got here - from greedy profit-seeking useless-widget makers shoving consumerism down our throats to banks who lock their customers into contracts with language that might as well be hieroglyphics the story is a long and twisted one - but I'm not really here to try and unwind the shit storm of the why. I prefer to spend what little time you and I have to concentrate on what we do about it now.

First, we need to make sure we all understand what we're actually dealing with here. If you don't understand that something is a problem, then you haven't got a shot in hell at fixing it. So here are a few points you should consider:

  • To be in debt to someone is to be partially owned by that person or organization
  • Indentured servants are simply people in debt who pay their debt with labor as opposed to cash; basically the extreme version of washing the dishes at the restaurant after not being able to pay for your dinner
  • It is almost always more expensive to finance a purchase (aka take out debt) than it is to pay for that purchase up front, in terms of both nominal and real dollars
  • Traditionally banks make their money by taking your money and lending it out to other people who pay it back plus interest; the difference between the interest they charge the borrower and the interest the pay for deposits is their revenue

When you think about it like that, are you so sure you want to be partially owned by someone? I didn't think so. Do you really think people decided to start handing out credit out of the kindness of their hearts? Of course not, they're doing it to make money. They're betting that you will fall into their trap and end up creating a mountain of debt that churns out interest payments to the lender for the rest of your life. Judging by the number of credit card companies and other lenders out there, I would have to guess that they might just be right.

"But, but, I want it now! It's shiny and all of the cool kids at school will like me if I have it!"

That's the voice that we've settled on in the Western world, particularly America, land of the free (diabetes) and home of the brave (marketers willing to peddle all of the cheap crap you didn't need). That voice has been taught, it's not natural, it's not a part of who you really are, and it can be overcome I promise you.

Next time you find yourself reaching for your credit card to buy something, stop. Instead, use your debit card. If you can't use your debit card because there isn't enough money for the transaction to clear or you will be in danger of overdrafting when your next bill hits, then don't buy it today. Write it down, take a picture, and set a goal for yourself to save the money to buy it. One of two things will happen:

  1. You will prioritize that purchase over other purchases in the coming weeks/months/years and set aside the money needed to buy it. When you actually come back and make the purchase you will feel an amazing amount of self-worth for the discipline you have proven to yourself in accomplishing a goal. Congratulations.
  2. Or, more likely than not, you will forget about that crap tomorrow because you never really wanted it in the first place. Either way you win!
Being in debt, like most things in life, is not something that happens to you but is instead something that you choose. A world built on debt is a fragile, fragile world just waiting to collapse. One major car repair, trip to the hospital, or hiccup in your career is all that it takes to ruin you in a model dependent on money that isn't yours. 

Related Stuff Worth Checking Out:
For an easy read on very straightforward personal finance check out Rich Dad Poor Dad.

For a book full of ideas that are mostly unlike anything you've heard before by someone who knows better than to buy into the mathematical lies of debt financing check out The Black Swan: The Impact of the Highly Improbable and it's follow up Antifragile: Things That Gain from Disorder. These two are at the top of my list for reads that have changed the way I view the world.

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