The word debt conjures many emotions, mostly bad ones. This is rightfully so. To be “in debt” to someone or something implies owing something or outright servitude.
Debt is most often applied to finances since money makes the exact quantification of what you owe so much easier. Owing money is much different than owing a favor to someone. For example If you borrow your friends truck to move some items, what exactly do you owe him in return? Since you don’t have a truck you can’t return the favor exactly, so what do you do? You could try to pay him, however how do you determine the amount? You surely wouldn’t pay him how much it would cost you to rent a truck, otherwise you would have just done that instead of calling him. Instead you probably just owe him a favor, something of relative value at a later time.
1. A sum of money owed
2. The state of owing money
3. A feeling of gratitude for a favor or service— Oxford English Dictionary
I Deserve It
In our culture of high speed, super deluxe instant gratification why do I have to wait to get that awesome thing I want, no I need? I was at Target the other day buying a $40 dollar toy for my son’s birthday and after scanning the items the clerk dutifully asked “Would you like to apply for a Target Red Card to save 5% on your purchase today?”
Holy shit, sure, you mean you’ll give me that fancy credit card and I get to save 2 whole dollars? Three words for you: Fuck. That. Shit. My goal for the past 18 months has been getting out of debt but more on that later.
I Got Status Bro
Debtors sell products with “status” and “prestige” to entice you into buying what you can’t afford and probably don’t need anyway. The Points Guy website, which I normally enjoy, had this write up about the coolest looking credit cards. It includes the “Palladium Card” by JP Morgan Chase, carried by former President Obama, with reported requirements being over 10 million on deposit in order to be approved.
Debtors use all kinds of tactics in order to get new customers and with credit card rates at just over 16% it’s no wonder. Debt is voluntary servitude.
Debt Is Servitude
Purely by the relationship, debt places one party as master and one as slave. From the moment you “applied” for credit, then being “approved” for x amount, then charging thousands of dollars in which you can’t possibly pay by the time the next bill comes. These lenders now have you under their thumb and more and more of your monthly income is eaten up by “minimum monthly payments (MMP).”
Speaking of MMP, if you owe 50 grand in credit card debt at the average rate of 16%, your 3% MMP would start out about $1,500. It would take you 290 months to pay for a total repayment of just over 90 grand. That’s also assuming you DON’T CHARGE ANYTHING for almost 25 years! All this for a whole bunch of shit you do not need. Go ahead and try, I’m sure you can’t recall with accuracy what was purchased on your credit card(s).
Types of Debt
Let’s take a small step back and look at different debts. I’ll break them into three sections: Financial, Social, and Governmental. There is a bit of bleeding between these categories however each category stands on it’s own.
This is the most obvious debt: You owe x amount of dollars to “x” banking institution to be repaid at a given interest rate or term. There are several examples of financial debt. All of these should be eliminated as soon as possible or, better, never acquired at all. This reduction of monthly cash will be like an anchor around your neck, one that you will get used to and accept as normal.
- Unsecured Debt
- Student Loans
- Secured Debt
This is one area where there are some exceptions. Some social debts are good, and no I don’t want to get into a discussion about how society is a
- Civil Courts
Anything with the governments backing carries a lot of weight. Whether it is punishment for criminal behavior or collection of taxes, you can be sure the government will take their pound of flesh. Debts owed to a government also should be avoided whenever possible, with the only possible exception being military service. That should ONLY be entered into as long as YOU benefit from it: i.e. skills, education, training, money, etc.
- Criminal Behavior
- Military Service
- Tariffs/cost of doing business in your country
What Debt Is “OK” To Engage In?
This is the part where most people talk about how there are better kinds of debt and worse kinds of debt. That’s bullshit.
ALL financial debt is bad.
In just about every circumstance I could suggest an alternate plan. One example I’ve heard is about buying a car. Say you want to buy a car that is 30 grand. You only have $1,000 to put down, leaving you with financing 32 Grand (taxes and license are a bitch). Your monthly payments are about $700 (average APR) for the next 60 months.
Say instead you need a car right now and buy a huge beater for your $1,000. Save that 700/mo and in 3 months you buy a much better 2100 dollar car, but wait you still have your first car. At at the very least you could get a couple hundred in scrap from it, so it’s not a total loss. You can keep leapfrogging like that selling your previous car and buying a new, better car. What’s the best part? You are not beholden to the finance company. At any point you could just be happy with the car and ride it out.
Your choice. Your freedom.
How To Get Out of Debt
Financial debt is the biggest drain and one of the most important to get out of ASAP. I have a few suggestions:
Tighten your belt, go through your finances and eliminate all of the unnecessary wants in your budget. Renegotiate your phone/cable/internet bills or get rid of them if not necessary. Use the extra money to pay down your debt.
Follow a Plan
There are many plans out there but the one by Dave Ramsey seems the most straight forward. If you want more structure than the first option, check out his website.
CCCS (consumer credit counseling service)
These programs offer even more structure than some of the other programs out there. Often they will negotiate a lower monthly payment and a reduction of interest. As with everything there are tradeoffs. All of your accounts will be closed. But for some this is a great option.
Bankruptcy is a last resort but there is no shame if you are completely buried in debt with no way out.
The social aspect isn’t nearly as heavy as financial. However it has the potential to be just as draining. The social debt we can control is all about who we choose to be around and give our time to.
Cut Losses With Negative People
This should be a no brainer, however, it’s very difficult to follow through with. The people who constantly drain you and don’t contribute to your betterment.
Make Better Friends
Many of us have childhood friends that are still with us, for no other reason than you’ve known them since grade school. Cut the dead weight already.
If you find yourself in debt to your government you will quickly learn they are the worst to be indebted to. For example with military service if you go awol (absent without leave) the possible punishment is 5 years incarceration, or during wartime, death.
Most Aggressive Collectors
If you owe back taxes, the government can take your licenses, property, land, whatever. Get that shit in order quick.
Expatriate to another country. This potentially involves great sacrifice, however it could potentially give you some relief.
Why You Should Be Debt Free
- More monthly money
- Able to invest your money
- Better well being
- Be your own master
- Stop being a Slave!!
Live Debt Free, Live Superior!!