Archive for October 17th, 2010

17th October
2010
written by Randy

One of my goals for this year was to be completely debt free, and I am thrilled that I was able to complete it before the year was half done. But since this blog wasn’t started until after I had already crossed that finish line, I never really got much of an opportunity to talk about why that was so important to me.

With the exception of a few know-it-all economics majors who think financial leverage is good, I think most people understand that debt is bad. Most everyone I know, when asked what they would do if they won the lottery, begin by saying “the first thing I would do is pay off all my debts.” But if we all know that it sucks to owe, why do we all do it?

A system has been built up around us which sees citizens as nothing more than consumers. Our government refers to us as taxpayers, rather than as citizens. Our news is presented by corporations pushing an agenda. Our entertainment is filled with advertisements to buy, buy, buy. And with mortgages, loans, and credit cards, our banks have made it easier than ever to spend money we don’t have.

Why is it so easy to get into debt?

There is no advantage in giving away money, so you have to stop and think about why it’s so easy to borrow, to use credit, to finance things into the future. The reason is simple: debt is slavery.

If you buy a car from me and pay cash, I get just one transaction, and it’s only worth the price of the car. But if I can get you to finance it, I’ll not only make a bunch of extra money in service fees, but I keep you tied to my auto lot for a long period of time. As time goes on, I can make you special offers to trade in your car on a new one, and just move that debt around. You become trapped.

If it costs several hundred dollars to buy a cell phone, but I tell you that you can have it for free, so long as you agree to a 2-year service contract, I will not only lock you into two years with my recurring service, but over those two years I’ll also finance much more money than the price of that phone. (The difference in price for a no-contract service is usually around $15/month, which is $360 or more over the length of a contract.) And I’ll let you out of that contract early if you agree to sign a new one. Once again, you become trapped.

And that’s where we’ve ended up. Americans are stuck in they mortgages, stuck in their cars, stuck in their overpriced cell phones and cable television packages. Every year it’s a new credit card. Every two years a new phone. Every five years a new car. Every eight years a new house. Always moving bigger and bigger debts around.

The treadmill

It becomes a debt treadmill. Like the Red Queen from Alice in Wonderland, we’re all running in place, working harder and harder to get somewhere, but while the scenery keeps evolving, we’re stuck in place.

When you’re on the debt treadmill, stretched to the limit of your income, you can’t afford to be unemployed. Without a paycheck, you can’t service the debt, and eventually the whole house of cards will come crashing down on you.

That fear makes people do things they don’t want to do. Instead of taking that vacation to Europe you’ve always wanted, you find yourself having a stay-cation, which usually amounts to you doing those projects around the house you’ve been putting off while you’re on the treadmill. Imagine — taking a vacation from work… to do work!

That’s what we’ve become. Americans have become slaves. We’ve allowed those terms taxpayer and consumer to define us and control us, and like sheep we all follow the rest of the flock into a prison… with a treadmill instead of a floor!

It’s destroying the world

This treadmill is not just destroying ourselves — though that alone should be enough of a reason for you to want off. This cycle is also destroying our world!

In an effort to make things bigger, better, shinier, and more desirable every year, we’re mining up more resources from the earth, polluting the air as we refine them into building materials, and then selling them to people who take their previous baubles and toss them into the trash.

We’ve got junk yards filled with cars, most of which could have been repaired for much less than the cost of a new one. We’ve got landfills full of last year’s model of cell phone, computer, etc. We’ve got storage units syphoning money out of our pockets every month in exchange for keeping safe all of the things we don’t even use any more. And we’ve got a planet polluted with all the plastic wrapping that all of this stuff came in.

Our economy is in a shambles — and it affected the entire world! — because we, as a nation, exist only for the purpose of creating debt. Our national debt is astronomical, and the government’s budget runs in a perpetual deficit. Our entire country has become enslaved to the treadmill.

Getting off of the treadmill

It’s hard work, but it’s not nearly as impossible as it seems. You can get off the treadmill, as I did a few years ago. You can become debt-free, as I did this year. It just requires a conscious choice.

Getting off of the treadmill is the first step. When you find yourself stuck in a hole, the most important thing to do is stop digging. That means quit borrowing, quit spending, quit perpetuating the mess you’ve made.

I got off of the treadmill in 2008, and it was hard. When people around me were driving fancy new cars, I was riding the train or the bus. When people around me were eating in fancy restaurants, I was eating home-cooked meals. When people around me were buying the latest computers and laptops, I was using the same ones I’d had for 4 years.

But what I realized was that I was off of the treadmill. Instead of feeling deprived, I felt responsible. Instead of being jealous of that fancy dinner, or sexy car, or shiny new computer, I learned to look at those things as the bars of the prisons that everyone else was building around themselves.

I knew that if I stopped actively building that prison, I could start working on getting out of it. And over the next two-and-a-half years, I did occasionally buy things, but instead of carelessly spending, I now thought long and hard about whether I would value the item enough to justify adding bars back to the prison I was working so hard to escape.

Breaking free

Finally, after making difficult choices and living responsibly — for however long it takes — you do make it out of the prison, as I did this year. And it’s liberating!

When you’ve stopped spending recklessly, you find that life costs a lot less to live. And when you’ve stopped funneling every cent into servicing debts, you can actually save money. With a low cost-of-living and a very modest savings, you can work fewer hours, or even actually live comfortably for some time without a job if you choose.

When you’re not worried about how to service those debts and how to pay for that house of cards around you, your stress level reduces. Your health improves. You sleep better, feel better, look better, live happier.

When you’re constantly trying to have the latest television, or the fanciest cell phone, or the sexiest new car, you end up freeing a whole lot of attention that you didn’t realize you were spending on keeping up with those things.

When you’re not actively participating in the financial treadmill, you are doing your part to reduce its footprint on our society and our world. The more people stop playing the game, the less incentive there will be for banks to keep the game going.

You don’t have to make any more effort to be green; it’s a natural side-effect of being more frugal. Buying less creates less waste. Riding on public transportation consumes fewer natural resources. Fixing things instead of buying replacements keeps more garbage out of our landfills. And so on.

When you end your slavery, you gain your freedom. You gain the right to choose the job you want, rather than the job you need. You gain the right to trade things for experiences. You gain the right to go where you want to go, do what you want to do, be who you want to be.

Basically, the point is, if you want to make every year amazing, the most important first step is gaining the freedom to do so.

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