Debt Is A 4-Letter Word

Debt is a 4-letter word. And just like other 4-letter words, you should avoid using it! Especially for consumption reasons.

The banks make it look so enticing with images of happy couples fawning over new cars, lavish lifestyles, and vacations in a tropical paradise!

The reality is much different. Instead, the banks are really more like drug dealers preying off the emotions and greed of their victims lured in by false images of eternal rich bliss. Opening their pimp-like trenchcoats to the side, they invite, "Look here. Do you want some of this?"

Obviously, the banks are not that seedy. Focusing in more on impressionable young adults, the images bankers use are of healthy fit professionals, living in nice homes and offices, and enjoying normal upscale lives.

The problem with these images is that the debt Americans know today is anything but normal historically! It is rampant, almost addictive, today. Whereas many decades prior, use of debt was rare. Especially consumer debt, if you could even get it! And when you truly understand how todays' debt comes about, it will make you vomit, just like overdosing on a bad drug.

People get into debt because of an emotional need going unfilled. Usually a need to be seen or noticed, or to feel heard. The stuff purchased with the debt says to the outside world, "Look at me! I have it made! I am important. I have my act together.". Whether the debtor has their act together or not, emotionally they are insecure and feel like they do not. the appearance of wealth, the facade of stability or riches, masks the reality of how they feel inside.

The problem with that emotion is that nobody else really cares. Others only care about what they have and where they are going. When the debtor goes into debt to buy all this stuff, they are spending money they don't have, to buy stuff they don't really need, trying to impress people they don't know and who don't care! My belief is that it is better to appear poor and have great wealth than to appear wealthy and be very poor!

According to Thomas Stanley's famous book, "The Millionaire Next Door", some of the wealthiest people in America, those having a net worth of $10 million or more, are not lawyers or doctors who all look like they have it made. Rather they are junk yard operators! In other words, people who do not even come close to appearing wealthy, while operating simple cash-based, debt-free businesses!

Now for the truth. Debt is modern-day slavery! But instead of forced slavery, the debtor actually signs up for it voluntarily! Worse, it costs the slave owner (i.e. the bank) absolutely nothing to acquire the debt slave!

When you borrow money from a bank, you are NOT borrowing someone else's savings like what used to happen in the old days prior to modern corrupt banking. Today, when you borrow money for a car, or a home, or business, or from a credit card, the money you borrow is created instantly by the bank from thin air!

Let me repeat that..... When you borrow money for anything, the money you borrow is created at that very moment from thin air by the bank! If you and I were to do this, its called counterfeiting. But when a bank does it, it's called "making a loan".

Taking it a step further, that loan has interest due. That interest is funded by your hard labor, your real work, and any real way you earn money. That interest in other words represents REAL value. Putting it differently, the debtor pays REAL interest on the bank's FAKE counterfeit money!

The bank is essentially getting something for nothing! And if they lend you enough fake money, you can essentially enslave yourself with debt and interest for life. Just think about that the next time you take out a decade-long loan, or a 30-year mortgage! You are enslaving yourself voluntarily for that length of time!

In fact, there is no other word that better describes debt like the word "mortgage". The Latin roots of this word are "gage", which means "to promise" or "commit" (i.e. like when you get "engaged"), and "mort" which means "death". So a "mortgage" is essentially a "death promise". It is a "bond" until it is paid off! And we all know what "bondage" is.....slavery! Debt is modern-day slavery!

There is nothing lavish or glorifying about debt! It is not wealth. It is only the appearance of wealth, and only for a short while before the thrill of the not-so-free money wears off, like a drug you become used to. The fix only works for a short time.

For those who have become enslaved with debt, there is hope. There is light, and it IS possible to pull yourself out of the seemingly hopeless abyss. But it may not be easy depending on your situation and what you used the debt for. If you acquired assets with the debt like a house, precious metals, or stocks, the assets can be sold to pay off the debt. But if you consumed the money borrowed, spending it on vacations or stuff that quickly loses value, the hole you are in will be more difficult climb out from. But it is still possible.

I am a HUGE fan of Dave Ramsey and his approach to eliminating debt. Like many Americans, he got himself into too much debt, but mostly because he was "borrowing his way to wealth" by buying rental real estate with loans. At age 26, he bragged about a portfolio of properties worth over $4 million. But in 1988, he faced bankruptcy and financial ruin as the risk caught up with him and the bank called in his loans. At which point he was broke. he appeared like he was worth $4 million in 1988, but the truth is he was always broke!

Ramsey swore off debt after this event and began counseling people on debt usage. His advice to help others get out of debt and his best-selling books on getting out of debt have built him a net worth of over $300 million. Why? Because his methods work!

Having ZERO debt is the way to go. If you have assets with equity, sell the assets and pay off the debt! When paying off consumer loans, he recommends the "snowball method" (How the Debt Snowball Method Works - Ramsey).

While Ramsey believes all debt is bad, he does allow for it in certain circumstances. For instance, if you are renting an apartment for $2500/mo, and you have enough money for a down payment on a home that will cost $2500/mo (assuming you need a home that size), then you are better off renting the money from the bank and getting the tax deduction by owning a home with debt, than you are spending the same amount in rent getting no tax deduction. You will after all have to live somewhere.

Similarly, you may need a car to get to/from work to earn an income, but without the car there is no income. The benefit of the income earned exceeds the cost of the interest on the car. So it makes sense to get a cheap reliable car with a loan if that's the only way to get a car to earn the income.

For those with debt, Ramsey offers his baby steps to begin your journey of becoming debt free....ending your slavery. The baby steps can be found here: Dave Ramsey's 7 Baby Steps - Ramsey

If you want a truly lavish lifestyle, it does not happen with debt! And it does not happen quickly. It happens with discipline. Just like in the old days there is no free lunch. Wealth is not built in floods. It is accumulated and preserved over time drop by drop. This slowly accumulated wealth is called capital, and it is that accumulated capital that is used to earn real money in a "capitalist" system.

None of this is taught in school. What schools teach you is how to work for a living, which is not a bad thing. But by itself labor will not get you rich. The word "job" means "Just Over Broke". Capital is what earns the real money in America, not labor. Labor is just used to get some capital to start out. Our system is called "capitalism", not "laborism".

Unfortunately, this lack of financial understanding trains people that as soon as they have income to spend, they spend it, instead of deploying it as wealth-building capital that throws off additional income not dependent on your labor. And worse, not only do they spend their income, but they also leverage it with debt to ensure nothing is left over and capital cannot be accumulated. The savings rate in America is currently about 0.00%.

Even high-income people who just earn money from their jobs are mostly living on the edge. With the higher income, they also have greater outflow. Essentially, they have more toys rented from the bank, but they are just as much in slavery as the person having a lower income.

Only you can break this debt cycle for you. It starts with a decision, and a practice of discipline, planning, budgeting, and financial tracking. People who fail to plan by default, also plan to fail. A written plan for your financial well-being is critical to not only lowering and eliminating your debt, but to thrive debt free.

Dave Ramsey's system is a great place to start that journey today. He also has plenty of free YouTube videos. But just like stopping addictive habits, it doesn't happen until you decide to make it happen. As a participant in a free society, you are free to fully succeed, and you are free to fail. The choice is fully yours. It is far better to actually be wealthy, than it is to just appear wealthy. Your peace of mind, and your sleep, will improve dramatically when your financial life is on a solid path.