“Just as the rich rule the poor, so the borrower is servant to the lender.” –Proverbs 22:7
You may or may not be religious, but regardless there is truth in this quote from Proverbs. There is a reason that we listed “Debt Freedom” as the first step for financial success. Put simply, it’s the most important!
I’m sure most of you can relate to the stress of having debt and the toll it has on all aspects of your life. Debt effectively limits your single greatest wealth building tool (income), restricts your options when it comes to purchasing, while making it nearly impossible to give and volunteer as a productive member of society. What’s worse is that debt is often paid back over a long period of time, meaning you have to pay interest and endure this financial servant-hood far longer than is tolerable.
Debt also tends to have an effect on personal relationships. Nearly 80 percent of divorces are caused by financial difficulties and most of those are entirely a result of debt. In addition to adding strain to your relationships, debt is also bad for your health. It can raise your blood pressure, leads to anxiety, and depression.
The USA has become completely enamored with debt. The student loan disease is a problem, and a serious one at that. Total student debt is estimated to be around $1 trillion, with the average individual owing about $24,000. Good luck saving money with that anchor around your neck!
Now that we’ve reinforced how bad debt is, let’s understand the why and how it sneaks into our lives.
Our culture is filled with materialistic zombies who are reliant on instant gratification. Rather than save for something and then buy it with cash as people have done for the last 20,000 years, we now buy everything at first sight and then hope to pay it off someday (at a considerable price increase due to interest and default). Even buying a coke from a machine now involves swiping a card and paying it off over the next few months! Similarly, students avoid junior colleges or state schools while selecting private institutions that can cost 4 times as much with the same job outlook and placement rates as state schools.
We have become so enamored by advertisements that we agree to a life of servitude to a credit card just so that we can live like the Jones’s next-door. Many people fear change. They realize that in order to punch debt in the face it’s going to be scary. To become debt free you may have to give up some materialistic things that make you feel comfortable- for a time. You have to say to yourself I’m DONE WITH DEBT! Once you agree that debt is dumb, and it’s time to live a life of freedom, the war will begin. Just as war is not much fun, neither is the process of becoming debt free. Trust me, it’s so worth it! Imagine having the freedom to do whatever you want, create wealth, and give generously.
Now that you agree that the war on debt is worth it, let’s discuss the how, starting with: The Budget.