The Bondage of a Debt Financed Lifestyle

By Kevin, on December 30, 2009

Many Americans find themselves in quite the situation financially these days.  Their situation is nothing short of bondage.  They are completely trapped because of years of borrowing money to finance a lifestyle that was unattainable without debt.  They aren’t the only guilty party.  The government has encouraged it and the banking system was more than willing to loan the money.

The problem is that while government can tax, print and borrow, and banks can ask for bailouts, most individuals are stuck in the bondage that they have created for themselves.  People have been living beyond their means for far too long and the bills have finally come due.

Photo by sparr0 via Flickr

The ride while things are good is fun (big homes, nice cars, boats, extravagant vacations, etc.), but the pain of the bondage is worse, and most would not say that it was worth it.  Unfortunately, Americans as a whole have completely bought into this idea that it is better to live now, borrow and spend rather than be responsible and save for tomorrow.

Trapped In Financial Bondage

Individuals all over the country are underwater on their homes since they bought more than they could afford at inflated prices.  Individuals have massive credit card debt from funding a lifestyle that they could not have otherwise afforded.  Individuals also have excessive student loans and other forms of debt.

For many people, there is no way out other than a financial bankruptcy.  Climbing out of the debt hole that some find themselves in is all but impossible.  For others, it is possible, but will be a long and hard process.  Meanwhile, there are folks that struggle to put food on the table and provide their families with the basic day-to-day necessities.  The bondage is real.

The Freedom Of Zero Debt

While the responsible individuals who find themselves debt free may have not partaken in the orgy of spending during the most recent economic boom, they find themselves with something priceless: freedom.  Because they don’t have a massive burden of debt that is crushing them, they are free to save for their future, they are even able to spend more today because they don’t have money going towards interest payments.  These people are free to invest in assets that will pay them money rather than being someone else’s asset and paying someone else interest.

It is this lifestyle and financial picture that millions of people need to get back to.  Unfortunately, there is a conflict of interest with the political class due to the fact that our economy is consumer-driven and a short term recovery is dependent on people spending their money.

Young People

If you’re young and you weren’t able to partake in the previous economic bubble (mostly housing bubble), consider yourself fortunate.  While the job market might be weak and the broad economy not favorable, you got out of a major bust unscathed for the most part.

But my fear is that you didn’t recognize a valuable lesson that will prevent you from jumping into the debt financed bubble of the future.  Pay attention to the actual causes of today’s economic collapse, not the results of it.  Focus on keeping your spending in check and saving a significant part of your income.  Financial freedom is worth much more than having fancy gadgets and a new car.  Just ask the millions of people going through foreclosures and bankruptcies.

Thankfully, I see a large segment of young people waking up to economic reality.  They are seeing the flaws in the macro economic picture as well as the free spending lifestyle that so many Americans have embraced.  I hope that this trend continues and our country becomes more financially sound at every level.  Our futures will be determined by this trend.

Kevin is the writer behind 20smoney.com. 20smoney.com focuses on aggressive investing, developing income streams, money management and more with advice targeting 20-somethings. You can read more about his pursuits of online income and financial freedom.

Add Your Question or Comment (10 Comments)

1. Ken:

   December 30, 2009 at 9:08 am

   As a teacher of young married couples I totally hope that they don’t buy in to the ‘have more’ mentality. It won’t happen to them by accident. For many, experience has to be the teacher.
2. Craig Ford:

   December 30, 2009 at 2:00 pm

   My wife and I are coming up on two years of being debt free (except for the house). I cannot imagine getting another debt. There really is a freedom associated with being debt free. Thanks for the reminder.
3. K. Bowen:

   December 30, 2009 at 6:22 pm

   A debt-free life is exactly what people should seek. And young people need to think about their credit as much as people who are older.
4. Bill:

   January 1, 2010 at 8:52 am

   “Many Americans find themselves in quite the situation financially these days. …. They aren’t the only guilty party. The government has encouraged it and the banking system was more than willing to loan the money.” -Kevin

   While the post’s essence is right, the quoted comment is not only wrong, it is dangerous. It perpetuates the putative notion that someone or something else is at fault. The reality is, in America at least, each of us is completely responsibile for our own finanical situation.

   If we are individually in bad shape, we are guilty. No one else or entity is. Once this is understood, then it is equally understandable that we, ourselves, are capable of fixing the situation.
5. LeanLifeCoach:

   January 1, 2010 at 12:09 pm

   With all due respect, I have to agree with Bill.

   “They are completely trapped because of years of borrowing money to finance a lifestyle that was unattainable without debt.”

   The government only compounded the problem by pushing big business to do what they do best, make money.

   It was the individuals that made the choice to leverage themselves into a corner. The lifestyle you want is absolutely attainable without debt, but it takes time, sacrifice and a lot of hard work.

   Unless it was a result of some catastrophic illness, accident or some other rare cases we have nobody to blame but ourselves.
6. Mark:

   January 4, 2010 at 10:53 pm

   We have financed our lives based on debt not realizing that the bill would eventually come due.
7. Gaston:

   January 6, 2010 at 6:40 pm

   I can only congratulate you on your wisdom. I am an older man now, and I wish I had been able to read this essay when I was twenty years old and racking up the debt you speak about.

   At one point I had over one hundred thousand dollars in credit card debt and was drowning.

   I had invested in several businesses, and all of them had lost lots of money.

   Just when I was thinking seriously of bankruptcy, and had even met with an attorney regarding it, one of my business ideas paid off with a check for $170,000. After taxes, it was enough to clear my debt and I never looked back.

   Life can be such a bummer when faced with those bills through the mail slot each day, and the possibility of basically stealing the other guys money who lent you the money in the first place.

   I was lucky, and the timing of the business payoff seemed providential.

   You are correct when you say freedom is the reward for staying out of debt.

   One doesn’t have to be wealthy or have the best car in the neighborhood.

   The freedom you are talking about is a freedom inside, and I thank the higher power for creating a situation whereby something good could happen.
8. Dollars Not Debt:

   January 31, 2010 at 12:05 am

   The Zero percent financing scheme continues to be the BIGGIE that most people can’t pass up. Run, run very fast away from those “deals”. Spend Cash baby, you won’t ever be sorry.
9. Glen:

   February 23, 2010 at 10:11 pm

   It’s amazing what a little financial eduction can do. The more people that become educated about money, the more good money habits will become part of our culture. It has to start early at home as well as in schools. If we can educate our children, we can break the cycle of debt in America once and for all!
10. Glendon Cameron:

    February 24, 2010 at 10:09 pm

    I was on that treadmill years ago and fortunately ( got lucky) was offered a very well pay job that enabled me to get out of debt is a few month. I never made the mistake of going back to that lifestyle.

    Cash and carry is the best way to go, you always pay less when you use cash!