Tuesday, July 16

Debt: A Global Epidemic

"Do not spend the money that you don't have." - Fortune Cookie

This is a topic that I've been wanting to write about for some time now. It's quite personal. I'm sure most adults with a mortgage, student loans, and car payments can relate. Why do we do this to ourselves? Why do most of us live with debt almost all of our lives?

Well, ultimately it's so we can get stuff.
When we're little kids, adults ask us what we want to be. Not who we are, but how are we going to make a living. How are we going to pay for stuff, and then maybe later pay for their stuff if we're lucky and can make enough to help out.

Don't get me wrong, I love helping others from the bottom of my heart, but not with stuff (unless it's absolutely fundamental). In this modern era we're taught to believe that the more things someone buys for another, the more loved they are. Parents buying children toys. Teens getting that first car when they turn 16. Husbands breaking the bank and supporting an industry that does terrible things just so their fiancĂ© can have a diamond ring. Stuff equals love, and emotional advertising is partially to blame, but we're the ones that are buying into it. It's also a pissing contest. Who has the biggest home, the best car, and the latest smartphone? What about the environment costs of this type of consumerism? I've seen some of the most dreadful images of the dumps in third-world countries, the pacific garbage patch, and huge landfills scattered across the globe. This type of spending is not healthy for us or the planet.  

This was true for me as well when I started to look at universities after high school. Which one would get me the furthest, so I could be successful and wealthy. That's what I wanted, and I didn't think about how much it would cost, because I figured I could make it back. That's a terrible way to start off on one's own.

The same thing happened when I got a house. It's an investment, one that will eventually pay off, and then I can buy a bigger house! "A house is just a place to keep your stuff while you go out and get more stuff.", said the late George Carlin. I couldn't agree more about that now. So I'm stuck with a big mortgage too, because that's what successful people do, right? Well, I don't feel successful. I feel trapped and cheated despite the fact that I know I did it to myself.

That's why I want to talk about money. Most of us know that if we have the basics covered that's all we need: Food, shelter, transportation, and a little for entertainment. That's really it, but that all still comes at a big price. According to many statistics, $75,000 a year is all one needs, and anything extra is excess. That's all well and good if people were actually making that, but most do not. To be quite frank, it seems a little high. I'm reminded of an old story about a fisherman and a tourist, which goes like this:

An American tourist was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellowfin tuna. The tourist complimented the Mexican on the quality of his fish and asked how long it took to catch them.

The Mexican replied, "Only a little while."

The tourist then asked, "Why didn't you stay out longer and catch more fish?"

The Mexican said, "With this I have more than enough to support my family's needs."

The tourist then asked, "But what do you do with the rest of your time?"

The Mexican fisherman said, "I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life."

The tourist scoffed, " I can help you. You should spend more time fishing; and with the proceeds, buy a bigger boat: With the proceeds from the bigger boat you could buy several boats. Eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor; eventually opening your own cannery. You would control the product, processing and distribution. You could leave this small coastal fishing village and move to Mexico City, then Los Angeles and eventually New York where you could run your ever-expanding enterprise."

The Mexican fisherman asked, "But, how long will this all take?"

The tourist replied, "15 to 20 years."

"But what then?" asked the Mexican.

The tourist laughed and said, "That's the best part. When the time is right you would sell your company stock to the public and become very rich, you would make millions."

"Millions?...Then what?"

The American said, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos."

That's pretty absurd, right? All of that time and money to get right back to where he started. That's how I feel, because I spent all of this money on an education, a home, a car, and all I ever wanted was to relax in the sun, have amazing relationships, and eat fruit all day long. Now, I have to pay for it.

Hope is not lost for young people though. Instead of selling this consumerist "American Dream", perhaps we should instead teach them about debt early on. I don't blame my parents, because they did what most loving parents do. I'm sure they thought it would all be okay.

I close with this, if you're on the cusp of spending a lot of money that you don't have, please consider all of the consequences. Ask yourself, why do I want this? Do I need it? Will I be able to pay it off? 

Five tips for managing debt:

1. Stop buying stuff. I'm not kidding. If it helps, create a spending budget and only buy the essentials.

2. Don't buy things without the money. This would seem like common knowledge, because it's truly that simple. I wish I would have thought this way years ago.

3. Cut back on restaurants. We all need to eat, but this one is huge when it comes to saving money. Even cheap fast food is still more expense than going to the store and buying a meal. 

4. Make biweekly payments instead of monthly ones. This will seriously decrease the interest on a loan, and will take less time to pay off. Make it a habit.

5. Get rid of credit cards. If you need one for emergencies, then fine, but for the most part they only make matters worst. Mine sits in a drawer and is never used.

I wish everyone well, and my heart goes out to people that are struggling with debt.
I know how it feels.