Taking on excessive debt — and continuously spending more than you earn — greatly reduces the wealth you can accumulate down the road. As a result, your options in the future become greatly diminished because you’re essentially spending tomorrow’s wages today. In short, accruing excessive debt can severely limit your choices in life as you get older, thereby making you an indentured servant to your lenders.
The bottom line: By staying away from excessive debt you’ll not only maintain more control over your life as you get older, you’ll also avoid the chains that prevent you from ever attaining financial freedom.
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I take the position that ANY DEBT (as opposed to excessive debt) makes a person a slave.
There are two types of people: Those who understand the difference between principle and interest, and those that do not.
Principle is the basis for the amount of interest you PAY. INTEREST is what you get from the PRINCIPLE of others, who have debt.
I prefer to live in the second batch of folks!
Fair enough.
My position, Spedie, is that not all debt is bad debt (a home mortgage assuming you don’t buy more house than you can afford, business loans, higher education loans for worthy degrees). These are loans that permit folks to acquire things they would never be able to save for — or at least require them to save an excessively long time. To me, if the loan payment(s) for good debt are reasonable and do not pinch your lifestyle, then I personally would not consider that servitude. But that’s me.
Absolutely! What is excessive? Is it too big a mortgage? Too many cash purchases can affect your goals too!
Taking on any debt is bad IMO. But society is ingrained to think taking on a mortgage is OK.
Agreed. It’s so difficult to get get out of the pattern, but so easy to get into. Many also dont realize when they are doing it, and dont think they can turn around at all, so they use that as justification to continue down the same path.
If you can’t put away 20% of what you earn for retirement then you are an indentured servant, because you will have to toil in your twilight years, just to survive.
By the way – I love the term indentured servant being associated with debt!
Thanks!
@krantcents: Good point!
@Mr.CC: I don’t see a prob taking on a mortgage, as long as you don’t buy a bigger house than you can reasonably afford.
@Jeff: Yeah, after awhile of continually racking up debt I think many people really don’t understand what they are getting themselves into — it becomes an accepted way of life with little regard for the consequences.
@Money: Why thank you. If the shoe fits, right?
You got to the point very efficently here, and I totally agree. When in debt, you work for others. You aren’t in control of your time and energy – someone else is. That’s lousy. Is a material “want” worth becoming an indentured servant? No. Do what you can to avoid having your financial life structured that way!
That’s 101 words you liar! You’re the worst Len! Oh, sorry, you’re right, 100. just kidding; I do love these posts.
I’m curious if this was a narrative on the US deficit spending spree or Americans in general.
Your sentiments are true to both, but what is even more egregious is when the government overspends since it punishes responsible individuals with higher taxes regardless of their contribution to the societal debt.
And you will also be able to hopefully handle any health (or other) expenses that come along without stressing out.
Freedom to make choices instead of having choices made for you is a great thing.
I like these 100 word posts. You’re right on.
@Squirrelers: This little factoid was pointed out to me by my cousin Kevin when I was still in college, and it is what solidified my determination to always be in control of my finances. To be in control of your personal finances is control your life.
The government’s overspending also punishes us responsible folks because it can eventually lead to inflation, which hurts us net savers.
@Darwin: Is it? I may have erred, although, just for the record, my goal is to try to hit 100 words exactly on all of these posts.
@Everyday: That it is, Kris!
@FirstGen: I’m glad you enjoy them. Thank you.
I agree completely – most debt is bad news!!!
I have a question for you/your followers: my wife and I have been averse to debt for most of our adult lives (in our 40′s). We are routinely amazed at the financial mistakes our younger neighbors make (early 30′s); expensive new cars every couple of years, not saving for retirement, foregoing health insurance as its “too expensive”, etc. We can see the road they are on and the cycle they will never break away from without some enlightenment.
Since we all know people like this, I am curious what others do to “help”? Anything? Sit back and watch them continue? A touchy subject to be sure, just curious the thoughts of others…
Thanks!
[...] Penzo offers us 100 Words On: Why Excessive Debt Leads to Indentured Servitude. Maybe not, I did a cut/paste into Word and it reported 99. I just didn’t have the heart to [...]
[...] bottom line is this: Because you end up spending tomorrow’s wages today, debt limits your choices and future opportunities in [...]