I have a voracious appetite for time-travel stories. I absolutely love ’em.
One of my all-time favorite television shows, The Twilight Zone, devoted at least five episodes to the subject; I wish Rod Serling had written more of them.
With that in mind, this weekend the Honeybee and I watched Looper, a relatively old time-travel flick starring Bruce Willis and Joseph Gordon-Levitt. It was a really terrific movie — and if you don’t believe me, check out Rotten Tomatoes, where Looper currently has a stellar 93% approval rating on the Tomatometer.
In the movie, time travel was possible, but it was illegal and only available on the black market. The mob discovered that they could use time travel to eliminate their rivals without a trace by sending them 30 years into the past, where they would immediately be terminated by a hired hit man — known as a “looper” — who was paid in silver bars for his effort.
But here’s the catch: As part of the bargain, those handsomely-paid hit men eventually had to “close the loop” by terminating their future selves.
I know; the premise makes my head hurt too — but it’s a delicious story line!
I bet many of you are walking around right now, unwittingly living the life of a modern-day financial looper, enjoying the high-life with earnings from your future self. Unfortunately, you’re also setting yourself up for some very unsavory consequences further down the road.
After all, every time you borrow money, you’re hijacking your future earnings for something you want today.
True, debt isn’t always a four-letter word. There are times when a case can be made for borrowing money, especially when you use a loan to buy something that has the potential to increase in value. For example, going into debt often makes perfect sense when you’re looking to buy a home, or trying to start a business, or expand an existing one. It can also make sense if you want to go to college — assuming you’re planning on earning a degree that’s in high demand.
Unfortunately, most people who find themselves up to their eyeballs in a sea of red ink got there through the irresponsible use of credit cards, buying baubles and other disposable goods destined to become obsolete or consumed before they’d ever be paid off.
And therein lies the rub.
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 severely limits your choices in life as you get older, thereby making you an indentured servant to your lenders.
On the other hand, those who stay away from excessive debt not only maintain more control over their lives as they get older, they also avoid the chains that can prevent them from ever attaining financial freedom.
Face it, folks. You wouldn’t steal from your neighbor.
And you’d certainly never think of holding up a local merchant.
So why would you ever capriciously rob the wealth from your future self?
Photo Credit: Kim Carpenter
I disagree that you need to take on debt to attain financial freedom. Sometimes all it takes is a smart attitude towards money from a young age and some good investment choices along the way.
I have a friend who went to Uni with me who bought a small bar just outside of town with just money he saved by tutoring and working part time jobs. He got it through receivers who were trying to recoup debts from the previous owner.
Long story short, he got a stellar deal and worked on it himself to get it into good shape. He now owns at least 2 other bars and hires people to look after them for him.
He is 29 and never had debt.
Granted, he is the exception not the rule, but I don’t like promoting debt in any fashion unless you really know how to invest wisely.
It’s a very good point. As someone currently paying off excessive debt, I’d never really thought about it like that until very recently. Now I look back, and think about how much more I could have put into my pension previously and how I now have fewer choices…
Great post Len. I think it’s hard for some people to grasp the reality of what you just said although it’s pretty well common sense.Although they say common sense is not common to everyone. Turning an eye to something they know can bite them in the arse is a trait that many can say they wish they didn’t do. They don’t get that spending money you don’t have is just digging a hole especially if you don’t have the funds to pay off those debts. It’s not always a bad thing like you mention but where it gets rough is when people see the negative impact but continue to dig that hole. Spending less than we earn has always and always will be our lifestyle. Mr.CBB
Yep. In the end, good personal almost all good personal finance habits usually can be boiled down to spending less than you earn. Funny how that works!
I time travel with my savings every day. Whenever I have a “No spend day”, I see it as an increase of one day lopped off the other side where I won’t have to work. Yes, each day you spend zero means you can take away one working day from the end. The middle chunk gets smaller and smaller. 🙂
That’s a great way to look at it, Edward.
People steal from their future self because they are too optimistic about their futures. If they could meet their future self and see how their decisions today change their future self people would hopefully make smarter choices.
All good points. It makes me think about whether it’s ever a good idea to borrow to buy a car, especially if it’s a fancy one upwards of $30,000. My sister’s ex-husband just bought a $40K porche and he probably earns about what he spent on the car. He’s driving around in a gorgeous car but his future self won’t be too happy when he doesn’t have enough to retire on.
No. It’s never, EVER a good idea to borrow money to buy a car for more than $10k, and it’s almost never a good idea to borrow money for a car that’s less than $10k.
Your sister’s ex-husband is a moron, and he’s going to be wondering in a couple of years where all his money went.
Volfram, I agree with you. He is a moron. That’s why he’s the ex!
Volram, never Ever is a long time and in my circumstances it was wise, IMO, to buy a new Subaru Forester for $24.5K including a seven-year all inclusive warranty on everything.
Where I live and at my age I needed as reliable an all-wheel drive car as I could get, fully supported by road service.
I could have easily paid cash from savings, but the car was financed at zero percent interest for four years. Interest on my savings account is 0.1%. As I make the car payments in 2017 dollars from my savings account, I gain the difference between 0.1% and the inflation rate.
Suzanne: We borrowed to buy our 1997 Honda Civic (brand new). The only reason we did buy new, as opposed to buying one that was a couple of years old (to avoid taking the depreciation hit), was because we knew we were going to keep our car for more than 10 years. We made the same calculated decision in 2001 with our Odyssey. Yes, we could have saved a significant chunk of change by buying newer (as opposed to a brand new) cars — but we knew we were going to be holding the cars for a long time, so we figured it made sense to start off with brand new cars.
That being said, my next car I buy will probably be one that is a couple years old. But because the US dollar is being devalued so quickly now by our government, if the interest rate is reasonable, I will probably take out a loan — even though I can afford to pay cash.
Len, that is very helpful to know that you borrowed for a vehicle you knew you would have for a long time. I usually put down 50% and pay off the other 50% within one year on a brand new car (and then keep it 10 years). For our next car, I can’t decide whether to wait and pay cash or finance 50% of the cost. The dealerships don’t seem to like it when I put down a sizable downpayment and I guess I know why.
When auto dealers are offering 0% or thereabouts loans on new cars, any purchaser who plans to keep a car more than 10 years would be foolish not to consider such a deal.
Still driving a well-kept car that was purchased new in the 90’s.
It’s called leverage 🙂 Big difference and even better if you are freeing up money in your budget to further increase your net worth.
I did see Looper and thought it was a great movie. Joseph is becoming an excellent actor. Too bad he doesn’t always get the media credit he deserves. I saw him in Inception where he did an excellent job, too.
Ornella – I thought he was also great in 50/50 (maybe the most underrated film of 2011) and Premium Rush (a film that…suprisingly….didn’t suck).
I can’t wait to see Looper. Now that you & the Honeybee liked it, I’ve just moved it to spot #1 on my queue.
I just saw Premium Rush last week. I liked that one too — although not as much as Looper.
You Joseph Gordon-Levitt fans out there, I hope you saw Brick. If not, please watch it NOW. 😀
Excellent points, Len. Too bad it’s too late for me.
I saw Looper recently and I thought it was BRILLIANT! Time travel makes my brain hurt but it’s one of my favorite plot devices….after zombies, of course.
I love time travel stories too. My favorite show is Ancient Aliens on History channel. Your comparison to financial or credit time traveling is superb.
Great post Len. Delayed gratification can go a long way towards reaching financial independence.
Thank you, Marc.
The 0% loans are only a good deal if one is also driving hard for the best price. To often, folks lose focus on the deal when 0% is dangled in front of them. The dealer is not offering 0% for nothing.