Debt, The Passive Income Killer

Stove+Fire!
For readers of this blog, it has become increasingly clear how easy it is to take advantage of the obscene wages paid in high consumption society. This surplus of money can easily be used to take charge of your time. The simple recipe for financial success lies in learning to achieve happiness through self reliance rather than consumption of material things. When you constantly optimize yourself and the use of your time, rather than your paycheck, you discover that you really don’t need to spend your time chasing expensive thrills to be happy.

Not to say you shouldn’t earn as much as you can, just never sell your soul to do it.

In order to spend your time on only what is important to YOU, you must lose your dependency on an outside income. This is done by building a passive income that can be lived off sustainably, which we know is actually quite simple once you understand what investing is.

This all seems straightforward enough, yet something is holding most people back. There seems to be a disease that has spread throughout the land, preventing people from having any hope of building a positive income for themselves. This disease makes people believe that it is actually okay to be in debt, and it is the scariest fucking thing I’ve ever seen.

Debt is not okay. I don’t care if everyone and there brother is in debt, that does not change what it is.

We have established that your savings rate is in direct correlation with your working years. Being in debt requires that you pay interest (the compound snowball is working against you here), compromising your ability to save and lengthening your working years. Because of debt, you are required to work for pay longer.

In other words, DEBT IS ENSLAVING YOU. Yes, I am seriously comparing debt to slavery. Don’t worry though, there is a key difference. The difference is that you are in control whether or not you go into debt.

Many would scoff at that last sentence, but yes, debt is your choice. Most people treat debt as a part of life that cannot be avoided. I would agree with this for one thing, if you plan to buy a house (still a choice on your part though, you are not required to buy a house). As for cars, vacations, and clothes, these are wants and not needs. This means they should only be purchased if you have the means to pay for them upfront with cash. It pays you in the long run to own what you have rather than borrow for it with the hope of eventually owning it.

Since most of us plan to live in a house, are we all doomed to some form of debt, no matter what we do? I think not. If treated right, debt can on occasion be the right move, but only if it ends up paying you more than it costs you in interest. A house can be made into an asset by making it a rental property or through appreciation. Although you will pay interest through a mortgage, a profit can be turned. This would be one of the few examples of going into debt for the right reasons.

Too commonly are people going into debt for the wrong reasons, however. There is a debt mindset disease that leads to financing cars and shopping on credit. If you want on the fast track to becoming rich, you will eliminate the ‘debt is okay’ mindset.

If you are currently IN debt, I will forgive you just this once since you are only now reading this blog. However, you now have an important task at hand. KILL IT OFF. Becoming debt free is not something to “work towards” as traditional finance would tell you. Debt is more of a I just lit the stove on fire and need to deal with this now type of situation.

When you are paying interest into someone else’s pocket on a daily basis, it is not the time for eating out and buying video games. It is a learn to cook a mean plate of rice and beans and outdoorsy leisure type of time. It is also worth it to investigate loan consolidation*, as it could save you some of that valuable interest while you aggressively, angrily through everything you’ve got at your debt until it is thoroughly suffocated.

Creating the optimal financial situation is done in two stages, first is getting our of debt, next is creating a sustainable passive income. Both of these can be accomplished with a simple to-do list.

Once you are debt free, stage two is much more fun. I promise.

*Loan consolidation for the most part is straightforward. However, I recently helped my brother with a case with multiple loans, each at different rates and some not yet accruing interest. I think I will make a post about this later on.