“The rich rules over the poor, and the borrower is the slave of the lender” – Proverbs 22:7
Imagine that you are about to run a race. Let’s assume that in preparation, you trained day and night to give yourself the best odds to win. Not only are you rigorously training, but you are also eating all the right food to get in the best shape possible for the big race. From your standpoint, you’ve done everything you can to put yourself in the best position to win. Now, imagine that as the race is about to begin, someone gives you a 50lb backpack to wear. It doesn’t matter how much you’ve trained and how well you have eaten, that 50lb backpack will slow you down and keep you from winning the race.
This is essentially what debt does to your financial plans. Not only does it slow you down, it makes it nearly impossible to achieve the wealth you were hoping for. If you have a mountain of debt, while there may be a desire to save money or invest, the reality is that you won’t be able to consistently do that. There may be a month here and there where you feel as though there is extra money to go towards investments, but that slave master called debt won’t allow to happen. Even if you avoid paying down debt, as many people unfortunately do, the debt doesn’t disappear; it only grows larger. Like cancer in the body, the longer you ignore it, the bigger it gets. Even after you pass away, any money you were hoping to leave behind to family can first be gobbled up by debt holders. This is actually what probate was originally designed for. Probate was a means to ensure that anyone who was owed money could make a legal claim when the person who owed them money passed away.
In 2023, according to the Federal Reserve Bank of New York, the total U.S. debt by Americans is at $17.5 trillion! Even excluding mortgages, total debt is at $5.251 trillion. When I talk to clients regularly, one of the largest hindrances to their financial goals is debt. This is why I believe Solomon uses such strong language as it pertains to debt. When you borrow money, you are indeed a slave to the borrower. You are not free to save as you please, plan as you please, or even splurge as you please. Every financial goal you can think of will be hindered by that slave master.
If you are already in debt, how do you get out? Here are a few steps that you can make to begin the process of removing those chains:
- Minimize expenses in order to maximize debt pay off.
- What usually gets people into credit card debt is a lack of self-control in spending. As a result, you spend more than you bring in, which puts you in a position where you are using credit cards to pay for things. If you want to get in shape, exercise is important; but diet is also very important. If you exercise regularly but eat terribly, you still won’t be in the best of shape. Likewise, if you try to pay down debt but are still spending terribly, you won’t get anywhere.
- Create a snowball plan to tackle the debts.
- Oftentimes, the sheer number of debt holders that you have can be overwhelming. Sometimes, I find that people will attempt to tackle all the debts at one time. The problem with that is, when you are putting a little bit of money in many different places, none of the debts decrease substantially. What I have found that helps with paying off debt is to simply start with the smallest debt, aggressively pay that off, and once that’s paid off, move those payments to the next smallest debt. If you consistently take this approach, you’ll be shocked how quickly that mountain of debt becomes a tiny ant pile.
- Cut up unnecessary credit cards and limit yourself to one or two credit cards with a manageable credit limit.
- I have seen far too many people take on credit cards, assuming they have the discipline to not overspend, and end up overspending. The best way to not end up in debt is to not put yourself in the position to get in debt. Having a plethora of credit cards at your disposal is an easy way to end up in debt. So, I recommend avoiding the trap altogether and getting rid of all the unnecessary cards. For those cards you do keep, have the credit limit be an amount that is small and reasonable. Personally, I think a credit limit of $1,000 - $2,000 is enough. I tend to think that if you have a $15,000 limit, it becomes easier to justify charging up to $5,000. However, you can’t do that with a limit of $1,000.
If you want to truly achieve all that you can financially, do everything you can to remove the shackles of debt from your life. Only free people can truly build wealth; slaves can’t.