If you have been an adult for any amount of time, more than likely, you have struggled with finding the right balance with your money. Financial slavery is a term used to describe how our lenders ultimately rule over us.
Financial Slavery Is A Form Of Control
There is a great quote in the bible from Proverbs 22:7. It states, “The rich rule over the poor, and the borrower is a slave to the lender.
” How incredibly true is this? Take a moment to think about all the people and entities you owe money. Now before you get all depressed on me, I want you to understand the purpose of this. When you owe money to someone, you are indebted to them. They have control over you, no matter how large or small, they have some degree of financial control over you. For instance, take your vehicle. If you are making payments on your car, you don’t really own it. You are renting that vehicle until you pay it off. Until then, the bank owns your car and is letting you use it while you pay them extra money in the form of interest. If you can’t make the payments, your vehicle will be repossessed no matter how many monthly payments you made in the past. What about your house? Again, unless it is paid off – the bank owns it and will take it back if you suddenly lose your job and can’t make the payments. As you structure your monthly budget
, think about what you really own, and what you are renting. Are you paying other people interest to rent your items, hoping you eventually pay them off in full? How many other people truly own your material possessions – or your education? (Think student loans
Debt Is A Form Of Slavery
While this is a strong statement, it is not at all meant to diminish the severity and impact of physical and racial slavery. Physical slavery is by far the worst form of slavery and in no way compares to having debt.
With that being said, debt, in itself, absolutely is a form
of slavery. In fact, Vocabulary.com describes slavery as, “To be held captive and unable to pursue your own life.”
If you have a large amount of debt, you know the feeling I’m talking about. Debt has a way of increasing your anxiety, controlling your movements, and impacting your life.
Debt can cause you to work two jobs even though you would rather only work one. Debt is the master that impacts all areas of your life. When you are in debt, you are a financial slave to your lender.
Debt Is The New “Normal”
According to an article by CNN Money,
in 2017, 107 million Americans
had vehicle loans. The average monthly payment on those new vehicle loans
was $515. Do you have an extra $515 a month lying around? You would if you paid cash for your vehicle.
This is the part where you need to be painfully honest with yourself. What are you spending your money on? Do you spend according to your needs or according to your wants?
If you can’t pay cash for that $35,000 truck, then do you really need
it? This goes back to our wants vs. needs
Another option would be to save up and buy a used vehicle with cash for $5,000 – $10,000. Even an older used car will do most of the same things your current vehicle does. OK, the seats and steering wheel may not have a heater in them, but it will get you from point “A” to point “B.”
If you want a more detailed explanation of exactly how much money you are wasting by buying a new vehicle, check out my related article 5 Reasons Car Loans Are A Bad Idea.
Debt-Free Living Is Possible – Even For You
Living debt-free is possible if you’re willing to shift your mindset. Many of us go into debt because we are filling emotional voids with “stuff.” When we begin to deal with our trauma and messed up past in a healthy way with exercise or therapy, we can stop the out of control spending.
“Retail therapy” is a real thing, and it ends up adding more stress and instability to our life. When we become intentional about our spending patterns, we can start to make significant changes in our financial life.
Can You Really Live Without A Loan?
The quick answer to this question is, “yes!” But let me show you how it’s possible. To live without debt, we need to live within our means. That means we should be spending less
than we make each month.
How To Escape Debt Slavery
Each month, we should have more money coming in than going out. The extra money should be used for the following:
If you are really serious about freeing yourself from your financial slavery, you need to look at where your money goes each month. Breaking free from credit card debt and using credit to buy things you don’t have the money for will give you the financial freedom you have only dreamed of.
A monthly budget
is your secret weapon.
Most people live way beyond their means, and at the end of the month, they don’t have any money left. It’s time to change your perspective on life to live life to the fullest without the anxiety and stress of financial slavery in the form of debt.
Is It Better To Have No Debt Or Savings?
If you have $15,000 in debt and $15,000 in your savings account, it may be tempting to drain all of your savings to finally become debt-free. However, is this the best way to use your money? Absolutely Not!
In order to protect yourself from the unknown financial issues that come up in life, we need to ensure we have our own emergency savings to protect us. If you have no debt but no savings, the slippery slope to falling back into debt is a real thing.
Protect yourself by maintaining an adequate amount of cash on hand to avoid putting financial emergencies on a credit card.
In the above scenario of $15,000 in debt but $15,000 in savings, I personally would put $13,000 towards the debt so I was left with $2,000 in my savings account and $2,000 left in debt to pay off. By doing this, I would have reduced the amount of interest I was paying on the debt but also protected myself from the unknown.
I would then make it my #1 priority to pay the $2,000 off as soon as possible.
Is It Better To Be Debt Free Or Have A Mortgage?
From a mathematical perspective, it makes more sense to invest your extra money rather than using it to pay off your mortgage faster. However
, personal finance is personal
for a reason which is why I have chosen to pay my mortgage off rather than to invest all of my extra funds.
For instance, if you have a 4% interest loan on your mortgage, this means you are paying 4% in interest to the bank. If you spend your money paying off your mortgage
faster, you are reducing the amount of interest you will pay on the home – or paying extra to lower the 4%.
If you were to invest the extra funds in an index fund in the stock market, you could earn an average of 7.9% in interest each year based on historical returns. With all things being equal, you could make about 4% more on your money by investing, rather than paying off your mortgage.
I Chose To Pay Off My Mortgage – This Is Why
While I could make more money by investing, for me personally, the financial security
that comes with a paid-off home is worth more to me than extra money in the bank.
For instance, my mortgage will be paid off next month. This means that even if I lose my job or we face an economic issue, my family will not be forced from our home. I could get a minimum wage job and my family would still be able to live in our family home. This would not be true if I still owed hundreds of thousands of dollars on a mortgage and my income stream was interrupted.
By paying off my mortgage, I will be left with zero debt. No credit cards, no car payments, nothing other than the minimum living expenses such as food, electricity, and water. This opens many doors for me to invest and build a financially stable life many others only dream of.
Spend Your Money On What Brings You Value
Just like I am not asking you to give up your daily coffee habit, I’m not asking you to take the bus to work every day. You can save a considerable amount of money by making your coffee at home or purchasing a reasonably used vehicle
. These changes have the power to catapult you towards being debt-free
If you can not give up some of these expenditures that are keeping you in debt, you may not be ready to transform your life right now. Financial transformation is about a mindset. It is about screaming, “ENOUGH IS ENOUGH!
” and taking control of your life.
No more lying in bed each night worrying about how you are going to pay your bills each month. No more hoping your car doesn’t break down because you don’t have the money to fix it. No more money stress – period.
As you can tell, I have spent a considerable amount of time trying to bring you to a realization that you can not live the same way you have been living. If you want to continue to live like your friends and neighbors
, you will continue to be broke and stress about money – like your friends and neighbors.
The reason I am so passionate about this is that I have a financial peace I want everyone to experience. This blog is dedicated to educating you about money and how you can control it rather than it controlling you.
The reflection must start now. I want you to be happy and financially stress-free, so you can live for your passions and be extremely charitable to others. If you have had enough, welcome aboard! You have nowhere to go but up!
If you still need more convincing, ask yourself this – would you rather be the lender or the debtor? Debt and financial slavery go hand in hand – and I refuse to live my life in shackles.
About The Author
Ryan Luke is a father of three, a husband, a financial coach, and a full-time police officer. He has been featured on MarketWatch, Forbes, Fox Business, Experian, MSN, and USA Today. He focuses on providing easy to understand personal finance information to first responders so they can get out of debt and build wealth on a public servant salary.