The Debt Free Economy

I wrote previously about some of the basics of economics, how borrowing and lending works and gave some details about the debt spending that our country has undertaken. That part is done, we can only now look forward and act accordingly.

Throughout my professional work, I have always loved problem solving. What is the best way to proceed? What are the individual elements within a particular problem? What solutions have others offerred? A challenge that I give myself is to present an alternative for every idea that I don't think will work. For example, our economy is in a recession, according to the large media outlets and our prominent leaders, and there is only one way to get out of this recession: Spend lots of money (debt) to replace, or boost, the decreased spending of the people. There must be another way.

In the spring of 2008, my wife and I (along with friends and family) found a man by the name of Dave Ramsey. He, with some intensity, teaches that debt has no place, no function and no potential in helping to advance the finances of an individual (the only exception being a small mortgage for a primary residence). I think he makes some great points.

Living debt free starts with a personal responsibility. I vow not to spend more than I make, buy things that cost more than I have and commit myself to more than I will likely repay. This can be hard to do within out 'immediate gratification' society. Why not borrow a few hundred dollars to buy that new TV, when you will have it paid off in a couple months? Oooh, look at the features on that new car, since I need a car anyways, I might as well get that one. Everyone has a car payment, right? If I can get a loan and got to school for 4%, but invest my money and make 8%, what dummy wouldn't want to do that?

Since there is uncertainty in the markets, people have stopped investing and started saving, or paying down debts because those activities are guaranteed. People want to control their money, by placing it into the hands of another company (or government), some of that control is lost, that is why they save. I think that a vast majority of people in the country, perhaps the world would agree that their ideal financial situation would not include debt. Ideally, a company would never have to borrow money to expand, a family would never have to borrow money to buy a house or a TV, and that when you wanted a new car, you would walk up to the salesman, tell them want you wanted and passed them a wad of cash. Ideally.

If you laid out the game-plan of your life, would you make it a goal to have your total debt at the end of your life be $1,000,000? Probably not, you might want to be worth that million instead of owing it to someone else. Our government is taking out loans on our behalf.

I believe that a person can, and perhaps should, be held accountable for their actions. Oddly enough, this isn't a common belief in many regards. Perhaps the line between NEEDS and WANTS has been blurred beyond recognition, but we'll save that discussion for another day.

If someone found themselves in a position that allowed them to not act responsibly, with no repercussions, do you think they would?

We have been encouraged, within the financial area, to not act responsibly. Many years ago, our government has told our banks that they will "insure" part of their loans and their deposits. It doesn't matter if a failure happens, the government will be there to protect the people, to make sure that they get what they deserve. That is part of the story.

We have realized that we don't have to act responsibly to succeed. Since we deserve to live in nice homes, have nice cars, have TV's and cell phones, our government has decided that they will protect these basic rights and provide them to us if we cannot provide them ourselves.

Collectively, our country has forgotten personal responsibility. We have forgotten to elect leaders who promote responsibility. We don't want to give up anything, to suffer, in the name of personal responsibility. The solution to getting out of this recession lies in that suffering. Taking responsibility for what we have already done. We will never truly be free and prosperous until we do that.

"The rich rules over the poor, And the borrower is slave to the lender." -Proverbs 22:7