Escaping the Consumer Debt Spiral
BY: MARTIN WOODS ON WEDNESDAY, JUNE 06, 2018
Debt seems to be a permanent fixture of modern life. Even thrifty folks who understand the principles of sound money management tend to have at least a car loan and a mortgage hanging around their necks.
Are we doomed to be enslaved by debt for most of our lives? Is there any hope of escape?
Take heart. You can throw off the chains of debt and live free. All it takes is the desire to wake up and the courage to step off the beaten path.
Smell the Coffee
Look at these numbers from CEIC, a renowned dealer in accurate real-time macroeconomic data. All figures are in billions of US Dollars.
·Philippines: Household debt (HD) $8.1 Mar 2009 / $29.3 Dec 2017 / Gross savings rate (GSR) 15.9 % Dec 2017
·India: HD $9.3 Mar 1998 / $233 Mar 2017 / GSR 30.0 % Mar 2017
·Thailand: HD $56.1 Mar 2003 / $364 Dec 2017 / GSR 36.4 % Dec 2017
·Korea: HD $437.9 Dec 2002 / $1,527.7 Dec 2017 / GSR 36.5 % Dec 2017
·Japan: HD $3,945.1 Dec 1999 / $2,834.5 Dec 2017/ GSR 26.2 % Mar 2017
·China: HD $516.6 Jan 2007 / $6,599.4 Feb 2018 / GSR 46.4 % Dec 2017
·United Kingdom: HD $386.7 Mar 1987 / $2,506.9 Dec 2017 / GSR 14.6 % Dec 2017
·United States:HD $4,540 Mar 1999 / $13,148 Dec 2017 / GSR 16.8 % Dec 2017
Wake Up – It’s Morning
Asians have a reputation for carrying little debt and saving a lot of money. But look at the way Asian household debt has increased in lock-step with the adoption of western consumer culture.
Given time, the Asian savings ethic erodes as well. The Philippines has been an American colony since the late 1800’s. Their saving rate is Americanized.
Japan is about 70 years into westernization. The savings rate is down but the past 25 years of recession have helped to encourage thrift.
The Chinese government has pushed modern industrial materialism and consumer culture on the population over the past two decades. The effort is supported by massive expansion of money supply and credit. Household debt has exploded but it’s still early in the game so the traditional savings rate remains intact.
Work, Buy, Consume, Die
Get off the Work, Buy, Consume, Die treadmill and go back to being a human being instead of a consumer. Look around your personal space. It is already full of useless junk that is bound for the landfill, most of it sooner rather than later. You do not need to go to any mall this weekend or next, and you do not need to buy anything else.
We have been programmed to shop and buy in a habituated attempt to fill an inner void. Wean yourself off by shopping secondhand stores, garage sales, flea markets and the like. You will shop longer to find what you want and items are much cheaper, a win-win situation. Estate sales are very educational. It puts things in perspective to sort through stuff someone spent their life accumulating.
Enjoy Savings of Up to 100%!
You will save a lot of money by not buying anything. And when you absolutely must buy something, it feels good to save 90% off retail on a secondhand item. Learn to appreciate and be satisfied with only the really useful, necessary things.
Put the money you save toward the mortgage. Set some aside to buy a used car for cash and dump the car loan. Build an emergency fund to cover unexpected expenses. Build another fund to use for doing nice things with loved ones and gather memories that last forever while taking up no space in your closet.
Learn What Money Really Is
Money represents work. Work results from the transfer of energy from one form to another. The energy being transferred is your life energy, an absolutely finite resource. How many hours or days of your life is that new gadget worth?
Once you cut down on your expenses and only buy the essentials, staying out of debt is not really that difficult.
Image via Shutterstock