Debt will kill you, slowly, as you struggle to keep your head above water. It’s a nasty way to go. And you’ll never get rich carrying massive debt. Period. End of story. The banks, student loans, car payments—they all have you right where they want you. Unfortunately, you can’t emulate big shot businessmen, either, who can take on millions in debt for their projects, offload their profits upfront as “management fees” or “guarantees” of some kind and then declare bankruptcy.
So what’s a little guy to do? Reduce your debt or get out of it entirely. Yeah, yeah, yeah—I know—easier said than done. But you’re either going to find a way to get ahead or you’re going to wilt like toilet tissue in the rain.
Most people get into debt for depreciating assets, with the exception of buying a home. You know, car payments, all kinds of crap you throw on your plastic until you can barely make the minimum payment and then suffer that yoke for years.
Years ago when I got my first plum job, a salaried senior position at an ad agency, I was pretty much broke. Businesses that I started and ran successfully, such as a a women’s sportswear factory, were marginalized by cheap foreign imports. I’d had enough and bailed for the security of a regular paycheck and benefits. At the time I was driving a 20-year-old VW Rabbit diesel with about 200,000 miles. When it died, I went car shopping. By coincidence, I’d also just received a promotion to Associate Creative Director along with a 10K bump in pay.
I looked longingly at gently used Beemers. Almost popped for a sweet 5-series. But then prudence called. I ended up buying a 10-year-old VW Fox, body completely primer red, with 100,000 miles for $400. My colleagues thought I was out of my mind, or at least, eccentric as a $3 bill.
Hey, no payments! Cheap insurance! Terrific mileage! And it didn’t stop me from booking over $100K in side commercial work over the few years I kept the day job.
Now, I drive my choice of a classic, mint BMW M3, a gorgeous 525i and a 328i for backup. All close to 20 years old and all maintained perfectly. The savings went into a well managed portfolio.
If I could do it, you can do it. I postponed very little pleasure. I ate the finest sushi and drank the 12 year old scotch. Get smart. Get out of debt. Set yourself up for a little retreat in the islands before you’re too damned old to enjoy it.
Or dead. The ultimate amortization.
See the New York Times piece on household debt here.