As I mentioned in my goals post for 2010, we are attempting to pay down outstanding debt as quickly as possible. The simple reason is that debt = slavery, in another form.
Think of it this way. If you had no debt, would you go to work at the employer you have now? I don’t know about you, but I would rather want to be able to make a choice on what I want to do with my day, rather than someone else telling me what to do. If you think that self-employment is the way to break this bond of slavery, then you are sadly mistaken. Until you pay off all of your outstanding debt that you took out to service your company, you are still chained to working until it is paid off. Debt is a contract that you enter into with a financial institution that you must honour, by law. It is a burden that must be repaid.
So, to be truly free, we must become debt free, and owe nothing to anyone in the form of loans that bare interest. No Debt = Freedom.
To that end, are paying off our personal debt as quickly as possible with a view to being free! By the end of March we will have paid off the personal loan I took out for the Solar PV system, one year ahead of the loan term of 4 years. This will save use about $1000 in interest alone achieved by using the savings in electricity over the term of the loan to pay down extra off of the principle. Renewable energy is the only investment I know that pays for itself! So once this debt is paid out, we basically have free electricity.
With the surplus funds, we are then paying down our remaining mortgage. We have calculated that we can pay off the loan in 5 and a half years. With no other outstanding debt, that will make me a free man! As I have a military pension that will cover off basic expenses, I will only need a part time job, with the choice being mine alone on what I do and how many hours I work. I am very excited by this notion. Knowing that our frugal lifestyle and low expenses have gone a long way to achieving this goal, I am so glad I had my green epiphany when I did. Little did I realise that when I realised that by reducing consumption I was actually lowering my environmental footprint, and in the process, lowering my craving for debt. With all things being equal, I will be 51 when I semi-retire.
Unfortuantely, if everyone in the world paid off their debt, our current economic system would collapse;
“The entire world economy rests on the consumer; if he ever stops spending money he doesn’t have on things he doesn’t need — we’re done for.” – Bill Bonner
Our entire society has a foundation of money = debt, and the we rely on growth at all costs to continue funding this lifestyle. As I have mentioned before, this is not sustainable in the foreseeable future. Growth at all costs means having unlimited resources, which is something our planet is not able to provide us with. We live in a finite world that has boundaries and thresholds, many of which we have already crossed to the detriment of other species who co-exist with us on this big blue/green marble.
“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” – Kenneth Boulding, economist
For a better understanding of how money is created, pop on over to Mia’s blog, “Becoming a Good Human”, and reading this post titled “Economy #1: How Money is Created”, and the follow up post “Economy #4: The Debt Trap (Our Economic System is not Sustainable)
Both posts make for enlightening reading. It is partly because of the way our current economic system works, that our world leaders failed to act on climate change at Copenhagen. This is because they do not have the courage to change the very system that got us into this mess, as they realise that by curbing growth, the system as it stands, would collapse. Growth at all costs would have to be curtailed and the wealthier citizens of the world would have to stop shopping until they dropped to reduce excessive carbon emissions. With the current reality that money = debt, then this is looking like a slim prospect indeed. We only have one home, and we are using it up at an alarming rate.
Whilst I will be personally happy not having any debt, I still worry that our society is still geared as if we are partying like it is 1999! I don’t know the answers, but I do know we are in for a bumpy ride, very quickly.
It is so true about debts. I have only a very small mortgage left, and this has enabled me to be able to live a semi retired lifestyle. Firstly let me say I have a job that I get paid well for, and only work casually however I am in a field that I generally am able to work as often as I need to, or want to. the best bit is that as I only work 1 or 2 shifts a week if I need more money for anything I can usually pick up extra shifts. We lead a very simple life on the whole. We do have holidays, and go to the theatre, eat out very rarely. We dont scrimp for anything, but plan ahead, and save the cash for it. I have freedom that I never believed possible simply by not over extending myself. I also pay extra tax, which seems strange to many, but I receive a very nice cheque every year, that enables us to ie buy the extra rain water tank, do the fencing. Pay for someone to fell some trees. Or pay a lump sum of the mortgage. We do not own a credit card (well the debit cards are but not the same thing). We have savings, and yet our income is low compared to many. We do not have children(my DH had grown up children and a grandchild. We have dog and cat, and the chooks. I love coming home, I prefer it to almost anywhere. We are very fortunate and feel very rich. A great blog read thankyou
Tree Huggin Momma says
We are also trying to pay down our debt. I have amassed quite a bit of consumer credit card and I am in the snowball mode. I selected one of my high interest cards and made a large payment (from holiday money) to get started on paying it down. At $50 a month I will have paid the remainder of the debt on that card in 8 months. I intend to use that same $50 to add to the next highest debt and pay it down. I also intend to throw all of the extra money I can find at the one debt I am paying off, while making slightly more than minimum payments (monthly interest + 10%) on all of my other debts. Without including my mortgage we will be out of consumer debt in 3-5 years. And that is something I can look forward to.
I know exactly what you are saying about debt=slavery. I cannot not work because I have to pay my debts, without my debts I could work a part time job doing something I love, and be free with my time. Hopefully in purging my house and not buying anything new for a year I can find my way to getting out of debt sooner.
Mia @ agoodhuman says
Thanks for the links to a couple of my posts on our economic system, debt and the unsustainability of it all.
Discovering that all money is debt caused a really profound change in my thinking. Two years ago I was heavily in debt (all investment related) because I thought leveraging assets was the way to become financially independent in the long run. I’ve since changed my point of view and disovered that being debt-free is the ONLY way to be trully independent from the system. As you say: Debt = Slavery.
Since this realisation, I’ve been doing everything I can to get out of debt as quickly as possible. My current projections indicate that I should pay off the last of it by the end of this year. I can’t wait and I think I might just throw a ‘freedom party’ to celebrate.
Excellent thoughts Gavin!
We are self employed (after working a teachers for yonks) and do have a small bank debt, but it’s much lower and more manageable than the average mortgage. We aren’t quite semi-retired but we aren’t commuting more than a couple of minutes and we work just eight hours a day outside the house.
What we avoid most is credit card debt and loans. Then we try to save each week and it works.
Keep up the great work.
Permaculture Pathways says
Hi, Great post, debt really is at the foundation of so much. So many problems and the secret to success if you want to get off the treadmill. We got rid of debt in 2005 when we sold a big house we owed money on and bought a small house we could afford. We don’t have a credit card (we just get a gift card from a post office if we need to buy anything online – it really stops impulse buys) and we layby if we really want something. My husband works part time and I work part time from home. It takes effort to get in that position, but it is worth really striving towards.
Great post. Debt. Now that’s a 4 letter word. I didn’t realise that our economy was so dependent on us been in debt, that’s a scary thought.
Hopefully our brilliant leaders (think sarcasm) are doing something about gearing our economy away from debt, without putting the world into economic meltdown. Maybe that is the lesson they took away from Copenhagen. Goodness knows, they did little else.
Congratulations on being so close to debt-freedom! I live a debt free life – no credit to me, but rather to my generous grandfather who left me enough money to buy a home outright (best decision I ever made). I have never got a credit card – which means a little inconvenience here and there and also that I only drive old clunkers, cars that I can afford to pay cash for – but it also means no 18% interest. I choose to live a life of used clothing and extremely low-rent vacations, of saving up for major purchases in advance, etc. This has enabled my husband to be self employed, but it’s true we have no credit at all and that is a bit of a hassle when trying to do things like get a cell-phone contract. All in all I much prefer being debt-free to having the amenities so many Americans take for granted.
Excellent post. I’ve been trying to screw up the courage to read a book just out about how we might achieve a steady-state economy in the future, instead of our growth-at-all-costs one. It looks a bit dry but I think it’ll be worth the time.
Go for it Gavin!Have you read any of David Holmgren’s wonderful ideas for the future economy? Here is a link to his website…. http://www.holmgren.com.au/
If you have never heard David speak, you have not lived! After you of course Gavin, he is my number one hero… a truly amazing man…. so quiet and peaceful and so positive and intelligent.
Hi again Gavin… this is a better link to use to access the ideas of David Holmgren
Please move your cursor across the symbols on the top, click on them and read each of the explanations of each. These are the introductions to his design principles for a better world.
Great post Gavin, I have come to the same conclusion i.e. less consuming is better for the earth and better for our back pocket. Can you imagine if everyone came to this same conclusion at the same time?
Andy and Cheryl says
Hi! Saw your post on http://simple-green-frugal-co-op.blogspot.com/. I do agree, though think about Property tax…. That is a debt that unless I sell my home I will owe. IRS… I know what you mean about being debt free…. but I do not forsee ever being 100% free from debt unless I am completely homeless without responsibility. I considered solar for electricity, but even with solar there is a dependance on the parts if they need to be replaced. In the state I live some counties REQUIRE garbage service by law… So to be completely without debt outside of credit… when I start owing.. to taxes, businesses.. I no longer have credit… they can report me with interest just as quickly…