Modern Survivalism Tenet Number Two
Debt Is Financial Cancer! Minimize It, Pay It Off
Early and Stay Away From Credit Cards
by Jack Spirko
On the surface
debt elimination may sound far and away from what people think of
when they think of survivalism. The reality is the modern survival
philosophy actually hinges on this tenet. Before we delve deeply
into the topic though lets just put it up against even the
typical view of survivalism and ask if there is any place for debt-based
living in the survival community.
Think of a
typical image of a survivalist even the stereotypical
view: tough, able to live off the land, resourceful and ready to
deal with any disaster. Does this sound like the guy who whips out
a Visa Card when the going gets tough? Would you expect to see a
person working to build a homestead and a sustainable life using
a credit card just for airline miles? Or perhaps, would
you expect someone living by the mantra of adapt, improvise and
overcome to finance a lifestyle with a home equity loan?
When I speak
to mainstream media and they ask what is modern survivalism
I always include debt reduction in the basic explanation and the
response is generally some form or that is another topic all
together, the reality is the two are so intrinsically bound
that you cant really discuss modern survivalism without addressing
the cancer that is eating away at America, consumer debt.
Now there is
a place to properly leverage debt; very few people could afford
to ever pay cash for a house, let alone a first house. Still, even
with the purchase of an asset like real property, debt is and has
been abused for decades in the United States. Say what you want
about derivatives but it is debt that allowed their creation and
default upon the debt that brought them to bear on our economy like
a financial atomic bomb.
is about far more then continuing to breathe tomorrow; for the modern
survivalist it is about sustainable living and above all survival
of the family unit. It is a sad fact that the number one cause of
divorce today is debt and even when something like infidelity is
blamed it is often the stress of debt that was the root cause.
When I refer
to debt as a cancer, many people consider that an over
statement. Common responses are oh come on isnt that
over reaching or how can a person live without a credit
card in 2009. So is debt really a cancer? To answer that lets
examine exactly how cancer attacks and kills many people every year.
that kill are at first unseen, the individual appears quite healthy
and strong. They go about their day-to-day lives as productive and
happy individuals and look no different than those around them.
Yet inside the cancer is reproducing at an exponential rate, growing,
metastasizing and spreading throughout the body. This can go on
for months or even years in many types of cancer. The person might
even go to their doctor often for checkups and be told everything
is just perfect. Cancer may be spreading to the pancreas and liver,
setting up for a fatal blow but no symptoms are evident even to
a trained professional.
Then one day
the person starts to feel weakened, certain things that never caused
pain now are creating discomfort. Off to the doctor they go and
even now are often just given a pain killer or some other drug and
told they are just getting older all while the cancer
is eating vital biological systems from inside. In time the symptoms
grow, tests are run and a diagnosis is made, often the prognosis
is fatal, it is too late now to save the patient because the cancer
has gone too far.
such a diagnosis patients first go into denial, then deal making
(usually with god and self), then anger, then acceptance. They may
still fight but they accept the reality that they will probably
lose. They try to live healthy, take any and every step to prevent
eventual death but sadly for many, a lifetime of chemicals, stress
and ignoring initial symptoms push the body too far and the battle
examine the effects of debt on an individual and see how it compares.
Consider a man (we will call him Frank), Frank is 28 years old and
got out of college about 5 years ago. He was a good student but
like many got through school on student loans. For five years he
has worked hard and paid minimums on his loans while climbing the
corporate ladder. He also met his wife, got married and now is about
to buy his first house. He buys a house with a payment of 25% of
their income, nicely inside the limit of 28%. Frank and his wife
start a family, take vacations, use credit cards, have kids and
live the American dream.
He keeps getting
promoted so they upgrade the home (everyone is doing it). Frank
is no fool; he has a financial adviser who he meets with for checkups
twice a year. The advisor is comfortable with his debt because he
is putting money in his IRA/401K like a smart investor.
Frank even suggests at times reducing contributions to increase
his available cash and pay off debt but is advised to think long
term and stay the course.
at Frank from the outside sees his success, two new cars, and great
kids in all sorts of activities. One car is a huge SUV so mom can
take the kids to soccer, etc. He has a beautiful house, successful
career and seems to be living a perfect life. Yet inside his financial
body all the debt is compounding exponentially and it is spreading
too. He gets a home equity loan, pays off some credit cards because
it is smart. After all he cuts the interest rates and
the interest becomes a tax deduction. Unfortunately in time the
credit card balances go right back up and end up even higher then
come and more debt with them, trading up cars, now leasing them
(its what wealthy people do according to his financial adviser)
so he can trade them in every 23 years. Everything is going
just fine, minimal payments are made with ease and then the first
symptom begins. His wife take a break from shopping and does a bit
of math and realizes that now at the age of 45 she and her husband
will be 65 by the time all their debts are paid off if and only
if they stop spending now.
She goes to
Frank, they look at things and realize there is a problem, Frank
talks about paying down some of the balance again with his advisor
who as always says keep investing in tax-deferred accounts for retirement
and to use other funds to pay on the debt, perhaps even get another
home equity loan since the house has appreciated.
Then one day
the full-blown problems come to a head! The economy tanks (as it
does from time to time) but this time Frank gets laid off, his six-figure
job becomes 450 a week in unemployment. He is now looking at savings
that might take him 3 months maximum with a huge house payment,
huge credit card bills, funding for activities, huge car payments
and no idea what to do about it.
Frank and his
wife are now having marital problems, his investments are cut in
half by a market crash, his bills are overdue, fees and interest
compound and the lifestyle they have come to love is ruined. Frank
started in denial of the problem all while it continued to destroy
his life, he then tries making deals with the creditors, deals with
his wife and deals with relatives to try to get out of the mess
and of course deals with god in the form of prayers. His next step
was likely anger, blaming everyone from the credit card companies,
to the bank, to his financial advisor and even the company that
laid him off.
The last step
will be acceptance that his life has been torn apart; often a divorce
is the result if not major damage to the marriage. The kids either
deal with a broken home or massive stress from fighting parents
and may have to do without many things they have come to expect.
There wont be any money for college for them, but hey at least
they can get a loan. For 17 years anyone looking at Frank thought
he was the picture of financial health; then almost overnight he
appears to have been stricken with a financial death sentence.
Of course there
was nothing overnight about it, the debt started at
18 when he was full of dreams and told that an education was
priceless, now at 45 during what is supposed to be the best
time of his life he is dealing with a bankruptcy and often far worse.
The parallels between debt and cancer are so similar that they should
honestly send a shiver up your spine. Each allows the victim to
appear healthy, perhaps look in even better shape than most of those
around them, grows silently and at some point becomes terminal.
Yet the good
news is debt is 100% under your control, can be easily managed and
responsibly used only for the purchase of assets of sufficient value
to mitigate any real risk for both lender and borrower. Cancer can
and does kill people that live very healthy and stress free lifestyles.
You can reduce the risk of cancer but you cant be 100% sure
it will not strike you. With debt you can, you are the one that
signs the contract, accepts the shiny credit card and uses it to
buy shiny stuff.
is about sustainability more than anything else. The survivalist
evaluates threats not just to life and property but to his way of
life, his liberty and to the security of his family. When honestly
evaluated consumer debt or over-purchasing anything with debt is
like bringing a venomous snake into your home. The snake may never
bite anyone, or if it does bite it may not kill but cause disfiguration,
trauma and extreme pain. Hence people dont tend to go out
and capture rattlesnakes and turn them loose inside their homes.
The snake is
useful, it has a purpose in controlling rodents and may even be
beautiful to many people. However, it also has a place, outside
in the wild not inside a home crawling around the floor with your
children. In much the same way debt has a purpose, it is useful
to leverage as a tool for investing in solid affordable assets.
Yet just like the snake if not 100% controlled, disaster will be
reduction is not one of the sexy survival topics like
home defense, alternative energy or stocking up on food it is absolutely
necessary in the creation of a sustainable lifestyle. Remember tenet
one everything you do should improve your position
in life even if nothing goes wrong. Modern survivalism is
not just about planning for disasters, it is also about planning
for a lifestyle that you can maintain in good times or bad. Most
people in debt struggle with that during the best of times, to think
that such a person can succeed when there is a disaster is foolhardy.
have to consider that while long-term the survivalist saves a great
deal of money compared to most Americans, initially there are expenses
in setting up a sustainable life. These expenses revolve around
the creation and purchase of long term assets. The survivalist seeks
to accumulate assets such as surplus food, functional permanent
food production, paying for a home in full as quickly as possible,
additional land to act as a fall-back location, etc.
The list of
expenses for a survivalist to be self-sufficient seems unreachable
for most working Americans. Many never actually own a home let alone
own second homes or land and by "own" I mean paid in full.
Most pantries are 2 weeks deep in food at most and even with that
they can barely get by. Why? The money they earn is spent on debt
and attached interest before it is earned. For many Americans their
next 2030 years of income has already been spent. Yet once
free of this cancer even a modest income can, in just a few years,
create very a sustainable lifestyle.
So while not
something most people generally consider a survival topic eliminating,
paying down and staying out of debt may be the most critical actions
you can take as a modern survivalist. Once you eliminate debt you
will truly understand the meaning of the word freedom. Freedom after
all is the driving motivation in developing a sustainable life where
you are free to choose your destiny rather than being forced to
Spirko [send him mail]
is a former U.S. Army Airborne soldier and the host of “The
Survival Podcast,” a daily online broadcast that helps listeners
learn ways to live the life they want if times get tough or even
if they don’t.
© 2009 The Survival