Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20

Market Oracle FREE Newsletter


Debt Is Financial Cancer! Minimize It, Pay It Off Early and Stay Away From Credit Cards

Personal_Finance / Credit Cards & Scoring May 26, 2009 - 10:47 AM GMT

By: Jack_Spirko


Best Financial Markets Analysis Article 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 let’s 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 can’t 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.

Survivalism 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 isn’t that over reaching” or “how can a person live without a credit card in 2009.” So is debt really a cancer? To answer that let’s examine exactly how cancer attacks and kills many people every year.

Most cancers 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.

Faced with 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 is lost.

Now let’s 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.”

Everyone looking 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 before.

More promotions come and more debt with them, trading up cars, now leasing them (it’s what wealthy people do according to his financial adviser) so he can trade them in every 2–3 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 won’t 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 can’t 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.

Survivalism 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 don’t 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 the result.

While debt 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.

Finally you 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 20–30 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 accept it.

Jack 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.

Copyright © 2009 The Survival Podcast

    © 2009 Copyright Jack Spirko - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules