Thursday, November 11, 2010

Buying Yourself Back From the Pawn Shop

Pawn shops are generally raw deals both for the person pawning their goods and for people buying things there. But the one thing almost all of us do in life, at one time or another, is pawn ourselves - by going into debt and staying there forever.

I went down to the Pawn shop the other day, ticket in hand, and bought myself back from the pawn shop.

By that, I mean I am debt-free.  Completely and utterly debt-free.  I owe no one, other than the utility company and the County tax collector.  And those bills are all paid up!

Most of us go though a significant portion of our lives in debt.  And we do it for so long that we think it is a "normal" condition.  And the TeeVee and societal cues reinforce this notion.  All your friends are in debt, so it must be normal, right?

And yet, at the end of every month, you send off checks to creditors, which include both principal and interest - interest paid at a much higher rate than you could ever hope to earn!

And at the same time, we send off money to our investment accounts, so we have "savings" earning a rate of return that is not guaranteed - nor is even the principal safe!  An in most cases, the money we earn on our "savings" is at a rate lower than what we are paying as interest on our loans.

Paying off debt is the one sure "investment" you can make.  You cannot "lose" your principal this way, once you pay off a debt, it is paid, period.  Once you buy a stock, it can devalue all the way to zero.

And the "income" from not paying interest is guaranteed as well - and at a pretty hefty rate for many people.  Many Americans are desperately trying to pay off 22% interest credit cards - while also trying to "save" money for retirement in their 401(k).  Could you imagine if you could get a 22% rate of return on your 401(k)??

And yet most people do this - paying interest on debts, while at the same time trying to "save" for the future.

Don't get me wrong, saving is a good thing.  But doing so while acquiring debt is a horribly bad idea.

Don't acquire debt!  Pay down debt!  Get out of debt!  STAY out of debt!

All the debt I have incurred in life was largely for things I didn't need - beyond student loans (and even then....) and housing (and even then...).  Yes, I borrowed more in student loans than I "needed" to get by.  I could have lived a more frugal life and been less in debt.  And yes, I paid more for housing (more house) than I probably needed at several times in my life.  I did better than many, if not most, however.

I avoided the mini-mansion debacle, as well as the luxury car leasing nightmare.  Many people in Suburban America right now are selling their souls to the devil so they can pretend to be rich and impress people they don't know.  But they aren't - by and large - actually rich, just heavily in debt.  And they view this as a "normal" condition - monthly payments which spread all the way to the horizon.

I've bought myself back from the pawn shop.  This means I don't have to hump anymore to stay ahead of bills and debts.  I can live how I want to live.  And I'm 50 years old.

The sad thing?  I could have done this at age 40 - and have enough money to live on to RETIRE at that point!  But I failed to do that, only so I could have "things" more THEN.

Being frugal is hard - very, very hard.  Our society tempts us constantly, like a beckoning prostitute, saying "Hey big boy!  Want to have a good time? Just sign here!"

And it is hard to say "No" to the constant barrage of consumerism.

But it can be done.  It can be done!