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 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
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