Debt Slavery – What it is and Ways Out

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This article is part of the Lending Club Debtbuster Challenge.  I have written two other in the series: “Debt Help – The Lending Club DebtBuster Challenge” and “Debt Consolidation – It Can Work.”

How is debt slavery?

Don’t let anyone fool you… no debt is good. Sure, some debt is better than other debt… but no debt is actually “good.”

Although there are always exceptions to the rule, typically “bad debt” refers to any high interest consumer debt (like credit cards) while “better debt” alludes to low interest debt (like 1st mortgages and student loans.)  Whether bad or better, debt is bondage and it presumes upon our future ability to earn.

Let’s examine 3 trust worthy sources to prove the point, then mull over a few ways out.  How is debt slavery?

1.  The bible tells us so…

While the bible does not equate debt to sin, is does equate debt to slavery.

“The rich ruleth over the poor, and the borrower is servant to the lender.”  – Proverbs 22:7

Now let’s apply Proverbs 22:7 to a modern context:

Bankers charge us interest to borrow their money.  We labor for the better part of our lives to repay the bankers.

Sounds like debt slavery to me.

2.  Common sense tells us so…

Would you rather have debt or be debt free?  And therein lies our common sense answer.  🙂

Yes… it is possible to earn more in interest on our investments than we pay in interest on our debts, but it’s risky at best.  Getting rid of debt guarantees us a rate of return equal to the interest rate of the debt.  While in debt, no investment can guarantee you specific and consistent returns better than eliminating the debt itself.

Ask yourself this question, “If you were debt free… would you continue to work full-time at your current job?”  If your answer was even partially no, then you are likely in some form of debt slavery.

Our grandparents knew the dangers of debt slavery… why don’t we?

3.  Mathematics tell us so…

If we were to consider neither of the previous points, we can always turn to the concrete wisdom of mathematics.

[Borrowing + interest = more debt] [income – more debt = less savings & less investing] [more debt + less savings + less investing = more labor & less giving]

The less money we borrow the less interest we pay to others, the more we can save, the more we can invest, the more our money pays us, which ultimately translates into less necessary labor and a greater ability to give.

I trust the bible, common sense, and mathematics.  What do you trust?

Ways out of debt slavery

1.  Sacrifice and repay

Quit acting like you deserve to go out to eat 3 – 5 times per week and get a clue.  You’re not alone, me and the misses spent nearly $6,000 dining out in 2008 and thought it was totally normal… our brains were in debt slavery!  As a result of this mindset we grew complacent toward our fiscal health and mathematics caught up to us.  Our biggest problem wasn’t massive bouts of irresponsible spending but rather a plain old fashioned lack of self-discipline.  Now it is time to sacrifice and repay.

2.  Consolidate, sacrifice, and repay

Sometimes debt consolidation makes perfect sense, it did for us.   If your goal is simply to shift debt around, then you are approaching debt consolidation inappropriately.  The healthy purpose of debt consolidation is to combine several higher interest debts into one lower interest loan to be repaid on a graduated scale.

I advise you steer clear of debt consolidation service companies and recommend instead negotiating you own settlements and securing a debt consolidation loan through Lending Club.  We used LC to consolidate debt which saved us $500 and a bunch of stamps!  🙂

Use this calculator to help determine if personal debt consolidation is right for your situation.

3.  Bankruptcy

“If ye have faith as a grain of mustard seed, ye shall say unto this mountain, Remove hence to yonder place; and it shall remove; and nothing shall be impossible unto you.”  – Matthew 17:20b

Should you file?  I advise against it at all costs and beg you to turn to God instead.  Although I do not presume to know the will of God, I do know that he does not desire his children be in debt slavery.  In the scriptures Jesus healed people according to their faith and belief in his ability to do so (Matthew 9:27-30)  and likewise will help us according to his will and our belief.

If faith in God is not for you then please make sure to consult your attorney and/or accountant to determine if the last ditch effort of bankruptcy is your only viable alternative remaining.

Are you in debt slavery?

What is your plan for getting out?

photo credit to Doug Naugle

Betterment is one of my two favorite ways to earn interest on my savings! They have an awesome program for the Average Joe to save and invest simply and effectively. There are no minimum balance requirements and no transaction fees. Read my Betterment Review or open an account to get started earning now.

1 Jeff

Yes Sir, I’m a slave to my debt.

My plan is to spend less than I earn. Use my budget to make sure all the money that touches my fingers has a plan “On Purpose On Paper”. Use the debt snowball to blast away my debts, and of course work my part time Pizza Delivery job to increase my income.

The more I pay down my debt the better I feel. I can see the light at the end of the tunnel, even though I’m still a long way away from being debt free. My Wife and I are happier now than ever. Having a plan and working has openned up our communication and given us single goal to focus on.

I may be a debt slave not, but once I’ve paid my dues I’ll be FREE. Debt Free that is.

Good luck to all my fellow debt slaves. WE WILL COME OUT ON TOP!!

2 Matt Jabs

I’m with you Jeff, my wife and I feel the exact same way. We’ve never been closer, nor happier – even in the midst of such aggressive debt repayment. There is such a great measure of peace in simply having a plan and working it.

3 Anthony

I also am a slave to my debt. It has caused stress and keeps me up at night… Fortunately, we now have a quasi-plan in place, and I feel a million times better about our situation. I expect our e-fund to be finished and our non-mortgage debt to be paid off in 3 to 4 years. It seems like a long time away, but we’re only 23/24!

Clarification: I guess I need to make a clarification on my own comment here. My wife and I aggressively paid down debt in 2009. That aggressiveness has subsided because of our newborn. We’re backing off a little and holding some funds in our accounts just in case the baby needs something.

4 Matt Jabs

The bad news is you are a slave to your debt. The good news is you realized it WAY before most people. Stay focused and faithful to a disciplined financial life and you will be rewarded accordingly. Aggressive debt reduction is wise, as is having an emergency fund for the concerns you mention.

5 Olivia

Keep it up all of you. Even if your means are tight, (as ours are), there is nothing more satisfying than knowing you can actually wisely give to someone else in need, without digging a deeper hole. That is financial freedom.

6 Lee Holcomb

Great article Matt! BTW, I really love the image you used!

7 Matt Jabs

Thanks Lee, I love that picture too! 🙂

8 Allison

For everyone who is currently a debt slave, keep going! You CAN get your debt paid down. We will be credit card debt free this month after 5 years of making big fat payments. We haven’t used those cards in those 5 years. It was difficult, but we are almost through.

After the cards are gone, we will have auto loans, student loans, and the mortgage to tackle, but those are all very manageble. So keep it up guys! You can do it!

9 Khaleef @ KNS Financial

This is an excellent article. Like you said the bible, common sense and mathematics/economics all tell us that being in debt in like slavery. My wife and I are also on a plan to get out of debt and are actually considering LC to help us streamline our payments.

I’m making more money than any point in my life, yet we are no better off! I can’t tell others about something that I’m not committed to 100%!

@ Jeff and Anthony, keep up the good work!

10 Matt Jabs

If it saves you money and you have a proper view of debt consolidation I say go for it. Be sure to read my Lending Club Review.

11 Matt Jabs

I wouldn’t stop working either, but I cannot honestly answer yes to the question in the post, “If you were debt free… would you continue to work full-time at your current job?”

12 Anthony

That’s a part of the post that I did not directly respond to. My answer would be “No.” Outside of being debt free, I would also like to build wealth (in form of retirement savings) and to be charitable. Working full-time at my current job would allow me to do both of these things…

Also, even though my job is stressful at times, I actually like doing it.

13 Khaleef @ KNS Financial

I didn’t respond to that part either. I would definitely quit my full-time job and just work on helping people understand the bible and to take control of their finances (of course the former is the key to the latter).

14 Personal Finance Student

I think the best advice is always to try as much as possible to stay out of debt as possible. But there come those times where you end up having no real choice. And in those cases as you’ve noted ensure that you have a plan to pay it off and stick to it. Most important live within your emans, especially when in debt.

15 Kate

I have finally gotten out of the debt slavery I had been in for the last 10 years. However, I have also recently moved into my own place and I am having to make adjustments on my spending so I don’t go back there. One of the biggest ways, cutting out alcohol for the most part, cooking meals at home and bringing my lunch to work. The best part, this coincides with my weight loss goals.

It has been so nice not to be so stressed about money, but I still want to do better than I currently have been doing budget wise.

16 Matt Jabs

I have long been wanting to write a post about $ spend on alcohol. So many bash the $4 latte with no mention of the $8 martini. 🙂

My wife and I stopped eating out, have lost 60 combined pounds in the last 18 months and reclaimed upwards of $10,000. We are healthier, happier, and much thinner!

17 Russel

Matt, great article. These are things I wish I had considered when 20 years ago.

In short, yes I am a debt slave. My wife and I are currently working our way out. Unfortunately, we have a lot farther to go than most.

I am particularly grateful for your reminder that, with faith in God, all things are possible. I try to stay positive for myself and my wife, especially when there are setbacks. But when I get discouraged and think I need to turn to bankruptcy, I feel the comforting reassurance that these struggles shall be “but a small moment.”

18 Matt Jabs

Faith in an All Powerful God is not conducive to the ways of this world so we need to exercise it daily by submitting our wills, reading his word, and obeying his commandments. If we do this he promises blessings! 🙂

19 Jason @ Redeeming Riches

Good post reminding us of the dangers of debt. In college I just simply didn’t care about the fact that I was racking up debt like it was going out of style – it took a lot of sacrifice, but after I got married, my wife and I paid off all credit card debt and only have an auto loan and a mortgage now!

20 Robert Espe

I’m happy to say I am NOT a debt slave! Although I married into 2 short years of such slavery, by God’s grace I am free again, and my wife as well. It is a good feeling not to owe anyone anything, and when I work to know that all the money I spend goes to things we want, or to our families future (and savings add up quick without debt).

21 Financial Samurai

Just wondering. Are we really in debt slavery, if debt has allowed us to live our lives beyond our wildest dreams?

22 BG

FS) And once you realize you are a debt-slave, you also realize that the dream-life you have been living is an illusion. People who have car loans need to realize that they don’t own their car — someone else who is debt-free owns that car. If you have a mortgage, you don’t own your house — someone else who is debt free owns that house.

And when someone else owns all the ‘stuff’ in your life, you my friend, are a slave to that person — keep working hard and pay it off, or they will take _their_ stuff away from you.

Matt) This has to be the best PF article I’ve seen to date!

23 Financial Samurai

Is it OK if others be my debt slave though? Or is that immoral?

For example, I’m loaning about 75K in a private equity investment, and they are required to pay me a certain minimal dividend yield, and then the final pay out when the company is sold. They need my capital to create their business, and I enjoy the returns. Is this OK?

24 Phanio

That is OK – That is capitalism at its finest – both parties win!

25 BG

They chose to be your slave…and that’s just business.
I wouldn’t charge interest to friends/family though.

26 Artie

Bad news for Christians….

If the courts say you no longer owe the debt, God still says you do. Even if you are forced into chapt 7. According to the late Larry Burkett.

So don’t look at chapt 7 as an easy way out.

27 karyn

We’re fortunate in that I can stay home with the kids and my husband likes his work – but I still feel like we’re slaves to our debt because I’m always worrying about it, even though it’s “only” the mortgage. I don’t like the feeling of worrying if my husband’s job will always be there.

28 gettingputtogether

I totally agree – debt makes you a slave to the bank. That’s how bank make so much money and become so powerful. I just saw the movie “The International” on netflix streaming, about how the banks manipulate everything – scary.

29 Khaleef @ KNS Financial

Is this movie a documentary?

30 Ken

My plan is to spend less than I make and find a second job. My wife has chimed in with some babysitting as well. Good post.

31 Phanio

Debt is not bad. Debt is just a vehicle. If it is improperly used, then the user is bad (made bad decissions) but the debt is not bad.

If properly used and manage – debt is a great way to increase wealth and improve both life and business.

Debt is merely leveraging current resources for growth. Without debt nearly 90% of our population would not have houses or cars.

It is always better to use other people’s money – you take debt to puerchase an assets – this assets show produce some return to the borrower – a return that 1) pays for its self – pays the interest and principle back and 2) provides a profit. Thus all win.

32 Matt Jabs

@Phanio: You deal in loaning money to businesses, so you are obviously partial to using debt to acquire things that cannot otherwise be afforded. While I understand your point of view, my argument stands – it is better to be debt free than to be in debt. So I will continue to encourage people to save money, then buy things.

“Don’t let anyone fool you… no debt is good. Sure, some debt is better than other debt… but no debt is actually ‘good.'”

33 Ronnie

It’s so sad when you work your tail off everyday, and focus so much energy on paying down debt, and for the love of whomever can’t recall what was so important that you had to have it RIGHT THEN AND THERE! Last year I gave American Express $11,000 to pay off $7,300 in debt, and I can’t recall one single thing I did with that money. Not just a slave, but a stupid one to boot. Now I’m focusing on my last two cards, but at least I remember what I bought with them, and given the family emergency that precipitated their use, I’m okay with having used them.

I do agree that there is no such thing as “good” debt. I’ve got student loan debt up the wazoo, and I know that it’ll take approximately another 15 years at my going rate to pay it off (which is still 10 years ahead of schedule), but when I look at that debt, I recognize that I have my current position as a direct result of that debt, and I’m making what I do because of that debt, which has allowed me to accelerate payments on the other, plainly “bad” debt. When I buy a house, at least I can concretely look and see where that debt comes from. So often that’s not true of credit cards in particular.

Oh, and I’d probably work my current job 4 days a week with no debt. The whole part-time lawyer thing doesn’t work in this particular field, and I genuinely love what I do.

34 Matt Jabs

Well put Ronnie. Your comment beautifully illustrates the article stance on bad debt vs. better debt.

35 BG

Matt) This is offtopic — but about the awesome artwork on your site? Are they your original creations? I’d love to purchase a higher resolution 5×7 print of the Visa Handcuffs from you, extra cash for you side hussles…


36 Matt Jabs

Hey BG, photo credit goes to Doug Naugle.

37 Shona aka greenpiggy

Brilliant article. Plain, short, sweet and simple. Definitely true as well. There is no such thing as good debt. Debt equals modern day slevery, as you mention in the article. Am also in the process of paying debt off this side, and will never again incur another penny in debt, or interest payments. I’ve added a link to your site on my blog (url mentioned above), because I’m sure my readers can benefit from this article, and many others on your site. Keep it up! 🙂

38 Dollars Not Debt

<Would you rather have debt or be debt free? And therein lies our common sense answer.

The grown up in you should know what to do next!

39 Jo Clo

Love this article…There is just something refreshing about straight, “no play” words of advice. Reminds me of the book “Debt is Slavery” ….Loving the concept Matt about Consolidate, sacrifice, and repay…many people forget that sacrifice has to be made. People think it takes effort to get out of debt…its true, but no more than the effort we put into creating the debt. ….same goes for weight gain/loss….Trust me, it takes effort to stuff your mouth unconsciously….My advice is to not associate eliminating debt and or loosing weight with something you “have to do” but rather something “you want to do” …..I’ve never been so excited about eliminating debt….articles like these have helped along the way….I actually have been willing my debt repayment into existence before I even get my income checks…so much so that I think my faith and determination have lead to monetary opportunities as of late…made an amendment to my tax return and I’m getting 3k back, switched my mortgage insurance to geico, saved 200 on my insurance translating to a lower mortgage, refinanced my auto loan from one credit union to another, dropped my car payments by 100… I’m going debt elimination crazy…More healthy advice is to get angry about debt slavery…it just isn’t cool….man…this is fun!

40 Tara

While all of this looks and sounds good on paper, the hard truth is that if one is living in the United States of America, living a debt-free life is simply not possible. The cost of living is very high in the U.S. Most people’s wages are not able to keep up with that increase. People’s wages have remained stagnant for many decades while the cost of homes, vehicles, college, insurance, clothing, food, etc., has gone up. This is the real reason behind escalating debt in the U.S., not greed and foolish spending habits on the part of most U.S. citizens. Sure, there are times when we all splurge on something that we really don’t need, but I am convinced that most people are in debt because the credit card is the only way they can buy the things they need. Unfortunately, because there is more month at the end of their paycheck, people have no choice but to break out the credit card to buy clothes, shoes, dental care, etc. Simply put, by the time they pay for their mortgage/rent, utilities, car payment, health insurance, car insurance, etc., there just isn’t much cash left over to buy the things they need. Hence, the credit card debt. My husband and I have tried desperately not to have to use the credit card. But we are only on one salary over here, and for us, it just hasn’t been possible for most of our married life. My children need clothing. We need tires for the car. We need dental care (for which we have no insurance).

Most businesses in the U.S. now only hire part time so that they don’t have to pay for employees’ insurance. This insurance has to come out of the paycheck of the employee, who already isn’t getting paid enough to keep up with the true cost of living in the U.S. How is such a person supposed to avoid credit card debt?

Walmart cashiers here in my town get $8.50 an hour with no insurance benefits. How are they supposed to avoid using their credit cards with criminal salaries like theirs?

If people are going to write articles about staying out of debt, they need to take a look at the whole picture instead of assuming that most people have debt because they are financially careless. Because of unfettered capitalism, exploitation, and greed in the United States, most Americans have no choice but to get into debt in order to stay afloat. Why do you think more and more people have been forced to dip into what little retirement they had just in order to survive?

It seems to me that credit card debt is a bitter reality for most Americans because of financial negligence and carelessness on the part of Corporate America, not the typical U.S. citizen.

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