Debt is a really cruel master. It enslaves the mind while destroying our health and relationships. As my example of how bad it can get, please do not make the mistake America and many Americans are making.
For years, people have looked to America as the world’s richest country. Sadly… no longer. It is the world’s most indebted nation and people.
Please do not take my word for it, simply look at the US Debt clock.
This sight lists all the US Debt like the US Total Debt ($54 Trillion, $807 Billion as of this writing) which is the combined federal, state, personal debt, etc. Considering the USA economy is a whopping $16 Trillion, if every single dollar earned in the USA went into paying off this debt and nothing went for food, clothing, energy, schools, roads, wars, charity or anything else, the USA could pay off this debt in only 4 or 5 years. Of course if they still wanted to eat, heat or cool their homes, use their cars (but little else) it might take 25 years or so but would ravage the USA’s ‘consumer’ economy.
The sight also mentions the unsecured, underfunded credits owed for Social Security, Medicare, Medicaid which are promised, paid for by the citizens but no money set aside or held in reserve. That will add ANOTHER $107 TRILLION to the total debt bringing it to $154 Trillion. Now we are starting to talk some real money.
The average American has a negative personal net worth of -$8,000 to -$28,000 in their 50s plus their home mortgage and now often with a 2nd or 3rd mortgage.
Interesting, if every man, woman and child in the USA decided to pay off their share of the $12 Trillion US Government debt, with 300 million USA citizens, it would require $41,107 each (including babies and toddlers). That comes to $164,428 for a family of 4. That is not personal debt, just the portion that family owes for the government’s debt.
A wonderful mentor of mine told me recently not to discount the USA because it always bounces back. She is partly right. It is already discounted and the checks will soon bounce. China… the USA’s largest creditor already slowed it’s rate of lending to the US. It’s $1.2 Trillion reserve of USA banknotes means that EACH of the 1.5 billion Chinese men, women and children have each loaned $6 to America! In other words, EVERY American man, woman and child has borrowed $4,000 from China. This means, every Chinese family of 4 working a rice field or factory in China has bailed out the banker on Wall Street, the school teacher in Iowa and the accountant in Phoenix, by $24. America should say “she she ne” to their ‘wealthy’ Chinese investors. Debt is a very cruel master.
Long term impact? Billionaire George Sorros was asked at the Devos Summit recently about the US dollar and he said, yes, he worries about it but that there is no other choice yet. He mentioned the Euro has its problems and the Pound may be worse off than the greenback. Interesting, China is buying gold by the ton and is predicted to back the RMB with gold in just 5 years, why would investors buy greenbacks backed by huge debt if the RMB is actually backed by gold?
The wars the USA is fighting in Iraq, Afghanistan, etc., according to correspondent Bill Moyers, have cost the USA $1 Trillion, all debt financed. With that kind of money, the USA could have completely rebuilt New Orleans, Detroit, retooled most of the American factories and educated her youth. As a father with 3 children in SIngapore schools, Singapore schools worldwide ratings are #1 in Math and #1 in Science. USA schools are ranked #27 in math and #19 in science. Does borrowing to bomb make sense?
This newsletter is not intended to ‘Bash America’ but just a simple reality check and a lesson to learn for all of us: Debt is a cruel master. No government, company or individual can afford to go deeply into debt. Instead, I suggest you follow my family’s simple formula: We tithe 10% to God first, pay taxes next (less than 20%… thank you Singapore!), live simply on 30% of our income and invest the rest. We have only borrowed for our mortgage because at less than 2% interest (I LOVE banks in Singapore), it makes more sense to invest the money rather than pay off a mortgage.
IF you are in debt, here is a 10 point plan to dig yourself out and to gain your freedom from debt, the cruel master:
- Pay off all credit cards starting with the highest interest rate first (Suzy Orman’s advice)
- Cut out everything you do not NEED from your budget. Needs are shelter, food and basic replacement clothing for worn-out items. We do NOT ‘need’ designer clothes, the latest fashions and to eat out at restaurants every day or even every week. A car may not be a necessity. We don’t own one in Singapore and spend $450 SGD on transportation a month for a family of 5 by using buses, trains, taxis (sparingly) and walking.
- Invest time in your children so you do not feel guilty and begin placating them in your guilt by spending more money on them.
- Save the environment and your pocket book by buying used furniture and appliances. Why buy new when used will do!
- Don’t throw away what you no longer use, sell it on Yahoo or ebay. People will even buy spoiled computers and televisions.
- Follow our simple rules: A. If we do not have cash, we do not buy it. B. If we have the cash, we still don’t buy it (unless we positively MUST have it)
- Before you go to the store, look in your drawer. You may already have what you need.
- Invest smarter and make your money work as hard for you as you work for your money.
- Eliminate the words, “It’s only…” from your vocabulary.
- Stop window shopping until you are debt free. The temptation can be too great to resist a ‘bargain.’
Free yourself from Debt the Cruel Master. Stop being enslaved. If you know someone in debt, share this newsletter with them. Let’s see how many people we can help live a happy, healthy, debt-free life! God bless you all.
Smile Maker: Are you financially independent?
A gambler said, “I finally achieved financial independence. No one will lend me any more money.”
Got comments or questions? Just leave your comments here.
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