Friday, October 21, 2011

The Limiting Factor is Debt

When I was listening to Ron Paul speak a couple of days ago he said something that caught my attention and hasn't left my thoughts since.  He was talking about the US debt crises and he pointed out that the limiting factor (for anything that the US government wants to do) is debt.  Want to go to war?  How are you going to do that when the US is buried in debt? Want to fund a whole bunch of new jobs? How you going to do that when the US is buried in debt?  Want to improve infrastructure so that the people of our country will have safe bridges to cross and safe water to drink?  How you gonna do that when the US is buried in debt?  Although he didn't use these examples--these are mine--he made an excellent point.  A point that applies to the US economy as a whole as well as to your individual financial life--no matter what you want to do, you are limited by the amount of debt you have.
Now in the example of the US economy, our government continues to print money and borrow to fund their high flying spending...we know this isn't going to end well.  But for your own personal economy, there is hope.
Do you want to tell your boss what he can do with your employee review?  Your ability to do so is limited by how much debt you have.  If you have a giant mortgage, two car payments, and a handful of credit card bills, you won't be able to say have bills (debts) that need to be paid.  If you have zero debt and a big, fat savings account, you will be in a much better position to say "take this job and shove it" if the situation necessitates such action.
While there isn't much we can do about the national debt (aside from electing people who will actually DO something about it instead of lamenting the spiraling debt as they continue to spend like drunken sailors that just hit port), we can adjust this limiting factor in our own lives simply by getting out of debt.
I'm not talking pay off your credit cards and your horizons suddenly expand but pay off every single debt you have (house, car, credit cards, personal loans, student loans, et al).  Can you imagine what your life would be like if your only bills each month were for utilities?  When you get to this point, your opportunities will then truly be limitless.  Kind of a nice thought...

1 comment:

  1. I agree to a point - eliminating debt is not so much my priority as is building income streams to cover my expenses so that my work earnings become a luxury rather than a necessity.

    Some debt is almost a necessity to these plans, and so I don't shun it - I just try to make sure every bit of debt incurred is to further those goals, and never more than can be offset by the asset itself in a reasonable term.