How to make work VOLUNTARY Part Three – Avoid debt like the plague

In one sense, debt is just another expense. However, as well as nasty interest payments, it brings an even nastier inflation of your consumption beyond your means.

Again, there are many blogs out there that explain the evils of debt. For now, suffice it to say that you should NEVER go into debt for anything except a house (I am reluctant to even include that!) or a business. Certainly NEVER NEVER NEVER for any sort of consumption e.g. car, clothing, travel or whatever other crazy things people pretend they can afford by getting into debt.

It took me years to figure out why I always got confused when business books would talk about optimal levels of debt for maximised profits, and why I got chills when real estate books talked about leveraging A to buy and then leverage B. It’s because it makes no sense in the real world. It’s an example of things in the financial plane getting frothy, artificial and unhealthy. Thank goodness I largely avoided the perils of debt, albeit more by good luck than good management initially.

I did, though, have a line of credit with a bank when I started my business. It was a very big mistake. For years that line of credit trundled along at $25,000 or $30,000 or $27,000 or $40,000 in the red – up and down from month to month. Because that was nowhere near the limit, it never worried me (although it should have!) and because I was free to increase and decrease my level of indebtedness at will, I never focused on paying off the ghastly thing. When I came to my senses at 31 or so, I realised what a drag on my finances it represented, and after several YEARS of unnecessary interest I paid off and closed the facility in a matter of months. I have never put myself through the pain of calculating just how much money I flushed away in interest, but I have a good enough idea of the size of the loss that I won’t ever fall prey to a mushy target like that again. Incidentally, after seeing the idiocy that it reduced me to, I’m convinced that banks just love to persuade people to save pennies on interest by setting up a big debt trap of this sort in conjunction with a business loan or a mortgage on a house – you might save a few dollars in interest by having all income go into a line of credit type account, so that the balance is a little lower when averaged over the month, but you will likely lose thousands and thousands of dollars through the fuzziness of thinking that can result. I’m not a stupid person, and I’ve always taken an interest in finance, and yet I was no match for the line of credit. My new Voluntary Worker self, however, remembers the painful lesson.

We have no debt and I don’t plan to ever go into debt again as long as I live. (Actually, I would be OK with taking on a debt equivalent to maybe 25% of our total assets if it made it possible to secure a great business. But I shudder a little bit at the thought and would take it VERY seriously.) If you wish to become a Voluntary Worker, I believe you will be very well served by joining me in a healthy hatred of debt.

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