It's easy to forget that taking on excessive debt – and continuously spending more than you earn – greatly reduces the wealth you can accumulate down the road.
This post by Len Penzo comes from partner site LenPenzo.com.
I have a voracious appetite for time-travel stories. I absolutely love ‘em.
One of my all-time favorite television shows, The Twilight Zone, devoted at least five fantastic episodes to the subject; I wish Rod Serling had written more of them.
This weekend the Honeybee and I rented Looper, a recently-released time-travel flick starring Bruce Willis and Joseph Gordon-Levitt. It was a really terrific movie – and if you don’t believe me, check out Rotten Tomatoes, where Looper currently has a stellar 94 percent approval rating on the Tomatometer.
In the movie, time travel was possible, but it was illegal and only available on the black market. The mob discovered they could use time travel to eliminate their rivals without a trace by sending them 30 years into the past, where they would immediately be terminated by a hired hit man — known as a “looper” — who was paid in silver bars for his effort. But here’s the catch: As part of the bargain, those handsomely-paid hit men eventually had to “close the loop” by terminating their future selves.
I know. The premise makes my head hurt too, but it’s an undeniably delicious storyline.
I bet many of you are walking around right now, unwittingly living the life of a modern-day financial looper, enjoying the high-life today by using earnings from your future self – and in the process setting yourself up for some very unsavory consequences further down the road.
After all, every time you borrow money, you’re hijacking your future earnings for something you want today.
True, debt isn’t always a four-letter word. There are times when a case can be made for borrowing money, especially when you use a loan to buy something that has the potential to increase in value. For example, going into debt often makes perfect sense when you’re looking to buy a home, or trying to start a business, or expand an existing one. It can also make sense if you want to go to college – assuming you’re planning on earning a degree that’s in high demand.
Unfortunately, many people who find themselves up to their eyeballs in a sea of red ink got there through the irresponsible use of credit cards, buying baubles and other disposable goods destined to become obsolete or consumed before they’d ever be paid off.
And therein lies the rub.
Taking on excessive debt — and continuously spending more than you earn — greatly reduces the wealth you can accumulate down the road. As a result, your options in the future become greatly diminished because you’re essentially spending tomorrow’s wages today.
In short, accruing excessive debt severely limits your choices in life as you get older, thereby making you an indentured servant to your lenders.
On the other hand, those who stay away from excessive debt not only maintain more control over their lives as they get older, they also avoid the chains that can prevent them from ever attaining financial freedom.
Face it, folks. You wouldn’t steal from your neighbor.
And you’d certainly never think of holding up a local merchant.
So why would you ever capriciously rob wealth from your future self?