I was a typical naive college freshman, relishing my first day on campus. Lining the hallways of the crowded student center, financial companies competed obnoxiously for our attention.
“Apply for your first credit card and you could win a brand new TV!”
“Step right up! We’ll make it easy for you to buy things now… then pay for them forever!”
The Giant Marketing Machine deftly defines what is fashionable and brainwashes us to spend. As young adults, my friends and I were perfect targets.
Too bad Michael Mihalik’s book, Debt is Slavery: and 9 Other Things I Wish My Dad Had Taught Me About Money wasn’t prerequisite reading prior to admittance into those hallways, littered with credit card applications.
Michael’s short book offers preventative medicine for students and young adults — plus concise treatment for anyone struggling with debt. This author didn’t create words simply to increase page count. He created a short read that gets right to the point. In his just-the-right-size book, he offers practical advice and illustrates financial concepts with relevant examples.
Golden nuggets of wisdom are sprinkled throughout each chapter. Here are some of my favorites:
Chapter 1: Debt is Slavery
Do you ever wake up in the morning and groan, “I don’t want to go to work today?” As you lie in bed toying with the idea of staying home, your thoughts turn to all the bills you have to pay. So you drag your tired self out of your warm bed, drink a pot of coffee, and drive to work (in your cool car–only 43 more payments and that baby is all yours!). You drag yourself out of bed and go to work, because you have to. Isn’t that a form of slavery?
Reading this passage brings back haunting memories of the relentless “BEEP! BEEP! BEEP!” of my old alarm clock. Aack! I hated that obnoxious beast! When I say that I haven’t set an alarm clock in years, I truly mean it. Financial freedom has set me free from that blasted beeping slave master.
Chapter 2: Time May Not Be Money, But Money Definitely Is Time
…if I earn $12 per hour and want to buy something for $12, I am spending an hour of my life. I quantify all potential purchases with two questions:
How many hours do I have to work to pay for it?
Is it worth that much of my life?
Bingo. We trade our time for money and our money for stuff. Problem is this: while we can make more money, we only have a finite amount of time. See my relevant post, How to Revolutionize Your Spending Habits by putting a price tag on your time.
Chapter 3: Possessions Are a Prison
Don’t love something that can’t love you back.
I have friends who define their self-worth on what kind of car they drive. They just love their car. But is that love returned? When you love a thing, the love will never be returned. A car will never comfort you when you’re sick. It will never help you when you’re in trouble. If you’re going to love something, make sure it can love you back.
Powerful concept. Have you ever participated in “retail therapy”?
Chapter 4: Be Aware of the Ongoing Campaign to Separate You from Your Money
We have become so desensitized to advertising that we are unaware of its insidious effect on our lives. We have become sheep who buy what we are told.
Isn’t that a little extreme? Are we really sheep?
So what kind of clothes are “in”? What kind of car should you drive if you want to look successful? How do you know what’s “cool” and what’s not?
Advertisers and marketers tell you.
What I appreciate most about our Tivo boob-tube box is that we can skip past the commercials, thereby reducing our exposure to advertisements. We avoid magazines for this reason, too.
Chapter 5: Money Buys Freedom
Money may not buy happiness, but it does buy freedom, options, and opportunity–and freedom, options, and opportunity may lead to happiness.
This is certainly true for me and my family.
Chapter 6: Don’t Sell Your Soul for a Salary
Sunday nights fill many people with dread because they know they have to go back to work Monday morning. So why do we end up at jobs we don’t like? Because we sold our souls for a salary.
Yep, the salary that’s required to pay for the vacation you charged to your credit card — two years ago.
Chapter 7: Own
Most wealthy people, especially if they’re self-made, are aware of the difference between income-producing assets and income-consuming assets.
I’m tickled pink that Michael recognizes and demonstrates the difference between the two — especially when it comes to real estate!
Personal real estate may appreciate over time, but it does not produce income. It consumes income. It consumes income because you have to spend money on maintenance, utilities, repairs, taxes and insurance. The only way you can extract money from real estate is by taking out a home-equity loan (debt!) or by selling the property.
As I’ve said several times here before, home-ownership is not normally the most effective way to create wealth and financial freedom.
Chapter 8: Spend Less Than You Earn By Controlling Your Expenses
…you have to value your peace of mind and financial security more than the things you buy.
Chapter 9: Save 50 Percent of Your Salary
If you save 50 percent of your salary, for every month you work, you will save enough to take a month off– without changing your lifestyle.
(The author doesn’t take compounding interest into consideration here — which would grow your future savings balance exponentially.) He illustrates his point by sharing a personal story of financial hardship: he was able to withstand two job layoffs, lasting a year or longer, because he had sufficient savings to see him through tough times.
Chapter 10: Control Your Money or Your Money Will Control You
Change your attitude toward debt. Every time you use credit for a purchase think, “Debt is slavery; I am making myself a slave.”
In this chapter, the author provides step-by-step instructions for creating a written financial plan aimed to minimize expenses, eliminate debt, and start saving.
While Debt is Slavery: and 9 Other Things I Wish My Dad Had Taught Me About Money might not be particularly suited for advanced finance readers, I enthusiastically recommended it for young adults and those struggling to break free from the handcuffs of debt.