About this episode
Simplified Explanation: How much do you owe all together? This includes car, home, school and personal loans. Do you owe the utility company for late payments or a credit card? This, all together, is a specific number, weighing you down every minute of every day.
Real Life: Debt is a type of modern-day “indentured servitude”. You work just to pay your bills, even before feeding yourself. When you owe someone money, you always worry about your next payment, cautious of them calling the loan early, or if they will ask you to do something that you don’t exactly want to do, including paying on a month you don’t have the money.
It’s much like welfare. When someone is giving you money, then they control your life, because all they have to do is pull the purse strings and pay you less money, and your whole life is turned upside down. When you make your own money or relinquish your debt, you begin to gain control over your life. No one has power over you when you are debt free.
So, who are the players when you are deep in debt?
Credit Card Companies – Credit Cards traditionally have the highest interest rates, around 20%, so their number one task is to get you signed up and spending money. They know that human nature is that you won’t pay that debt on time and will have to pay the high interest rate. They are so determined to get you to sign up for their credit card that they are the #1 producer of spam emails, physical mail, and internet advertising, when you are younger. Go into a Lowes, Home Depot, or most major big box stores and they have someone trying to sell you on their credit card - whether it’s someone walking around the store, or the cashier on the way out, incentivizing you with a discount when you check out. Look at Amazon and Walmart when you check out online; they have these advertisements, too. Then they incentivize you to use their card by giving discounts or flier miles, for your use of the card. They know, at some point, most people won’t pay and instead pay fees and interest.
Banks – Most loans are taken out directly from a bank. They have every type of loan you could need, because their #1 job is to find a need and provide a loan for you. They are incentivized to get you to borrow money. If you go into a bank to talk to a banker, most are tasked with asking you to get a loan. The cycle of your money is not to sit in a vault; people save money in the bank, usually at an extremely low interest rate - maybe 1% - then they take those collective funds and sell it to someone who needs a loan, and charge them 9% interest. They then make a consistent 8% interest off that money. For home loans, they borrow money from the Federal Reserve (Fed) for a certain interest rate (in 2022 it was 0-0.25%), and then let you borrow it for a house, paying about 4% (2022). That doesn’t seem like a good return, 4%, does it? But that low interest is what the mark
