Debt Cycle

Our modern society lives on and for debt. If you have debt, you are more likely to conform to the norms of society and you are viewed as a normal person. Debt will ensure that you will show up to work on time, and that you will work hard for the promise of payment. You will also buy things that you need to work, in order to pay your debt. The best part of this is you will buy these things with debt.

That's right, you will go to work to pay for your debt, and you will make more debt to pay off your existing debt.

When I worked as a dentist full time, I would listen to the things my patients would say. I would see these people twice a year, but the stories they would say all melted together as they were all the same story. They would buy a car to get to work with debt. They would get excited when the car was nearly paid off because they wouldn't have a car payment anymore! Then they would come into their next appointment in a new car because they traded in their paid car for a new one with debt. Over and over the cycle repeated itself.

The car was just a toy to the bankers, who have these people on the hook for hundreds of thousands of dollars with the houses they financed. These people have to work every day to pay their mortgage, precluding them from ever taking a long vacation, one which would allow them to realize what happiness really is.

I myself was caught up in this rat race as well. I had graduated from dental school with a significant amount of student debt. Each month, I had to pay a little over $2,000 in student loan payments. Then I bought a new car to get to work, which added on another $400 a month. I needed somewhere to live, luckily it was an old boat that I was able to pay for and not owe for the rest of my life, but the slip fee was still $500 a month. This means that if I stayed home, I had to pay $2,500 a month. If I wanted to get to work, I would need that car and it would cost me.

The first $2,900 I made each month was already spent. This may sound dismal, but the fun is only starting! I worked for this money which means that the tax man needs his cut of it. Between state and federal taxes, I was paying nearly 40% of my income in taxes. The $2,900 that I had to earn to pay these simple payments would cost me another $1,160 a month in taxes.

At this rate, my first $4,060 was already spent! I haven't even gone out to buy groceries yet, but I've managed to spend $4,000 a month. Believe me, this was a huge motivator to not take vacations! When Maddie and I would go on our month long cruising adventures, I would save up not for the trip, but for all the bills I would have to pay while not working.

Going to work each day cost me $48,720. This is a deep hole to dig myself out of, and it was not that deep of a hole compared to other people I know. I chose to live on a 50 year old boat, so it was very inexpensive to purchase. Those who live in McMansions are far deeper in a hole then I am. They are also tied in to additional taxes as they are subject to state and county property taxes.

I remember in school being told that it is a good idea to have a mortgage because you can deduct the interest on your income tax form. I couldn't understand why that was good, because you still had to pay a monthly payment with interest! The system is setup very well to keep us from seeing what it really is and who it serves.

Maddie and I are ducking out from the rat race and instead following a the path less traveled. Both of us have stopped working, which greatly reduced our income levels and the associated taxes that go with them. We have saved up some money and will be living on a very strict budget that may seem ridiculously low to most, but still rather high in our opinion. Following this plan we will slip out from society and explore the world on a shoestring budget where we don't have bills or monthly payments due.

This ducking out was not easy. The whole world is setup to make sure that you feel crazy to do such a thing! We had to get rid of our cars, and stop going to work. This took out the car payment, but it didn't get rid of the student debt.

Luckily, there are student loan refinance options which base the payment on your income, and if your income is low enough, you don't have to pay. There is no free lunch, and interest will continue to grow, but we will kick that can down the road and see where it leads.

With the student loan payments cut down to $0 and the car payment gone, all of a sudden, we don't need to get up in the morning to rush to work! There is no monthly quota of $4,000 coming due, and instead we can focus on being happy and exploring the world.

The first day felt really weird. I got up early in the morning but didn't have to go to work. Instead, I worked on the boat to get it ready for our trip. This continued for a few days, until I would wake up in the morning ready to work on the boat and not even thinking about going to work. After the first week, I began to forget what day of the week it was because it didn't matter any more. I stopped dreading Monday and didn't care if it was Friday, because everyday was about doing what we wanted to get done that day. We would set goals for each day, and strive to complete the goals early in the day so we could have the rest of the day to do whatever else we wanted to do.

After 2 weeks of this, something clicked in my mind. Now I can't fathom how I used to run the rat race! I was always tired because I didn't have enough time to sleep at night. I used to get up at 530am and get home at 9pm. Somehow I would squeeze in a few projects at night on the boat and get to sleep around 11pm. I was exhausted but I knew no different. To me that was life, now I understand that my old life was crazy!

I see why corporations only give you 2 weeks of vacation per year. If you know you have to return to work, you will start gearing up for it in your mind and you won't slip out of the system. In my case, at the 2 week point, it clicked how ridiculous the entire system is and it made the choice to stop going with he flow all the easier.

Now Maddie and I work on the boat as we prepare to go cruising full time. We will work odd jobs, rigging jobs, teaching jobs, or dental jobs as we go, working for a few days or weeks and living in a vacation instead of the other way around.

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