This was a book that kicked me in the teeth. It is a powerful indictment of how society has come to view the use of debt to buy worthless consumables to satisfy its insatiable need to appear successful. But when you’re a slave to anything, how can you even remotely consider yourself successful?
When I first saw the subtitle, “…and 9 other things I wish my Dad had taught me about money,” I thought to myself, “His father must feel terrible with that being out there in the marketplace.” But then I read that his father had passed away when the author was only 13. It drives home the point that we ALL need teachers and mentors to help us navigate the pitfalls of life, and especially the pitfalls of money.
He begins the introduction with How to Choose a Teacher. The author, Mihalik emphasizes two questions that you should ask anyone who is going to teach something:
- Have they done what they are teaching?
- Do they have your best interests at heart?
Those two questions are keys to insure that you’re not being taken for the proverbial “ride” and to find out whether or not someone has an agenda different from yours. He answers those questions by the way.
Chapter 1 – Debt is Slavery
Michael Mihalik begins with the position that “Debt is Slavery” (and therefore bad) because it places limits on your freedom. Borrowing to put yourself in a better position for the long haul isn’t acceptable either because of debt hanging over your psyche. Monthly payments are monsters. The solution is no debt of any kind, not even debt that you could pay off with monies from savings. He does make some allowances for people borrowing to create a business or possibly a home since those items have such large initial purchase amounts, but even if you do borrow to start a business, you’re still a slave to that debt. He points to your car title and mortgage deed — both of which list bank’s name as a co-owner if you owe money on those items. If you owe money on anything, you don’t really own it.
Chapter 2 – Time May Not Be Money, But Money Definitely Is Time
What is your true hourly wage? How much do you REALLY make per hour? In this chapter, Mihalik instructs you to figure out how much money you’re really putting into your pocket in exchange for an hour of your life. And he reminds us that we can NEVER recover those hours. The amount is probably lower than you think and he says that your time is more valuable than that. He looks at your marginal pay rate in several circumstances. For example, a job paying $20 an hour for 20 hours of work is better on a marginal basis than one paying $10 an hour for 45 hours of work. Huh? The difference is only $50 but you have to work another 25 hours to earn that $50.
Don’t work just to make extra money, work because you love what you’re doing. Why are you working in the first place? You’re working to free up time to enjoy the parts of your life that bring you joy and happiness.
Chapter 3 – Possessions Are a Prison
When you subjugate yourself to the acquisition of possessions, you put yourself into a prison. The most valuable parts of your life aren’t things, but experiences and time to enjoy them with people you care about. So, the stuff you buy is essentially paid for by lost experiences. He says that unused stuff in your life should be put “back into circulation.” Sell it and let someone else enjoy those items. He relates a story about his guitar collection that did nothing but collect dust. After selling them, he realized that many people were now able to enjoy those things and he felt good about it.
Let’s say you spend $12,000 on new kitchen cabinets and counter-tops. That $12,000 could be used to fund a trip to Disney World with your children, start a college fund for them, take them on a fabulous trip to Yellowstone National Park, or any one of a host of other experiences that will stay with you emotionally for the rest of your life.
My best memories are experiences with people I love, they’re not about things. Things can’t love you back. Shouldn’t I be devoting my financial resources to more of these experiences instead of accumulating more things? Things are just another money trap.
Never “love” something that’s incapable of loving you back.
Chapter 4 – Be Aware of the Ongoing Campaign to Separate You from Your Money
Marketing is everywhere, and it’s constantly trying to convince you to spend money. Television ads, print advertisements, and billboards are the most “in your face” example but what about those subtle messages like giving away “trendy” clothing to teenagers so they can influence their peers? The sole purpose of marketing is to create desire in your heart for something you don’t currently own and thereby separate you from your cash.
It takes practice to get used to really identifying the marketing and really figuring out what you want as opposed to what marketing is suggesting you want. When it really clicks, it becomes much easier to cut down on your possessions in life.
Chapter 5 – Money Buys Freedom
Once you begin to break free from all of these entanglements, you find yourself spending less and less money. What does that reduced spending really mean? It means that you now have the money to buy your freedom. Mihalik explains it like this: If you can get by with only spending 50% of your income each month, then you only have to work half the time – or if you can get by with only saving 25% of your income, you only have to 75% of the time. It becomes easier to do things like take a leave of absence from your job to follow up on a dream like writing a book, tracing your genealogy in Europe for 6 months, touring the world with your brother, or taking time to explore the Grand Canyon with your kids for the summer. Wouldn’t THAT be cool?
Chapter 6 – Don’t Sell Your Soul For A Salary
This chapter punched me right in the stomach. He examines how people choose their careers and how they should choose their careers. Mihalik expands on the idea that turning around your financial life, being in control of your spending, and free from all debt eventually means you don’t have to sell your soul for a job you despise simply because of the pay.
That is what financial freedom really is. It’s the freedom to make YOUR choices in YOUR life without having to worry about all the day to day financial obligations and the mental drain they have on you. If you hate your job, you can just go find something else to do – the money isn’t going to kill you. Plus, when you do find a career that you’re passionate about or even one that just really interests you a lot, you’ll truly enjoy what you’re doing and the money will follow.
Chapter 7 – Own
Mihalik gets into the “nitty-gritty” of managing your finances in this chapter. He urges people to actually own the things they use (what a concept!), then use them until they’re truly UN-usable. He discusses the ins and outs of income producing and income consuming assets as well as the handling financial windfalls. He also covers the best way to buy a car – buy new (yes, new) and drive it for 10+ years. Quite different from the two year lease cycles constantly thrown in our faces.
Own your stuff so your monthly outgo gets smaller and your freedom grows larger.
Chapter 8 – Spend Less Than You Earn By Controlling Your Expenses
He examines the two kinds of finances — continuing and one time. His advice is pretty general, but it basically adds up to looking through all of your regular expenses for places to trim the fat. Do you really need extra cable channels? Do you need web access on your cell phone? Do you need a brand new car with payments? Do you really need a new flat screen television with a home theater system? Those are the types of things keeping you from acquiring freedom.
Chapter 9 – Save 50 Percent of Your Salary
Yes, you read that right — FIFTY PERCENT! He’s pretty blunt on this one. Save 50% of your salary, period. No exceptions. Make that your goal. If I calculate the money I spent last year on debt repayment, I’m already doing this. I’m just saving for someone else. I don’t know about you, but I’m tired of “saving” for Citibank, Bank of America, GMAC, and all those blasted student loans.
Chapter 10 – Control Your Money or Your Money Will Control You
Mihalik shows you how to create a budget where your monthly bills are matched up with your paychecks. Then, you imagine other expenses (such as food, clothing, entertainment) as bills and match them up with paychecks. The goal is to set things up so there’s some cash left over after each paycheck, and that left over amount is the seed to start saving for your future.
Chapter 11 – A Bonus
I once told someone that I shouldn’t go to graduate school because it would take two years and I’d be 41 when I graduated. He asked me how old I would be in two years if I didn’t go. The answer’s the same regardless. You’re never as young again as you are right now, so why not get started?
Buy or Don’t Buy?
Mihalik did a fantastic job of connecting to me as a reader and he really nailed home a handful of few key points:
- Stop spending money needlessly on things that will become obsolete, things you really won’t use, things you really don’t need, and things that will never love you back.
- Avoid debt like the plague.
- Be frugal and make wise financial decisions.
- Take steps to implement extreme savings in your life.
- Ignore marketing’s siren call. Because the book is so short (88 pages), he is really blunt and to the point. This book doesn’t waste your time and at about $10 or $11 bucks, it doesn’t waste your money either.
If you’re looking for a book that cuts to the chase and gives you the information and kick in the pants you need to get your financial house in order, Debt is Slavery is the book for you. I highly recommend it.
[tags]debt is slavery, possessions, stuff, things, choices, consumer, debt, expenses, finance, finances, financial, free, freedom, frugal, frugality, s, income, home, graduate, money, paycheck, payments, ing, save, savings, salary, s, giving, college, bonus, books, credit cards, credit, book review[/tags]