Dealing With Debt: Get Rid of It as Fast as You Can

You have a dream. You are on a beach of golden sand. You have a large bucket, large enough to carry a million dollars’ worth of that golden sand back home with you.

You put a scoop in the bucket. Then another. With each scoop, you feel richer.

But then you notice something. The bucket isn’t getting fuller. There is a hole in the bottom, out of which sand is escaping.

You work faster, hoping to fill the bucket by adding more sand quickly. Yet, as fast as you fill it, the sand escapes. Still you move faster, and still the bucket will not fill.

In fact, the level of sand in the bucket is getting lower! This is—for many people—the experience of trying to get richer through debt. Debt allows you to have things that you want but can’t afford. There is a cost to it, but you think you can manage that.

But that easy money becomes a habit—a bad habit that, like most bad habits, is hard to break. And even if by some supernatural effort of self-control you desist from acquiring more debt, the cost of the old debt is so large (and growing larger) that no matter how hard you work, the wealth you hoped to acquire disappears. At some rudimentary level, we all understand that debt is dangerous.

But in our daily lives, many of us view it as a necessity. We buy homes with it. And cars.

And some of it use debt to buy things that money can’t buy—like prestige, or status, or self-worth. What we bought was a negatively amortizing mortgage with a three-year term and an 11 percent int.