Each bit of saving is a bit of the future you own.
Each bit of debt is a bit of the future that somebody else owns.
But, boy, has the debt been tempting.
We come from an era with decades of declining interest rates. Since the 1980s, borrowing money has only become cheaper and cheaper. At the same time, everything has become more and more expensive—especially the stock and housing market, which has been a lucrative place to put cheap borrowed money.
Debt has been the instrument, the key to play, for producing a larger orchestra of wealth—since when most of us were born.
The rational, unemotional economic agent, only focused on numbers, would have zero doubt in his mind (and max debt to his name) as to advice for the highest level of loans. It has been the way to go—dollar for dollar.
But we’re not rational agents—we’re irrational emotional human beings. We have doubts. We have stress. We have anxiety.
Yes, we do value money, but we also value our time and freedom to choose. And debt comes with an obligation, and that obligation is a promise to surrender bits of our future time and choices.
We’re not in a time of super cheap debt anymore. It’s still relatively cheap compared to the 80s and 90s. But whether we stay at these rates, go higher or lower, is beside the point. Sometimes money isn’t just about money.
An anonymous woman was once featured in a column. She would be widely considered a successful businesswoman who appeared to have it all together. She managed multiple small business ventures and owned several properties.
But even those who appear financially successful can experience the debilitating effects of debt.
This woman admitted that the substantial loans taken to finance her expansions left her feeling like a slave to her debt. The monthly payments became so high that she felt like she was walking a tightrope with little margin for error. Any rental drop or dip in business performance caused severe anxiety and fear of losing everything.
On various personal finance forums, there are stories of real estate investors who own multiple rental properties but struggle with the debt associated with them. One investor shared how, despite owning several houses, the high mortgage payments, maintenance costs, and vacancies left him feeling constantly stressed and overwhelmed. The fear of not being able to meet his debt obligations made him feel trapped, despite outward appearances of success.
Or consider the educational system: It’s not hard to imagine graduates whose career choices are constrained by the weight of substantial student loan debt. They might feel forced to take a higher-paying job that they’re less passionate about simply to manage loan payments, rather than pursuing something they love.
Debt can certainly be used as a force for good, but there's no denying that debt is a contract that dictates your future options—for better or for worse. And if you don’t like that future, it can feel like being a slave to the debt, creating a downward spiral of severe emotional distress and reduced quality of life.
In contrast, savings give you power over your decisions.
Savings represent a portion of future possibilities that you control. When you save, you are essentially purchasing a slice of your future. It also provides the means to take calculated risks, such as starting a new venture, which can potentially lead to greater financial rewards.
It can serve as the tool we need to make choices that align with our values and aspirations.
Patience is sour to swallow and a struggle to follow, “but its fruit,” the philosopher Rousseau says, “is sweet.”
Investing principles applied to life: Patience.