Why We Fear Debt, Except When It Makes Us Poor

Why is it that in American culture the only thing that’s acceptable to go into debt for are the things that will make you perpetually broke? Your house, your car, and for many, their college education aren’t assets that you’re investing in, they’re liabilities that drain your bank account.

Most people think that their house is their biggest asset, but in reality it’s their biggest liability. Assets are things that make you money, liabilities are the things you have that suck your money! Worst part is, if you end up buying a house using a 30 year loan, you’re paying DOUBLE for the house that’s already sucking out most of your money. And don’t even get me started on cars. Cars are the worlds worst possible allocation of finances. Sure it may be necessary to buy one, but don’t blow your savings on it, especially if it’s new! The moment you drive your new a car off the lot, your net worth drops by a few thousand dollars, because the value of that car just tanked.

Most people spend their entire lives living in a state of debt because they have student loans, then a car payment, and eventually a mortgage looming over their head, but according to societal norms, these things are okay. It’s okay to go into debt over education as long as you are spending tens of thousands of dollars going to a prestigious University, but it certainly is not okay to buy a $20 book from the bookstore, or get an online course, or hire a coach, or start a gym membership, or travel the world, when you’re financing it with someone else’s money.

What most people don’t get is that everything that I just listed has a much higher ROI (return on investment) than a house, car, or university degree. This year I’ve read a little over 40 books. I don’t know the actual numbers, but let’s say that it cost me $25 per book. That means I spent $1,000 on books this year—roughly the cost of two college credits or half a course, yet I learned more this year than I did in my previous four years of college.

Similarly, I spent $2,000 on an online course (consulting.com by Sam Ovens) that has taught me 10x more about business than what college ever taught me. I joined the Entrepreneurs Organization Accelerator program for $2,000/yr, which taught me more about running a business in 8 hours than I ever learned from hundreds of hours of forced lectures in a classroom. And I went to a Tony Robbins conference for $3,000 that in four days helped me get out of one of the biggest ruts of my life—worth every penny. I know for some, these may sound like crazy numbers. Just between these four things I spent $8,000 on myself this year, but how far would that help me go in terms of formal schooling? $8,000 at the University of Minnesota, where I got my degree, would buy me one semester or about one eighth of a college degree...

Likewise, traveling costs a lot of money (although I have been able to find ways to travel for free for the last four years) but every dollar spent traveling is a dollar well spent. Traveling the world has turned me into a new person. I’m now more compassionate. I’m wiser. I’m more grateful for what I have. I’m more understanding of other people and cultures. And I have made friends and memories that are utterly priceless. But none of this would have been possible if I didn’t choose to make traveling a priority just as much as other people make buying a house a priority. My situation is unique because I’ve actually made money from traveling, but even if you never see a direct financial return on your investment from traveling, you will certainly feel it in the quality of your life, which is worth much more than a formal education.

What really blows my mind though, is the excuse that someone can’t afford to work out, get a gym membership, or hire a personal trainer. First off, you don’t NEED any of those things to be healthy. You can run outside, do pushups, go to a park and do pull ups, etc in order to be healthy, but when it comes to peak health, someone who can push you to achieve peak performance and a facility surely help. In fact the biggest excuse for poor health isn’t money, but time and effort. Either they don’t want to work out or they don’t have the time. But working out holds a higher ROI than anything else you will ever do, because working out is like literally buying back life. When you’re old and decrepit because you never spent the time when you were young to maintain a healthy body, you will trade anything, and amount of money, for more health and a longer life. There are no excuses here. You must invest in your body, period. It’s the number one most important investment that you’ll ever make, no matter how much time and money it costs you right now.

So why is it that these “fiscally responsible” investments in a car, house, etc, are all okay, but the things that make life meaningful and worth living are shamed upon? Well part of it is that most people just play it safe, they don’t play to win. If you buy a house, get a mortgage, car, and live with a nice job, you can live a nice comfortable life without much stress—but you will never get rich from owning a house.

On the other hand, if you buy is a triplex, you occupy the smallest of the three units, rent out the other two, and deal with the B.S. of being a landlord, but at least your investment makes you money, then you’re playing to win. You’ll face more resistance. You will definitely struggle more. And you may learn some tough lessons about real estate, but in the end you’ll end up with more wealth than 99% of people, and one day you won’t have to work because your properties will pay the bills. This is what playing to win looks like. Most people don’t play to win because they want the safer route that faces less resistance.

Another factor in play here is the directness and timeliness of your return on investment. Part of the reason why college is a good investment for most people is because they want to get a higher paying job. It’s a fact that if you have a college degree, better employment opportunities open up for you. In theory, those earnings start coming in immediately after you graduate, because a degree equals a higher salary. That's a direct, immediate, and easily measurable cause and effect. But reading books, investing in your personal education, buying online courses, etc, don’t have this inflection point where all of a sudden you get a badge of honor that shows that you’re not educated and are allowed to earn more money. No, those investments compound over time and are harder to track directly to the output, because the cause and effect is less clear. Most people think in the long term, especially when it comes to compounding investments like reading, and therefore society is going to shun an investment in an education that doesn’t provide you with a degree—there’s no clear cause and effect.

That’s why taking out a loan to travel is shunned upon. I feel like I should disclose that I’m not suggesting that you dig yourself into debt to travel. You still need to be responsible with your money, but when it comes to traveling you also can’t tell yourself the excuse, “I’ll travel when I have more money” or whatever excuse you’ve been telling yourself for the last few years. No, you need to do it now. The younger the better. Find a way. Because what traveling does is it opens you up to how things are done differently in other parts of the world. And perhaps I should get more specific: travel internationally. Travel to a place that you’re not 100% comfortable going to. Travel to a place where you don’t speak the language and where you don’t know what to expect. This step towards pushing your comfort zone will make you more money than you can imagine, but once again it’s harder to see the direct cause and effect relationship, because what traveling does is it changes something inside you. Pushing your comfort zone makes you more bold, more confident, and teaches you that it’s okay that you don’t know what’s going to happen next. You just have to go with the flow and learn to enjoy the ride. How might that make you money? Well, I can tell you that no one has ever started a successful business without first getting comfortable with being uncomfortable. Yet, when it comes to becoming successful, most people forget that the reason they got comfortable with pushing their limits was because of the uncomfortable experiences they had from things like traveling.

So when society pushes against investing in things that make you rich, not just financially, but emotionally and mentally, people freeze up. Our bodies are wired to go with the flow of the people around us. It’s literally engrained in our human instinct to follow the tribe, because solo hunters in the African Savannah didn’t survive for very long. Our instincts then hold us back with fear and anxiety and we associate a deep fear with doing things differently, but when you observe the wealthy, you see that there is a reason they’re rich and most aren’t. They go in the opposite direction of the tribe.

Rich people know that attaining wealth is a long term game. You have to invest in yourself consistently over a long period of time before you start to see your income scale up, but once your income grows, it grows exponentially—it just takes long days and nights working on something that doesn’t create an immediate ROI. The average person thinks in the short term. They think in terms of observable, certain, and immediate cause and effect. They don’t play to win, they play to be safe, and that’s part of the reason why the average American holds a credit card balance of $3,000. They fear uncertainty, and therefore avoid long term investments, ensuring that they will never be free of debt.

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