When I was still working in Corporate America, one of the executives used to say that he looks to hire salespeople who are basically up to their eyeballs in debt. “The best sales reps are the ones with the biggest houses and the newest cars!” he used to say, meaning that, since salespeople are typically paid via commissions, the ones with the largest debt are the most motivated to make money and would therefore close more sales for the company.
Employee Debt Is Good For Corporate America, Not For Employees
I don’t really miss anything about that corporate job (except for the benefits maybe), but I was recently reminded of that executive when I watched the movie Picture Perfect, starring Jennifer Aniston, on DVD. Certainly not a masterpiece, but I thought it was interesting that the boss in the film basically refuses to promote Jennifer Aniston because, unlike her colleagues, she’s not up to her eyeballs in debt. She’s free – no house, no car, no marriage – and as a boss, he doesn’t like that. He feels that he can’t trust a person like her to stay loyal to the company, because she can leave anytime – she doesn’t have that overwhelming fear that people who “own” assets experience, the fear of losing their assets, admitting they have “failed,” and giving up their lavish lifestyle.
Of course, this goes back to what Miranda said here a few weeks ago – do we really own an asset if we financed it with debt? It also raises the issue of how easy it is, in our culture, to become a slave to the rat race, to acquire more and more assets and to raise our standard of living so much that it’s very difficult to finance without working insane hours and losing our freedom. Is it really worth it?
Making Unpopular Choices
I used to know a couple here in the Bay Area of California who had made it a point to live within their means. This is of course a very unpopular choice – here and in many other urban locations in the US. They decided to work part time, leaving enough time to be with their children and do stuff other than work. Since they refused to get into huge debt, they had bought a very modest house – a tiny fixer upper, that they gradually fixed up on their own.
They didn’t have a large house or a big yard. They didn’t have many friends either – I suspect they were too “different.” They certainly weren’t in the habit of hosting dinner parties or renting a jump house for their kids’ birthdays. I myself was very guilty of occasionally feeling uncomfortable around them, of occasionally wondering about their choice to live in such a tiny, “unremodeled” house.
Unpopular, But Free
Until one day, one of them talked about it openly – how they were almost free of debt, how they were saving aggressively and paying off their mortgage, how they were planning to pay their mortgage off in less than a decade and have enough in savings to enable them to fully retire by the age of 50.
They had it all planned out, and it was all within reach. When I heard them talk about their financial future, I realized that despite leading a lifestyle that to me seemed unacceptable – living in a tiny old house, buying secondhand furniture and clothes, scrimping and saving on everything, they were in a better place than many of the people around them, those living in overpriced mansions and working 50 hours a week. THEY WERE FREE. Free from corporate America, free from the need to work long hours, free from excessive debt, and free from the overwhelming, constant need to repay a huge debt, to stay on top of your game, to keep looking like you have a lot when in fact you have so little.
Above all, they were free from caring about what others thought about them.
That day, I have learned a valuable lesson. I learned that big shiny assets and large salaries do not equal freedom. On the contrary, they can make us slaves to our jobs and place us on a path that we must stay on for years unless we make a conscious choice to downsize and drastically change our lifestyle. Isn’t it better not to get on that path in the first place?
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It’s unfortunate that the family had to lose everything. But you’d think that they’d know better than to spend so recklessly. The moral here is to buy only what you need, and if not, then only buy what you can afford today, and don’t depend on tomorrow.
I recall vividly my mid-teenaged daughter coming home one day from a friend’s home and raving about how their house was so big and they had all the trappings of money (e.g., vacations in exotic locations, many big screen TVs, a hot tub, his & her identical “Spyder” cars in the driveway complete with vanity plates, etc.). The family’s mother worked on sales commission in real estate, before the housing market crashed. My daughter believed that because they had all these trappings of wealth, they had to be very rich.
At the time, my husband and I sat my daughter down and tried to convince her that this was an illusion, and the lifestyle was likely bought on credit, hedging against future earnings which was very risky and expensive (e.g., interest). This family was no doubt up to their eyeballs in consumer debt and would continue to be for many years to come.
Cut to 6 years later, and my daughter is in college, and we learn that her friend’s family home was foreclosed on and the friend drops out of college for lack of tuition money.
Although we feel great empathy for this family, the life lesson our child came away with is priceless.
I agree its good for some people..Im in my early fifties own (yes OWN) 2 homes and live off the rent money ..so I guess you can say RETIRED)!!!!!!! I also didn’t take a real vacation for 10 yrs…. or drive anything close to a new car …or buy any WOW THIS JUST CAME OUT NEW STUFF! was it worth it???? H E L L…..
Y E S!!!!!!!!
Am I the only person offended by the image of a black man with the title of this post?
Having too much debt can keep you from living a comfortable retirement. It can also prevent you from achieving financial independence.
Debt can make you indebted to the rat race.
I agree with you, with one qualification —
People should have something they enjoy doing. If they enjoy their career in corporate America, good for them.
There are people out there who are working sixty to eighty hours a week, but they love being productive, writing computer programs, solving problems, discovering new scientific principles, teaching, taking photographs . . . the list goes on.
I dream about living in a tropical retirement, and I will get there . . . but I don’t want to ever stop writing.
I agree with the stay out of debt part, but I have to draw the line at scrimping and scraping and making do.
I think it’s good to be greedy if it makes you work harder and smarter and contribute more to the world.
I want the financial freedom not to have to work a job I hate, but not so I can do nothing for the next 50 years, but so I can do something I enjoy instead. Have a grand passion, a powerful enthusiasm and a compelling vision — and make it pay off big time.
I agree. My Father is 86 years old and still working part time at a business he has owned and operated for over 30 years. He is extremely wealthy, and doesn’t need to work another day in his live. He works, because he is passionate about his business (Broadcast News). I am certain that keeping active and engaged in the day-to-day workings of his business has extended his life and given it great quality.
@Joe – But work is only one out of many purposeful things that can serve as a reason for getting out of bed.
This article reminds me of another Bay Area resident, Peter Lawrence who wrote the book The Happy Minimalist. He too opted out of the rat race and consequently was able to retire young from Hewlett Packard.
Working isn’t the enemy guys. Working gives us purpose, a reason to get out of bed every day, which is something that we NEED as people. That’s not to say that you should put up with poor working conditions or a job you really hate. And never let the things you own start to own you. But putting in a good day’s work is good for the soul.
Totally Agree to this Joe,
Getting out of rat race should not be the only aim.
We should aim to have freedom to do the things which have some purpose
I think I have read about the Rat Race in Robert Kiyosaki’s book, Rich Dad Poor Dad. This is really cool. Thanks for sharing this post. I’ve learned a lot. Thanks. I will strive hard to get out of the Rat Race.
Better to be unpopular and free than popular and drowning in debt.
I had a boss that used to say the same thing about the sales team at this old company I used to work for. I thought it was a great motivational tactic from a company standpoint, but a horrible way to live from an employee standpoint. It always comes back to managing your wants versus needs. Nobody needs a mansion or a luxury car, but just about everyone would want one. Would you be willing to sacrifice your financial freedom for it, though?
I couldn’t agree more. Living beyond your means is like being jailed by debt. You cannot get out of it and you will still have it until your retirement. The couple in the story is a good example of being frugal and living within your means and lives happily after retirement. We need some sacrifices to get that happy ending, right?
This post makes me really happy I don’t have a sales job.
I retired at 50 from corporate America. My house is the only dept I have & that should be paid off in Jan 2012. Things are & never were important to me. Simple life is freedom…aaahh
I officially envy that couple. Just being able to work part time with kids alone is making me wish I can do the same. We’re still young, so it’s definitely a possibility, and one that I would like to make a reality in a few years before we have kids. Like you said, a lot of us in urban cities are slaves to keeping up with the Joneses. A lot of things you could do is frowned upon. But hey, look at the Duggars. They have a HUGE family, and are practically debt free. It’s time to make some decisions.
This type of freedom you describe is exactly what I’m working towards right now. As I said to my husband,
“If someone calls and says ‘hey, I have a place in Paris – wanna come stay with us for a month? Check out the city?’, I want to have the FREEDOM to accept that opportunity.”
I agree, most time people want to keep up with what others do and end up paying the consequences later with huge debt and higher stress…
It’s funny that most of the people who feel the need to buy lots of fancy possessions, live in a huge house and drive the newest expensive cars are usually the people that WONT work extra to support it and most people who worked hard enough to support it would rather not spend it.
I guess that’s the downside of the credit card era… you CAN have it all, for a little while anyway.
“You CAN have it all, for a little while anyway” – loved this sentence. It beautifully captures the essence of this dilemma, and goes back to what Sam said above – credit allows you to delay “payday,” and for many of us, this creates financial problems.
I wholeheartedly agree. we’re on pace to pay off our mortgage within 9 years of it’s inception, and its the best feeling ever. i can’t wait to have that extra cash every month to go right into an ira so i dont have to work forever. whats the point of having a great job with a great income if you cant live your life?
I like this idea of freedom from working to get money all the time. If you have to work all the time, you don’t actually get to enjoy your lifestyle. Sometimes I feel a little harried, but the truth is that working from home allows me to sometimes just take a break and go do something with my son. I can always work later, after he’s in bed. And, sometimes, I think about taking on more clients. But then I realize that I could have more money, but what would I do with it? I’d be too busy working to enjoy it.
The root of the problem seems to be that careless spending doesn’t hurt…….until later. So if we could get it somehow to hurt when the spending takes place, we’d be able to be the master of our expenses instead of a slave to them.