Books for Lawyers: Debt Is Slavery

Over the last 20 years, I have read easily more than 100 books on personal finance and investing.  Some of the books were eye-opening studies like that in the Millionaire Next Door that we discussed in this earlier post.  Many of the books included some tidbits of wisdom, but may not have given practical, dollars and sense advice - like Rich Dad, Poor Dad as we discussed here.  Frankly, it's been a lot of work and effort over several years to mine these books for their wisdom.

Consequently, I could not help but be a little irritated when "Debt Is Slavery" came out - Why?  It's just too darn good!  In its short 102 pages the book clearly and concisely sets forth about 80% of the basic personal finance advice that I had to learn the hard way. 

I highly recommend "Debt Is Slavery" and I have given the book to several of my younger relatives. Let's take a more detailed look at it below.


The author of "Debt Is Slavery" (DIS) mentions in the forward that he had read many self-help personal finance books and he felt that most of them could be half as long and twice as interesting.  Boy, did he hit that nail on the head.  Many of the books that I have read include a lot of self-aggrandizing passages and thinly veiled sales efforts to sell another of the author's products.  For example, Rich Dad, Poor Dad was chock-full of the author's self-aggrandizing exploits.  DIS, however, is written by an engineer with no other products to sell and is written in a "just the facts" style that keeps you reading.

The author gives five reasons why people go into debt:

1. Impulse buying
2. "Rewarding" themselves
3. Keeping up with the Joneses
4. Impressing Other people
5. Overcoming depession of a feeling of inadequacy

Now, we as lawyers are going to enter the profession with a mountain of student loan debt.  We know why we went into that debt - to get a law degree.  However, I see many, many lawyers falling victims to the above reasons as their cause for taking on additional unnecessary and avoidable debt.  For example, the practice is so draining that the temptation of "rewarding" yourself is always there.  In combination with this is a sense of "keeping up with the Joneses" other than the traditional sense.  For example, in the traditional sense, "keeping up with the Joneses" means that if the Joneses get a grill, then you feel compelled to get one as well in order to illustrate that you are just as good as the Joneses.  The non-traditional sense of "keeping up with the Joneses" is that when one lawyer splurges on a reward, it's not that other lawyers feel like they have to get one too, but it seems like it creates a precedent that it is OK for the other lawyers to reward themselves in that way.  It seems like the other lawyers look at the first lawyer and say "he can afford that, so I can also."  Unfortunately, the other lawyers don't know the first lawyer's financial position - he or she might be receiving financial assistance or on the brink of bankruptcy.

One of the author's first punches is "you don't own it if you owe money on it" - very true, but so often overlooked and brushed aside in the sales effort to saddle you with "easy payments".

Chapter 2 discusses how time may not be money, but money is definitely time.  The author presents the idea that before making a purchase, he would divide the cost of the purchase by the amount of his "life" that the purchase would cost.  In this regard, if the author was making $50/hour, then a new, beautiful $20K car would really cost him 400 hours of his life - that's 10 weeks of work.  In this way, the author found it much easier to resist impulse buying - it's no longer just money, it's the irreplaceable resource that is his life.

I have seen other books that do a more complicated analysis in this regard.  For example, someone making $50/hour has to pay a certain percentage in taxes and living expenses.  Often they are lucky if they have $10/hour left over to spend.  Consequently, that new car would actually be costing 2000 hours of life.

Another way that some books have looked at this is to determine an end goal, such as retirement or paying for a college education and then looking at just how much this expense would set the time frame back.  For example, if you are saving for retirment and buying the new car is going to cause you to spend an extra six months on the job, maybe you will just keep the old one in order to get free sooner.

In the next chapter, the author reviews how possessions are really a prison - that just about everything that you own costs money, time, and peace of mind.  However, the Giant Marketing Machine (GMM) as the author calls it, is out to convince us that we need more and more "stuff" - and that only through "stuff" can we achieve happiness.  The author advocates "putting stuff back into circulation" by selling it or donating it and taking the write-off on your taxes.  This can have a really positive financial impact - more than is immediately apparent.  I will address it more in an upcoming post.

Next, the author makes clear that although money does not buy happiness, it does buy freedom.  That's a powerful statement and a good counter to those who are seeking to buy the latest toys in order to try to make themselves happy.  For example, instead of buying a new Ski-doo, you are buying yourself the present that will make you the happiest of all - your freedom.  It is going to cost a lot more than a Ski-doo, but you will most likely be able to enjoy it a lot longer!

The title of chapter 7 is simply "Own" - use passive investments to earn money without spending time.  The author does not address specific investment strategies, but there are plenty of other books for that.

Chapter 8's title is "Save 50 Percent Of Your Salary".  Pow.  None of this namby-pamby "well I guess I can save $10/month by cutting a magazine subscription if I don't feel too deprived" advice that has become so common with an increasingly over-luxuried American populace and is so very easy to ignore - and even if successful produces very little benefit.  No - instead its "show me your war face!" *smack*  "and give me 50%."  Now, the author recognizes the reality that most people are not going to be able to save 50%, especially just starting out.  However, just by getting that number out there, and showing that by saving at that rate he was able to cope with being laid-off not once but twice, he's changing the way that money is looked at.  I think that the goal here is to help people get away from the common spending habit of measuring your spending by your income (when your income goes up, so does your spending) and instead measuring your spending by what you need to live a reasonable, fairly frugal life and then saving the rest, regardless of whether your income goes up.

Now, if you are right out of school, this goal is obviously out of reach.  There is just too much debt to repay.  However, if you are a lawyer who has been making top dollar for 3-5 years, what's really stopping you from saving 50% of your post-tax income?  Figure that you make $200K and lose $50K to taxes and health care.  That leaves you with $150K, 50% of which is $75K.  You can live pretty well in many places in America on $75K/year (maybe not New York and San Francisco due to the high housing prices, but still).  You were most likely living on less than that as you were repaying your loans - why have you allowed your lifestyle expenses to creep up?  Is it a case of "nobody minding the store" with a side helping of "I feel like I have plenty of money"?  Why not make a new challenge for yourself and buy your way to freedom.  You don't have to stop working, but your work is likely to take on a whole different aspect when it is not essential for your continued existence.

By Chapter 10, we are becoming accustomed to the author's brutal honesty and the title "Control your money or your money will control you" is no surprise.  Chapter 10 shows how to list your debts and plan your repayments based on the timing of your checks.  It's good for those just starting out and one of the reasons that I give it to younger relatives.

The final chapter is an admonition that you will never be as young as you are now - so get to work right away.  Boom.

All in all, I really liked the author's "in your face " style and "right to the point" writing and I find that Debt Is Slavery a great starter book.  Although you may have to look elsewhere for more detailed advice (for example, about specific investments), Debt is Slavery clearly and concisely presents a complete and aggressive vision for personal finance.