Recapturing the Feeling of “Out of Debt”
About twenty years ago, when I first came to a western country, I was shocked by one thing—debt. In traditional Chinese culture, there is a saying that “out of debt, out of pressure”; however, in the west, it is just opposite—when you are in debt, you are trustworthy and financially capable.
It seems to be an economic law that paper currency will always be depreciated as wealth is accumulated, resources reduced and everything inflated. The golden rule therefore is always to purchase future goods using today’s money, or making money by borrowing from others.
However, everything can go wrong if it goes over the limit during the upturns and downturns of long term economic cycles.
Taking the United States as an example, most Americans are debtors, having high living standards through borrowing. Under usual circumstances, everything seems to be normal. However, with troughs in the economic cycle, the chain of the debts may be broken, causing serious consequences or even driving the country into crisis, which was the case in 2008. Likewise, the current financial crisis in Europe is obviously a casualty of the massive amount of debt accumulated by governments over the long term.
So, living within your means still seems to be the golden rule. You can surely be more relaxed when you are out of debt than when you are in debt.