The debt cycle

Becoming debt free is incredibly important as debt drives the economic cycle which is very easy to get trapped in due to the social norms of renting a home, getting a mortgage, financing a car or other "buy now pay later" deals. These are often given without the relevant education so please watch the video below for a breakdown on how the system works from Ray Dalio:

The excessive debt constantly being added to the money supply means the cost of living is continually inflated and if you own assets such as property, a business, stocks and shares or natural resources you will profit from the extra money people are paying. If you only own liabilities such as debt you will be the one making the owners of those assets richer which is why budgeting to set some money aside for growth is critical to breaking this cycle and achieving financial FREEdom.

Reading between the lines

As of August 2022 Consumer Price Inflation (CPI) for the UK is currently 9.9% but when you look at the individual statistics food and beverages is actually 13.1% which is one of the most critical purchases any of us need to make. Motor fuels is at 32.1% which is also vital for commuting to work and if you compare what you're paying for individual goods and services now against what you did a year ago you may find more disparity in the numbers. It's therefore important to be aware of the individual costs that are affecting you, and what strategy you are using to grow your income to hedge against that increase in your expenditure and avoid your wealth decreasing each day.

Once we understand the system we can begin to make more informed choices on what we buy, when we buy it and how much. If there's a particular product that you want but might not need, look at the returns in that company's stock over time and think about how much richer past purchases are making them, and how much better or worse off you are for those purchases. If we don’t take the time to secure our route to FREEdom, we will follow the set path of working for decades to pay off debt for the things we can produce ourselves, and could do so on our terms while spending more time doing the things we love.

I hope you've found this information useful, please send in any questions or feedback using the email button at the bottom of the page.