Below are some rather colourful illustrations to challenge the way you think about the volatile mix of employment and bad debt (also know as wage slavery).
The entire world wants you to become a wage slave and they want you stay a wage slave. This really puts you behind the eight ball as you fight an uphill battle toward financial freedom. Question is; do you have the guts to fight for it?
Below is a list of organisations who are quite happy for you to remain a wage slave:
The Tax Man: I remember reading in the Financial Review before I even became an accountant, that those who pay more for tax advice generally pay less tax. Typically people who need to pay heaps for tax advice are not the wage earners, but the self employed, the business owners and the investors. As a wage earner, the government collects its tax from you every month from your employer by way of “Pay as You Go” withholding. Business owners, the self employed and investors can defer their tax payment until the very last day it's due (usually 11 months after the end of financial year!)
As a wage earner your tax optimisation options are limited to basic strategies such as negative gearing and salary sacrifice. The self employed, business owners and investors however enjoy a myriad of tax planning options limited only to the imagination of their accountant (and the boundaries of the law, hopefully).
As such it’s in the tax office’s (and the government's) interest that you earn wages so you can keep the government coffers full.
The Bank: Banks love wages slaves. Why? Because wages slaves as defined in my previous rant spend beyond their means, which means they often use borrowed money from credit cards, car loans, holiday loans and personal loans. Because this is unsecured debts (bad debt as described in another previous article), the banks get to charge higher interest rates and cash in big time.
What's got me thinking; is that it's actually harder for the newly self employed, business owners and investors to borrow as much money as their employee counterparts. This is because their income is irregular and not guaranteed. So in this way they're actually prevented from borrowing beyond their means, which is a good thing.
The Salesman: Anyone flogging big ticket consumer discretionary goods (ie the fancy stuff you can live without; cars, televisions, jewellery, holidays etc) are more than happy to peddle interest free their interest free payment plans if it means they'll sell more product. And as long as you're employed full time you can go your hardest! Just don't miss a payment or else you'll get flogged with a 20%+ penalty interest rate. God forbid you lose your job.
So do you get the picture; bad debt + employment = trouble. You'll find yourself going to work just so you can pay off your debts, and that my friend is not conducive to a happy life.
So until then,
Shut Up and (Stay Out of Debt)
Chris Hooper