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This 4th of July, are you a slave to your debt?

July 6, 2011

You may not be a slave to the land, but could possibly be a slave to your credit card, student loan, or mortgage.

Are you free or a slave to your debt?

Another Fourth of July has come and gone with fireworks, barbecues and time spent with family and friends. Being a former history teacher, I always think about freedom and the Fourth marking the day the Declaration of Independence was proclaimed.

The Revolutionary War was a great moment for America, but I would argue the Civil War was a more important war for Americans’ freedom.

The Civil War kept our country together, and the Thirteenth Amendment legally ended slavery in the U.S. With the end of slavery, there were many former slaves who neither had money nor education. The sharecropping system took over, which strongly resembled slavery.

With sharecropping, a farmer rented land from the landowner and gave the owner half the crop after harvest. The sharecropper usually had to purchase all his seed and other supplies from the landowner and he sold his crop to the landowner. It was very difficult for sharecroppers to get ahead.

Even though they officially had their freedom, many former slaves were still tied to the land. No matter how good of a crop they had, the owner usually came out in front while the sharecroppers worked the land just to survive.

Even though we do not see this arrangement today in northeastern Colorado, there are still many situations where people feel like they have lost their freedom because of their financial situation. So who are some of today’s sharecroppers?

First, we have the individual who is in consumer debt through credit cards. A person with $10,000 in credit card debt at 18 percent who is making $200 payments a month will take 94 months – almost eight years – to pay off the debt. This individual will pay almost double the $10,000 to pay off the card. Even though credit may feel freeing when one starts using it, that freedom can quickly lead to bondage.

Next, I think we have the fastest growing type of slavery in student loans. As the cost of a college education continues to increase faster than the cost of inflation, student loan debt increases as well. Last year 14.6 percent of college graduates ended up with more than $40,000 in debt, an increase of 4.6 percent from just four years earlier. Many graduates will start with jobs that pay less than $40,000 as an average salary. Because of great student loan debt, these students will have difficulties saving up to buy a home, start a family, and may be limited to job offers based on what they need to pay back on their loans.

A third type of today’s sharecropper is the individual who borrowed too much to purchase a home and now owes more on his or her house than what it is worth. In the last quarter of 2011, approximately 11.1 million households, or 23.1 percent of all mortgaged homes, were under water. In some states such as Michigan, more than half the mortgaged homes in the state had negative equity. Homeowners who want to move for a new job face the added difficulty of not being able to get out of their house.

We live in a great country. I believe there still is more opportunity to succeed in the U.S. than anywhere else on earth at any time. We are still the richest country the world has ever seen. This being said, many people are slaves to their debt.

If you are feeling like you are living in bondage in a free country, make your own declaration of independence this year. Start tracking your expenses, make a budget, and commit to paying off your debt. It will take great personal sacrifice, but not even close to the sacrifice thousands of soldiers have made for this country over the past two centuries.

It will not be easy and it will not be quick, but the first step to getting out of a hole is to stop digging. Start with a plan, and as you decrease your debt, make it a point to celebrate your freedom in the coming Independence Days.

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