Upside-Down Nation: How Debt Fueled Our Madness


As a culture, we’ve been given more freedom than any people in the history of mankind, and we’re selling it back – one monthly payment at a time.

We’re plugged into a system that trains us from birth to follow a very specific life path. Do as you’re told, and you’ll be rewarded with a life of security and comfort.

It starts with good grades. If you can pull that off for twelve years, you’ll have the privilege of borrowing $50,000 to attend a college.

Play your cards right there… and a life-sucking (but decent-paying) corporate job awaits you.

Finance a car, apartment furnishings, and weekly entertainment. You work hard – you deserve it.

Work. Buy. Debt.

Get married. Finance a house. Have 2.5 kids.

Work. Buy. Debt.

If we work hard, debt allows us to finance a fantastic lifestyle. In order to pay for that debt, we have to work even harder. Slowly but surely, our souls are crushed by increasing responsibility, stress, and workload. Battered, we turn back to debt to inflate our lifestyle even more. Our loans carry even more burden, which forces us in even deeper.

Welcome to the next 40 years of your life.

Is this what you call security?

Is this comfortable to you?

When did we start selling our freedom to Countrywide, Capital One, Nordstrom, and Sallie Mae?

“Any idiot can face a crisis – it’s day to day living that wears you out.” -Anton Chekhov

Wake up and choose…

Look, there’s nothing wrong with having a nice house. Or an office job. Or attending college.

As long as that is what you really want.

The issue here is that – by default – we slowly sleepwalk ourselves into a trap. A painful cycle fueled by debt, consumerism, and conformity.

And the more we finance our spiral into this cycle, the more we become stuck.

We’re bound at the hip to jobs – even if we hate every second of them – in order to pay our mortgages, car loans, credit cards, and inflated monthly bills.

This typical life path is fueled by unconsciousness. We wander busy, fragmented, and distracted for decades.

We make our most important life decisions based on the monthly payment. Our purchases don’t reflect our values, instead they swell to whatever amount bloated corporations will allow us to borrow at the current time.

As a result, we’re a nation of people living in upside-down houses and driving upside-down cars.

Our addiction with debt has morphed us into an upside-down nation.

“Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need.” Tyler Durden

Lifestyle Inflation: A Harvard Case Study…

One of my favorite case studies on this trend came out of Harvard a couple years ago. It compared the spending of the typical one-income family in 1970 to the typical two-income family in 2005.

Here’s what they found:

Average 1970s One-Income Family:

  • $32,000 inflation-adjusted income
  • Saved 11% of their take home pay on average
  • Paid 1.4% to revolving credit, such as credit cards or lines of credit.

Average 2005 Dual Income Family:

  • $73,000 average income
  • Saved nothing (0%). (Actually, U.S. had a negative savings rate overall at this time.)
  • Paid 15% to revolving credit, such as credit cards or lines of credit.

Even after adjusting for inflation, the increasing amount of dual-income households have more than doubled the income of our 1970s counterparts.

What have we done with this increase?

Plummeted the amount we save to nothing. And increased the amount we pay to revolving debt tenfold.

Sure, the adjusted cost of living has gone up in some areas – but that’s not the real culprit.

The real culprit is lifestyle inflation.

The adjusted cost of most expenses has not increased 200% since 1970, but our ideas of what we deserve certainly has!

Our lives are leveraged, borrowed, and financed to the max. What was excessive five years ago is standard today.

We want bigger, better, and faster. And we’re willing to swipe our credit cards to pay for it.

Meet Nadine, Mark, Angie, Bernie, and Pam…

Let me share three examples with you. These examples are based on several real-life people I’ve met. They are used with permission, although the names have been changed.


Nadine is a 23-year-old, single, recent college graduate. Her part-time job during school paid her bills, but didn’t prevent her from racking up $50,000 in student loans.

She considers herself lucky to be employed, even though it’s an entry-level, hourly corporate job running errands for a group of people who don’t take her seriously.

Nadine has always talked about moving to San Francisco and working for a non-profit she really believes in. A nice dream, but she’s still dependent on her family to help make ends meet from time to time.

She’s slowly realizing that the transition from college to the “real world” is placing her face-to-face with her financial habits and lifestyle choices. If she wants to make a shift, she’s going to have to confront them head on.

Mark & Angie are a young couple in their early 30s with two children under the age of five. Mark works 80-hour weeks at a local consulting firm, but desperately wishes he could pursue his own business ideas.

Angie has been a stay-at-home mom since the birth of their second child, but constantly feels pressured to re-enter to workforce (to help pay the bills), despite their current $75,000 yearly income.

Two years ago they bought the biggest house they could afford in a popular neighborhood. It promptly lost $55,000 in value within the first year.

They’re fed up with putting off their financial life and tired of the stress and constant money-related arguments over the last year. They are ready for a different way.

Bernie & Pam are approaching their 50th birthdays – and for the first time – they are looking around at an empty house. The last of their children has recently moved away, as they contemplate the next step.

They’re proud of the life they’ve built, but are starting to regret leveraging so much debt along the way. A recent 30% loss in their retirement and savings was a very rude financial wake-up call for them.

They’ve always wanted to travel – but have made excuses for years. They also regret not being able to financially help their college-age children transition more smoothly into their adult lives.

They have the means to be able to both travel and lightly spoil their future grandchildren, but know digging into the problem starts by downsizing their house and aggressively attacking their decades of debt.


These are just three all-too-common examples of the thousands of stories I’ve run into. These are not extreme cases.

Nadine, Mark, Angie, Bernie, and Pam are our neighbors, friends, and family members.

A new set of terminology…

Bankruptcy, foreclosure, short sale, bubble, meltdown, universal default, and “too big to fail”.

Sure, most of these terms have been around for some time. But these days, they are household names. Financial struggles that we’ve been putting off for years have finally let themselves into our living rooms.

Year after year, the notion that “debt is a tool” was beaten into our brains. We swallowed it hook, line, and sinker. Unprecedented leveraging of debt fueled our meteoric rise and our spectacular meltdown.

It’s easy to blame our situation on the “industry”, on mega-corporations, or on Wall Street. But we have just as much of the blame to share ourselves.

I have no idea if these banks, corporations, and government programs were “too big to fail”. But I do know one thing:

Your life is too important to stay trapped.

And therein lies the hope.

Hope is found in the realization that all of us have the power to control our destiny from today forward.

Each and every one of us has the ability to fight back.


photo by flatworldsedge

41 thoughts on “Upside-Down Nation: How Debt Fueled Our Madness”

  1. Adam,
    I couldnt agree more. After our 7 short sales and hitting rock bottom, we have bounced back … now trying to help others.
    And yes, even during some very dark times, we had hope and eventually fought our way back. Most importantly, we kept our family together.
    Thanks for sharing…..

  2. I really enjoyed this post. It’s sad but true – we’ve become a society obsessed with wanting more. Not just more stuff, but more debt to pay for said stuff. Everyone I know complains about being broke, yet all of us (myself included) have SO much. We are taught that we have to take on debt to be creditworthy, which basically just means worthy of taking on even more debt. Not sure what the answers are, but the problem is definitely very real. Thanks for this post!

  3. Baker,

    Wow! That Harvard study really sums it up. Thanks for sharing. I haven’t seen that one before. It’s really about changing our mindsets from consumers to contributors. Once we do that it opens up a world of possibilities.

    Joshua Millburn

  4. What a great article! I’m not sure exactly where we went wrong as a nation, but it is our culture that now has to change or we are doomed to slow growth and high unemployment at best. Not only does being debt free make sense financially but it is good for the soul and mental well-being. Stress is greatly reduced and life is more fun when your not worring about whether you can make you next payment or not.

  5. GET OUT OF MY HEAD. With the exception of the career path Mark is on, that summary is my family’s situation exactly. Right down to the value lost on our 2 year old home. You scare me!

  6. Spending some time back in Canada now, I can really see how crazy the lifestyle inflation is.

    In order to live like people my age, I would have to earn over $100,000 a year and even then I would just be breaking even.

    $100,000 income
    -$40,000 taxes
    -$24,000 mortgage (Entry level house in Calgary)
    -$12,000 two car payments, insurance expenses, gas, maintenance
    -$6,000 household bills, utilities
    -$6,000 Furniture, household expenses, maintenance, etc.
    -$12,000 food and entertainment
    -$6,000 travel
    -$3,000 hobbies

    =$0 dollars at the end of the year.

    My wife and I can live quite comfortably on 1/4 of that income. Sure we don’t have a fancy house anymore, no cars and try to cook at home more, but….

    We live a travel lifestyle, work on projects we want to, have time to exercise and eat healthy, and really enjoy our lives.

    The choice is consumption versus experiences. Are you willing to limit your consumption to 1/3 of your peers? It is hard to take a bus, when everyone else is driving fancy cars, but they all hate their jobs and work far too much.

  7. Heath J Beckstrom

    The last three comments pretty much summed it up. Now, more than ever, we need to adjust that mindset we grew up with to release the debt and make room for the saving! Everyone can live that life they dream of with a plan in place, and living within our means. My wife and I are still working on these adjustments;-) Keep the informative blogs coming!!

  8. Baker,

    You are so right. More stuff does not buy contentment or happiness. It is what you do that matters- not what your have. Spending your life energy on having more instead of doing more only leads to the hopeless work, buy, debt cycle you describe. Great post.

  9. It’s true that we just want more and more stuff. Things that don’t mean anything. Things that even after a couple months, we wish we hadn’t even purchased. There is so much waste. Recently, I’ve been cutting back and trying to declutter. I would like to be debt-free, be able to save a bunch of money each month, so I don’t feel guilty when I want to take a vacation, so I can purchase new windows for my home, etc. A lot of times, it’s the choices we make. Sometimes, life just throws us curve balls and we have to go with it. I would really like to enjoy having a car without a car payment, but accidents keep finding me and setting me further back.

  10. You do a good job of highlighting the personal choices that can bury us in debt. And I hope people who need to hear your message take the first steps toward freedom.

    But so few people talk about the role our national, economic choices have contributed to the debt society. When I was a child in the 1970s, I remember my parents planning to pay for big expenses with credit cards because CREDIT CARD DEBT WAS TAX-DEDUCTIBLE! (sorry for shouting but I’m still astonished at this)

    President Bush told Americans to go shopping so international terrorists wouldn’t feel they’d won after 9/11.

    And all our economic indicators measure spending growth.

    A step in the right direction might be to use “quality of life” indicators instead. Or to stop supporting corporations over citizens. The change we need is bigger than the personal.

  11. Thanks Adam for sharing the numbers from Harvard. Lifestyle inflation and debt seem common for a lot of people. It took me my last year in college to start realizing that I needed to change my financial habits.

    It’s been quite an adjustment, but I’m much happier now as I learned to live a simple and enriching life instead of impulsively buying things which led to debt.

    I think You Vs Debt will be a valuable resource for people and I think you’re the perfect person to lead it.

  12. Baker, I love the Harvard study! You can’t help but be amazed (and a little distraught…especially if you are the statistic) by the numbers. Numbers don’t lie.

    But, I love your ending…there is hope:

    “Your life is too important to stay trapped.

    And therein lies the hope.

    Hope is found in the realization that all of us have the power to control our destiny from today forward.

    Each and every one of us has the ability to fight back.”

    AMEN! Let’s start the fight 🙂

    Dr. Laura

  13. Lifestyle inflation is one culprit, but I know plenty of people who drive old, used, ugly cars, shop at thrift stores, and still have a tough time making ends meet.

    One major problem between today and the 1970’s is not just that the “adjusted cost of living” has risen (the price of gas, tuition, medical expenses) but also the tools we need to be a normal, functioning person in society has also increased. We need a computer, home internet, and a cell phone … without these, we can’t be taken seriously.

    In the 1990’s, it was common for friends to make plans with each other ahead of time. These days, people call at the last second to say “hey, we’re heading to dinner in 5 minutes; wanna come?” If you don’t have a cell phone, you’ll miss these crucial bonding/social experiences.

    So I don’t think it’s fair to allege that loads of people are overspending on fancy cars and clothes. There’s more to it than meets the eye.

    1. There are a lot of people who are barely making it… but most of the people I know who’ve had this problem were affected by a larger problem. (Last time I did the math, cell phone + internet + gadgets = only 10% of the budget.) Usually the real problem was student loans, expensive housing, or an issue that kept them from a good full time job.

      There are some changes between now and 1970 that have pushed people into the barely making it category. There are fewer good entry level jobs now than there were in 1970, and more people stuck with big student loan payments for a useless or partially completed degree.

  14. @Paula

    I agree that the cost of living for some things have increased, but compared to how my parents and grandparents lived, I can see huge amounts of lifestyle inflation.

    People live in houses and apartments triple the size
    Even children have TVs, $300 headphones, designer clothes, etc.
    Every one eats out more often.
    We all travel much more.
    We have expensive cable subscriptions with Tivo type recorders and surround sound stereo systems.
    Even in Canada, people are installing airconditioners.
    We have expensive barbecues and large patios with outdoor furniture.
    Children now have literally hundreds of toys.
    Families typically have multiple cars and often have recreational vehicles.

    As a child growing up in the 70s I can definitely attest that society as a whole spends much, much more now. As I outlined in my comment above, my wife and I can live on a 1/3 of the money as my peers just because we avoid the lifestyle inflation.

    Most things, relative to income, have actually decreased in price over the last three decades, the problem is that we are never satisfied with what we have.

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  16. Donna Reynolds

    I really enjoy reading your website. As I have said before, I think I have a problem relating to this whole problem of debt. I have spent my whole life doing what you advocate and don’t understand why people have to be told debt is a problem. When you showed the Harvard study, maybe I see a reason. I grew up in a household where you got what you needed, but you had to need it to get it. We had a nice house and 2 cars, one big and fancy, that was my fathers status symbol. My parents were obsessed with saving money. I just didn’t get why they “spend” more money. Why they made everything so hard. I asked a friend that was in her 70’s. She said my parents grew up in the Great Depression and it was a mind set. After living through that, they were never going there again. I got it.
    Another issue is credit today is very different than it was 50-60 years ago. There were no Visa Cards; credit cards were from a specific store or business, ie Esso (Exxon) for gas, Hechts (department store). Most of these were paid off every month. Really the only thing people got on credit were their house and a car. My parents house payment was $86 and that included taxes and insurance. When Visa etc. credit cards became the thing in the 70’s and beyond, that is when this whole thing took off. I have always had a fear of debt; that if I lost my job, I wouldn’t be able to pay my bills and that was scary. I guess that was a good thing.
    I spent most of my life tied to a well paying job that I hated. I did it because I thought I have to work anyway, it may as well be a job that pays well, because I thought everyone hates their job. The difference with my story I guess is, I didn’t live large. What I didn’t put into my house, I saved so one day I could retire. It paid off. When you say you don’t have to stay at a job you hate, I wonder if I could have done it different. Did I really have to stay 33 1/2 years at a job I hated every minute of.
    The world is a different place now than it was when I was growing up and I guess that is why I see this the way I do. You are doing a good thing for people who need the help, guidence and information. Keep doing it. Donna

  17. Hi Adam,
    I don’t know in America, but in New Zealand here, housing has seen huge inflation when compared with annual salaries.

    I read a few years ago that in the 1970’s in Auckland it only cost about 1.8 years average annual salary to to buy an average priced house, now it costs something like 8 times or something ridiculous.

    I think this has been partly because of women hitting the workforce (not bad in itself) increasing incomes and spending, but then making people more willing to borrow more to pay for increasing house prices.

    In some countries now, banks are offering fifty year home loans, where the parents will start paying off the debt and then the children will continue to pay it off. To me that’s criminal and absolutely stupid.

  18. Great Stuff as usual Baker.
    My family and I started downsizing in 2009 including moving from a 5,000 sq ft house far away from the center of things, to a 1500 sq ft place right in the middle of orange county with great Schools for my young boys.

    At first I thought the move would be impossible. What was I going to do with 5,000 sq ft of stuff? 8 Garage sales later and my wife earning a masters degree on craigslist 🙂 and we still have about twice as much stuff as we really need.

    We are still selling and I can tell you it has been the most freeing experience we have ever had to just get rid of all this stuff, half of which we forgot we even had.

    I think I read somewhere that the average American family easily has 20K worth of stuff that they could sell and not really notice it was gone. You know how statistics are, but there that one certainly rings true to me.

    Keep up the great stuff. How about those gas prices driving all over the country? Great timing huh? 🙂 A few years ago we took our trailer out for a few months around the Western United states when gas was hitting that peak 5 bucks a gallon. I have a feeling we will see that again soon. Drive with the wind and always go downhill. 🙂

  19. This is unbelievable.

    You versus Debt is outdoing Tim Ferriss. It’s outdoing Julien Smith. It’s outdoing everybody.

    If Seth Godin only had one blog to read, he’d do well to chose Man vs Debt.

    Adam, you’ve got something most people don’t have. You’ve got the drive, character, vision, and talent to provide desperate people with the solution.

    After reading this article and watching the video, I’m lost for words.

    This is incredible.

  20. You hit the nail on the head. We are stuck in the rat race, constantly chasing that elusive ‘thing’ that keeps us buying more stuff we don’t need and using debt to pay for what we can’t afford. Congrats on getting You vs. Debt going by the way. I look forward to seeing the launch.

  21. Very nice article. Do you have a link for the Harvard study you mention? I’d really love to read that in it’s entirety.


  22. I LOVE THIS! We are programmed from birth through a constant bombardment of adds telling us we are “not good enough” unless we subscribe to a specific lifestyle – one that has been toted as the “American Dream.” Well, its time to change the definition of the American Dream into something we CHOOSE rather than being coerced into! Keep up the good work! I’ve been promoting your site everywhere!

  23. If you feel trapped, your first step should be to stop having a negative attitude. The only person who can make you feel bad about yourself is yourself.

    Put on a happy face, figure out what it will take to get where you want to go, and start going there.

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  25. Wow, fantastic and thought provoking article. Debt definitely seems to be a major driver in modern society, and being reminded that it doesn’t have to be that way is something many of us could stand to hear more often. (Of course, the fact that we even need to be told that we don’t have to go into debt to lead a good life is a bit depressing…) You vs. Debt sounds and looks like it’s going to be fantastic, and I can’t wait to see what you do with it. Keep up the great posts, here and there.

  26. Such a timely post. It’s so hard to break the mindset of “what am I going to get” when you have money. Putting money towards paying off debt is the last place where people look to spend their money these days, which then grows their debt even more.

    I think it’s really important to step back and think about every purchase you make, big or small. We can get on shopping kicks, and depending on our moods, we can purchase a load of things that we really could live without.

    One of the biggest problems with racking up debt these days is simply the ease of it. Swipe a card and you’re all set. You got what you wanted at that moment. If you told that same person to go to their bank account, take out money in cash and then go pay for it, it would be a lot different. Sometimes people just need to see what they are spending, especially when it comes to credit cards, instead of swiping all day and then cringing at the end of the month at their credit card statement.

    And you couldn’t have ended it any better, just realizing that there is hope. It’s about time that many of us own up to our finances and live life freely.

  27. Great post, and completely dead on! Unfortunately it took me until after grad school to realize the debt wasn’t worth it, but I’m concentrating on cutting it down, saving up a little extra, and digging myself out of a hole I never intend to fall into again. Wish more people really took a look at articles like this at a young age before making such life altering decisions.

  28. My experience with what you are saying (and every word of it so true!) started when I was 13 and got my first job at McDonalds earning $3 per hour. I felt I couldn’t possibly put aside savings on so small an income, and yet I was able to spend it on designer clothes. I also counted on the fact that one day “I’d be making good money”. That, I thought, would be the time to start saving.

    As I worked my way through college my jobs got better and my income went higher. And yet I noticed a disturbing trend: it was never enough. When I was broke, living with roommates, working minimum wage, I could only dream of a VCR. Later, I was earning better money and the VCR was a “necessity”. Then I dreamed of a car. A few years later I took on the car (and the payments), but now there were more things I dreamed of.

    One day I woke up and realized that while my income had gone up by a factor of almost 10 from that first job at McDonalds, at no time did I ever feel like I had enough. I was “missing out” on just as many things as when I was at my poorest.

    Suddenly I realized it would always be this way. A six-figure income would not bring about any less “dreaming”, any less wanting of the things I couldn’t have. It just shifted the curve to pricier items, and saving seemed just as impossible. This was a big motivation in turning my life around and getting a handle on debt and the consumer rat race.

    Congrats on a very well-written article.

    1. @RuralAspirations

      I completely agree. It really is hard to break out of that cycle of lifestyle inflation. The only thing that worked for me was to move to a foreign country so that I could escape all the peer pressure from back home.

      It is really hard not to consume when everyone around you is buying more all the time. Many people think they are not susceptible, but we are ALL influenced by our peer groups and society. The only real way to escape the consumption cycle is to leave everything behind. Is it hard to buy things when you have to fit it into a backpack.

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  30. Gotta say I love this. 🙂 I wish I could actually explain to people how we can afford our cars, instead of people either assuming we pay astronomical amounts each month or thinking we’re somehow rich. (Which most people won’t, since in the military environment you know approximately how much someone should make each month.)

    I sometimes wish I didn’t go to college. It’s going to be nearly $40,000 when I’m done this December and the timing just sucks. The employment odds aren’t there like I was told they would be. So I’m looking into another option that would solve my problem and provide myself and my husband with a better life for a few years — long enough to wipe the slate clean and let me start over on the other side.

    We’ll also be paying off our current Subaru (the only car of our current four that has a loan) this summer and trading her in on a new Subaru. Yes, taking on a loan, but we’ll be trading in ours plus as much of a down payment as we can muster. (I’m hoping to knock off as close to $10k as I can get us.) While I vehemently hate debt and dislike loans, it is a tool to help us get what we’d like and I know we can be responsible. We can get a good rate, do our best to not be upside down on it and other than my education loans we have nothing else that we owe.

    And prepare for even more flak from a bunch of neighbors who can’t get their money straight and assume nobody else can either.

  31. This issue goes beyond debt. Working paycheck to paycheck has the same kinds of problems sans one debt-payment bill. You’re still bound to your job because of all these other bills if working is your only means of paying them.

    I’m not sure people are sleep walking as much as they’re simply going along with what others are doing. For example, how many twenty-somethings think the only way out working a 9-5 job is to become “famous on the internets” or run some other kind of online business. Quite a few I think.

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  33. It is very hard to swim against the tide, at least in the nice school district where I live, so I can see why so many get trapped. My son is bummed that we don’t have cable and people I talk to think it’s bizarre even though we have internet, basic TV and netflix. I don’t care about my clothes and cut my hair at Hair Cuttery. I also drive my two kids around in a 2007 Honda Fit or a 2007 Kia Sedona. I think both cars are great (and paid off!) but everyone I know has beautiful super SUVs with DVD players and heated seats with $800 a month car payments. I have the world’s oldest cell phone, I don’t buy my kids toys other than on holidays or when they earn them and well, you get the idea.

    These are just a few examples but we save about 30% of our income this way. I also find people think we are weird. I am okay with that but I imagine many people would be too insecure to live how we do.

  34. Upside down indeed Baker, Upside down indeed. Today, most normal people have turned into consumerists that pay credit card balances with other credit cards. Your You vs. Debt course couldn’t have come at a more needed time.

    Dwight Anthony
    Financially Elite Blog dot Com

  35. Any chance on getting a citation for that Harvard study? I’m curious about the details and can’t seem to find it.

  36. Tatiana Covington

    I manage an average 30% savings rate from net available income, I buy everything second-hand, I forage for a good half of my food and hit up charities, I dress from laundromat leavings and know the best dumpsters in town… Let’s just say I’m hurting for nothing.

    Debt? Who needs it? Back in the 1980s I racked up quite a bit. Then my income entered a prolonged drought. So, I just stopped paying, and dumped the debt (much as I dump yesterday’s meals in the day’s morning.)

    Nothing happened… life went on… the banks I blew off have since disappeared. I endure! That’s what I’d recommend for those students who’ve racked up 1 trillion in debt.

    Just dump it. Stop paying. Most of it went for shit anyway, such as ethnic feminist lit-crit. Let’s see how far that goes in the coming Age of Robots.

    And I do watch TV, Jerry Springer especially.

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