How to get out of debt and never get back in

DMDmitry Mugenov

Sasha, many people know what it's like to get a paycheck or some other money and have it immediately disappear into the bank because they have loans to repay. Why does a person get into debt in the first place? What's behind it? What layers could we look at?

AVAlexander Volchek

That's a very deep question, and there are different aspects to it. I'll start with some simple things, and over the course of the video we'll gradually get to the deeper causes. There are always straightforward reasons a person can see for having a debt or a loan, within their current awareness. They may have inherited a debt, taken out a loan to buy an apartment so they'd have somewhere to live, or borrowed to start a business. They say, “I wanted to start a business, so I got into debt,” or, “We just wanted a home of our own. That's what you're supposed to do, so now we have a debt.” Or someone decided to buy something, borrowed the money, and thought they'd pay it back gradually. But repayment wasn't so easy, and the debt remained. Many people have experienced thinking that borrowing wouldn't be a problem, only for it to become an enormous one. That's the first, simplest layer—the one the person recognizes and lives within.

Let's go deeper. That's very important. You always need to ask, “Is there a reason I ended up in this situation? Could I have chosen not to take on this debt at some point?” Many people live with debt their entire lives and don't experience it as a problem at all. It isn't a problem at all. They don't experience any problem with it. Others have no debt and live with a constant feeling that they have no money or not enough, even though they have savings. They still live in fear. My wife and I live in California—that's where we are now, for those watching. We were driving recently, and she told me some people had bought a house. I said, “Do you know the fundamental difference between renting and buying a home in America? When you rent, you don't owe anyone anything. When you buy, you owe for the rest of your life—and not just the mortgage.”

Suppose that house costs seven or eight million dollars. If you bought it right now at roughly that price, the annual property tax would be more than a hundred thousand dollars. Over ten years, you'd have to pay more than a million; over twenty, several million. How do people usually think about retirement? They'll own a house, won't need to earn money, and will spend a few thousand dollars on living expenses. Then someone says, “Wait a minute. You'll also have to pay two million dollars over those twenty years. And if you live to ninety, you'll have another million to pay between ninety and a hundred.” You sit there thinking, “Where will I get that million? I might not even have it when I buy the property.” This is one of the big issues in how we understand and feel about money. It's important to clarify your starting point. One person is euphoric about owning a home; another is delighted to rent because they don't have that loan or debt; another lives with borrowing and worries about it.

Again, the fundamentally important point is that there's a reason a person got into debt, or a reason they couldn't take an action that would have kept them out of it. Someone borrows for a business and puts almost all their own money into it. We know countless examples. Steve Jobs sold his Volkswagen van to make an initial investment. Someone sells a computer; people sell or mortgage their homes and build multibillion-dollar or trillion-dollar businesses. But huge numbers mortgage their apartments, fail to build a business, and lose the apartments. They borrow and owe for the rest of their lives. What's the fundamental cause? There's a main underlying cause: where money comes from. I'll get to that. But returning to loans, to begin studying how these things arise, you need to observe that you're in a state where you don't perceive the chains of cause and effect that led to the loan. That's number one: ask yourself that question.

Let's examine why money comes to a person. There are two sources: work and luck. What is work? Genuinely working, trying, putting in a lot of effort. Studying, searching for a job, posting your résumé, going to places, working, examining your life, making an effort instead of being lazy, sitting around drinking beer and thinking, “It works for him, but not for that person.” Truly working. The second source is luck. What is financial luck? A combination of karmic causes. Not only karmic causes—there are some indirect inherited causes and a degree of freedom—but let's mainly call them karmic causes to make it understandable. Money comes to a person through those causes, and everyone knows examples. The simplest is winning the lottery. But there are also businesses: one succeeds and nine others don't. That's simply luck. Or people were seizing factories, and all the others were killed but this person wasn't.

Just luck, and that person became an oligarch, for example. There were many more people doing the same thing than the one who succeeded. Simply luck. Here's an important point about luck and work. Some people receive money throughout their lives from both. Some receive it only through work, never through luck. Some receive it only through luck. Everyone says, “Can I have that?” And some receive nothing from either. They work their hearts out, do everything imaginable, and have no money—not just zero, but debt. Then a scammer calls, something draws them in, and they're three hundred thousand dollars in the hole. They have no idea what happened. “How will I repay three hundred thousand dollars when I was earning three hundred a month?” In a thousand months. It's an impossible situation. I'm not laughing at it; I'm illustrating something very important. We've been talking about a whole lifetime. But within a person's lifetime there are different periods.

There are periods with both work and luck, periods with only luck, periods with only work, and periods with neither, along with various combinations. It's very important to hear this. Luck cannot be present in every period. The overall system isn't arranged that way. Suppose someone says, “Ha! I have…” All right, you do—or someone else has it throughout. That's the first point. The second is that it's incredibly important to be able to receive money through work. Most people listening have probably thought, “Can I have luck?” They keep wanting luck, but they should want money through work. It's a paradox. Everyone dreams of luck. Look at what's happening in the world. Otherwise there wouldn't be casinos, scammers, quick-money schemes, ways to profit at others' expense, or a system in which people kill each other for money. People endlessly kill each other—not just husbands and wives, but children killing their parents.

It's a complete mess. Everyone is killing each other. Countries, missiles everywhere—it's a fact. Again, you should want, even crave, money through work, in the good sense of the word. That's the best thing there is. What next? Treat luck neutrally. What does that mean? Luck comes: “Ha! I'm lucky!” Or it doesn't, and you cry, become disappointed, or jump out of a window. A neutral attitude. Money comes through lu—

A neutral attitude. Money comes through luck—fine, it comes. It doesn't—then it doesn't. Treat it neutrally. This rule works very well in business, too. Some projects are completely uncertain: will they happen or not? Other things are clear: you make calls and people buy at a known conversion rate. Then there are more abstract ideas: “I'll publish a PR article,” or, “I'll put some kind of post somewhere,” or, “I'll go to a city and exhibit at a trade show.” If that isn't your standard business model, it's an unknown. Treat both success and failure in those tasks neutrally, without getting carried away. Above all, don't crave them. Craving brings comparison with others, which I've talked about on the channel, and enormous envy. It destroys so much around you: your life, your inner state, your family, your communication. Work comes first. Constant, continuing work. But even in business, it's fashionable to be someone who doesn't work.

There's a lot of talk about it, especially in the Russian-speaking world. It's fashionable to be someone who doesn't work and has created passive income. It isn't fashionable to still be working as a director—as if something must be wrong with you. That's very strange. I'm certainly not talking about misguided work that leaves you unaware of your family or your life as a whole. I mean a normal, natural approach to work. The third point to recognize—again, the first is that luck isn't constant, and the second is the importance of work—is that there are periods, or even entire lives, with no money from either work or luck. You may have borrowed when you could earn money, followed by a period when there is none and never will be. Believe me, many people watching this video will never have money. And many who've never had it will. Those who think they won't have it will somehow find it growing or appearing. They will have it.

That's a very important point. If there will never be money, you will, of course, end up in debt, taking loans, and living a very difficult life. Whole countries live that way. We know countries where huge numbers of people live in endless debt. Someone recently told me, “Can you imagine what's happening in India? There are so many people and so little money or economic activity that they're inventing utterly unnecessary jobs. One person opens the elevator door, a second presses the button, and a third opens the door on another floor. They do things that don't require extra people, just to earn enough to eat an orange.” And there are countries where, if you're born there, the probability of not receiving money is essentially absent. If you're born with a United Arab Emirates passport, for example, money is put into your account immediately—I think it's a million dollars—and you receive it later. They also give you property, plots of land, and so on. You're supported by the place you're in.

So you live and simply have money. Whatever you do or create, you can't even put yourself in a different situation. Some people want to spend and lose their money, but they don't lose it. Do you know how many businesses in the world are built on “false” money? And how many businesses never get built because others are operating on that money? Take two companies, Amazon and Ozon. Investment in Amazon began in 1997, I think, and in Ozon in 1998. As far as I know, Ozon has never made a profit and is still loss-making. Amazon only began generating profit relatively recently. Huge sums invested in these businesses—how many businesses did they destroy, businesses started by people who sincerely wanted to build something but simply didn't have enough money? That's a fact. I can say that in some of my own businesses and ventures, if I'd had additional assets of a certain size, I'd have had a much greater chance to crowd out competitors, enter markets, and create different things.

That would have had nothing to do with my intelligence or making the right moves. It depends on other causes. Why did I have or not have that money? You hear a remarkable thing in the stories of many wealthy people—not people who built Apple, say, but many others, especially in the Russian-speaking world. “We washed windows, then something happened and we had a factory.” Or, “We cleaned and sold jeans, then something happened and we had a financial investment company.” I always ask, “Where's the missing piece where the money appeared? What actually brought it in? How was it really earned?” I've often heard, “Oh, you just had an opportunity.” Or people say, “I was poor and ate onions, and now I'm rich.” But those things aren't connected: you were poor, ate onions, and became rich, while someone else wasn't poor and also became rich by earning their own money. Sometimes money helps you make more money. Sometimes it helps you lose everything you've earned, your entire fortune, and everything else—

If the elements of earning through work and luck are absent. Understanding this is the deepest layer of understanding loans: what the problem is and what a person should do about them here and now. Of course, everything depends on the situation. In some cases, there's a clear, simple sequence: one, two, three. Reduce family spending somewhere, don't be afraid to find a new job—different things. Elsewhere, a person is in a hopeless situation they'll never get out of. The concept of bankruptcy exists for a reason. Some situations can never be resolved, under any circumstances. What could truly help you never end up in debt again? Your own awareness and a genuine understanding of cause and effect. What is that? A genuine perception of how the world and events work, and real self-knowledge. That's one of the hardest tasks a person faces.

One of the hardest tasks. It may sound abstract, absurd, or pretentious, as someone might write in the comments. But it can truly keep you out of debt. Perhaps there are possibilities within energy, an order to them that lets you maintain some balance in the system. What I'd recommend reflecting on, though, is not how to avoid debt, but how to experience it calmly if you do get into debt. That's another, very serious level of perception. If such an event occurs, it could happen for various reasons, even ones unrelated to you. Let's be honest: do we control whether we end up in debt? No. A grenade could hit my building, or someone could accidentally enter my property. Let's take a hypothetical case. Ten children happen to walk in off the street, and my dog goes crazy and devours all ten—kills them. Would I be in debt in America, in California? I'd be bankrupt. I'd be sued for the rest of my life.

No umbrella insurance, no extra “umbrella” protection would cover it. I'd be sued for the rest of my life. That's the point: ending up in debt is something you can't control. It can always happen. We drive cars, live in a world with wars and different economic circumstances, and can make mistakes. There can be theft. My wife could start a business, die, and leave me a debt in that business. All kinds of things can happen. Again, what matters is being able to remain in that state, live through it calmly, and understand the time and situation you're experiencing. That's the important thing. Most people just want to escape debt and become rich, win the lottery and get money. Someone who doesn't want to earn it through their own—

Someone who wants to gain the right to be free of debt without their own effort, without understanding all the reasons they're in debt. There is always a reason. You've taken a particular, very specific series of actions. It didn't happen for no reason. It's your own responsibility, though you may not be aware of it in this life. Readiness for that is a step toward freedom, a step toward freedom.