“The rich rule over the poor, and the borrower is a slave to the lender.”  -Proverbs 22:7.

As we progress toward financial freedom, most of us will go through three financial lifestyle stages: borrowing, spending, and saving.  The first two, borrowing and spending, are stepping stones to achieving the final stage of saving.  Saving is the only stage with the power to progress us toward our ultimate goal of financial freedom.


We are all born into the first lifestyle stage, the borrower.  As we grow up our parents pay for our needs (food, clothing, shelter) and, if we’re lucky, pay for most of our wants (toys, concerts, movies).  This is necessary when we are young and dependent, but as we mature and begin to earn our own income we reach a decision point where we either lengthen or shorten our path to financial freedom.  If we continue as borrowers, our financial future begins to be sacrificed by the decisions we make in the present.

Borrowers tend to live for today with no thought of tomorrow.  Borrowers may try to keep up with the latest trends in fashion, technology, and foods.  They often do this by amassing credit card debt and then they increase that debt by carrying credit card balances over month-to-month.  Next the borrower focuses his attention on a new car, focusing solely on the “monthly payment” and not on the price of the vehicle and, more importantly, the cost of the financing.  Some borrowers pay as much or more in interest than they do for their car.  If a borrower makes it past purchasing the car of their dreams without reaching financial ruin, they almost always fail when purchasing a house.  The borrowers buy more house than they can afford because their loan officer approved it.  They often put little money down, leaving themselves with little equity and massive debt.  Once borrowers move into their house, they learn that their neighbors have gone on an elaborate cruise. Not to be outdone, borrowers find a way to take out a home equity loan (because their credit cards are already maxed) to go on a cruise of their own.

While this lifestyle stage is certainly fun at the moment, it is unsustainable over the long term.  Borrowers are furthering themselves from financial freedom and not moving toward it.  When the goal is financial freedom, the borrower needs to mature as quickly as possible before digging themselves into a hole too difficult to climb out of.


The second financial lifestyle stage is spending.  Spenders are not regularly accumulating debt and are learning how to live on their current earnings.  They are doing this through the use of a budget and knowing that they have a purchasing limit.

Spenders believe that they work hard and therefore can play hard, and by play hard they mean to spend their entire disposable income.

The spending stage is an improvement over the borrowing stage but still leaves the spender vulnerable to the larger expenses.  The spender finances their replacement vehicles, purchases their home without 20% in equity, does not save a portion of their earnings for retirement and has to apply for a loan when needing to pay for unexpected health bills.  The spender is not able to absorb the larger financial burdens in life and when they do, they temporarily need to revert back to being a borrower.


The last and only stage capable of getting us to financial freedom is saving.  The saver improves upon the spender’s budget by allotting a portion of their earnings to savings.  Savers not only budget but have exceptional purchasing discipline; they focus on buying goods they need and avoid many of their frivolous wants.  The allotted earnings they set aside each paycheck go toward building an emergency fund, investing in their future retirement, and increasing the equity in their home.

This savings allotment provides 5 incentives not available to the borrower and spender: reduced stress, ownership, a brightened outlook, contentment and the ability to give back.

As the saver progresses, they may begin to have a new perspective on the old adage “a penny saved is a penny earned.”  The utilization of ownership and understanding of compound interest enable the saver to progress toward investing and making their money grow.  This savings provides the saver with tools and opportunities to quicken their journey to financial freedom.

All of us are born a borrower but not everyone experiences the financial lifestyle of a saver, and with that, its associated benefits.