For years, I believed the formula for life was non-negotiable: go to school, get a job, take out loans for the big things (college, car, house), then spend decades working to pay those loans back. Everyone around me did the same. I remember the quiet dread of opening my credit card bill in my early 20s, wondering how I’d ever pay it all off. Money felt like a constant struggle, a cycle of work, borrow, pay, repeat – with no clear escape. It turns out, this wasn’t a personal failing at all, but rather a feature of the system. Society at large seems built on financial illiteracy, nudging us into a lifetime of debt by default.

"Debt... an ingenious substitute for the chain and whip of the slave-driver," wrote Ambrose Bierce over a century ago – a quote that feels all too relevant today. Most of us were never taught how money truly works, and it shows. In the US, financial literacy has hovered at only ~50% for years. In fact, surveys show this lack of knowledge is persistent across generations and geographies – a global blind spot in understanding money. When people don’t grasp basic concepts like interest or investment, it’s no surprise they end up ensnared by high-interest credit and perpetual payments. The result? A population locked in a paycheck-to-paycheck grind, easy prey for a debt-driven economy.

Look around and you’ll see the debt trap cycle everywhere. It usually goes like this: Work → Borrow → Spend → Work more to repay. You get a salary, you immediately owe part of it to credit card bills, student loans, car financing, mortgages, or that tempting “Buy Now, Pay Later” plan. The system makes borrowing frictionless – one-click checkouts, instant credit approvals – encouraging people to live beyond their means. As one financial observer noted, “it’s never been easier to buy something you can’t afford… and never been easier to not pay for it either”. In other words, it’s dangerously easy to slip into debt.

This wouldn’t be so bad if we were taught how to manage debt, but we aren’t. New ways to spend money have far outpaced education on how to handle money. The consequences are showing: nearly one-third of people globally struggle to meet their current financial obligations, and 1 in 5 list paying down debt as a top financial priority. Debt has become the invisible burden so many carry, often silently. It’s what keeps folks tied to jobs they hate because those bills must be paid each month. As a character in Fight Club famously quipped, “The things you own end up owning you.” In a very real sense, debt owns a lot of us – controlling where our paychecks go before we even get a say.

Why is this the default? One reason is that the business of debt is tremendously profitable for those holding the other end of the chain. Banks and credit companies make billions in interest from consumer loans and credit cards. Governments and economies run smoothly when people keep borrowing and spending, even if it’s money they don’t have. It’s the engine of consumption-based growth. And it’s propped up by keeping people in the dark about alternatives. After all, if the average person knew how to flip the script and make money work for them, who would willingly choose 30 years of loan payments? Unfortunately, our educational systems haven’t prioritized this knowledge – until recently, only a minority of schools even required personal finance classes (as of 2025, just 29 U.S. states mandate a high school personal finance course). A lack of financial literacy isn’t just an individual shortcoming; it’s practically institutionalized.

Let’s break down the typical debt trap cycle most people know:

• Earn → Spend: You work hard for a paycheck and use it to buy necessities and luxuries. Any shortfall? The difference goes on a credit card or loan (cue debt accumulation).

• Borrow → Consume: Need a car or college degree? Take out a loan. Swipe the card for that vacation you “deserve.” Debt piles up, often for things that don’t generate income.

• Pay → Repeat: A huge chunk of your future earnings is already spoken for. Each month, you pay the lenders back (with interest), and often borrow again to cover new expenses. The cycle continues, sometimes for a lifetime.

This cycle is extractive: it leaves you with depreciating assets or none at all, while siphoning away your earning power via interest. It’s a hamster wheel, and it can feel impossible to jump off. The debt trap keeps you working for money, instead of having money work for you. But what if there was a different cycle – one that builds you up instead of breaking you down?

Here’s the insight the financially savvy live by: debt and money can be tools, not just obligations. The alternative cycle (far less familiar to most people) looks like this: Work → Invest → Leverage (borrow) → Use capital → Build Wealth. In this script, you still work, but you deploy your earnings into assets – things that put money into your pocket, not just take it out. Maybe you buy stocks, or crypto, or a rental property, or start a small business on the side. The point is, you convert active income (your labor) into investments that generate passive income or appreciate over time.

Crucially, those in the know even use debt strategically to accelerate this wealth loop. This is often called “good debt” vs “bad debt.” Bad debt, as we saw, is borrowing to buy a new iPhone or pay for a fancy dinner – the money is gone and you owe more later. Good debt, on the other hand, means borrowing to buy or create an asset that earns enough to exceed the cost of that debt. For example, taking a mortgage to buy a rental property can be good debt if the rent covers the mortgage payments (and then some). Taking a low-interest loan to expand a profitable business is another example – you’re leveraging other people’s money to increase your own earnings. This is how wealthy individuals and savvy investors have been operating for ages. It’s not that debt is always bad; it’s that most of us were only ever offered (or taught) the bad kind. As one financial advisor puts it, debt “can be a powerful tool for building wealth when used strategically” – the key is that it must generate returns, not just bills.

Let’s contrast the Wealth-Building Loop with the debt cycle:

• Earn → Invest: You earn income and immediately allocate a portion to investments before spending on wants. Pay yourself first in the form of stocks, index funds, crypto, real estate – whatever you understand and believe in. Your money starts working for you now.

• Leverage → Acquire Assets: When appropriate, take on debt as leverage to acquire more assets. This could be a loan to buy property, a business loan to boost your company’s growth, or even a margin loan to buy more shares (only if you’re very confident and manage risk). The key: the asset or project you’re buying with the debt produces cash flow or appreciates, covering the cost of the loan and then some. As an example, many entrepreneurs borrow to buy or start businesses, because a successful business can repay that loan and deliver profits on top.

• Reinvest → Compound: Instead of celebrating and spending all gains, you reinvest profits and cash flows. This might mean expanding your investment portfolio, buying another asset, or paying down strategic debt to then reuse that borrowing capacity elsewhere. Over time, compounding kicks in – your assets earn money, which buys more assets, which earn more money, and so forth.

This wealth loop isn’t about get-rich-quick schemes or magic. It’s still hard work, especially the work of learning and managing investments. But it’s a path that leads somewhere better than the hamster wheel. It turns you from a constant consumer of loans into an owner of capital. When you hear the phrase “make your money work for you,” this is what it means. Instead of you laboring 40+ hours a week for decades and having little to show, each dollar you save and invest is another little “employee” of yours that works 24/7, earning more dollars on your behalf.

So, why isn’t everyone doing this? Two big reasons: access and knowledge. Historically, even if you personally figured out the wealth script, access to the necessary tools was limited. Investing often required significant upfront money or connections. Many lucrative opportunities (say, investing in a hot startup or a hedge fund) were cordoned off to the already rich via “accredited investor” laws – regulations that, for instance, require you to have over $1 million net worth or a high income just to legally invest in certain deals. Ostensibly, this was to protect people from risk, but in practice it meant millions of capable, informed individuals were locked out of wealth-building opportunities. In effect, the system said “only the rich can take these risks and reap the rewards.” If you weren’t already wealthy, you simply couldn’t access many higher-return investments, no matter how financially savvy you were. This “permission slip” mentality kept a huge swath of the population stuck with the plain old savings account and 401(k) — good tools, but not exactly the stuff of rapid wealth building.

The other reason was knowledge. You can’t pursue what you don’t know exists. In a world where formal education taught us algebra and literature but not how to balance a budget or evaluate an investment, most people never even realized they could flip the financial script. I was lucky to stumble on some eye-opening books and online content (shout out to creators demystifying money), but many are not so fortunate. Financial literacy, as we noted, has been stagnant and low. No one handed us the playbook for the wealth loop when we entered adulthood. Meanwhile, the playbook we did get — study, work, borrow, spend, retire at 65 — is showing its cracks. Wages stagnate, debts mount, and retirements get delayed. It’s painfully clear that doing things the old way isn’t a guarantee of security, let alone prosperity.

Here’s where the plot twist comes in. Over the last decade, an entire parallel financial system has been emerging — one built on open access, transparency, and permissionless innovation. I’m talking about cryptocurrency and decentralized finance (DeFi). Beyond the buzzwords and hype, what matters is how these new technologies remove the traditional gatekeepers and lower the barriers that kept average people from the “wealth loop” opportunities.

Consider this: in the world of DeFi, there is no banker deciding if you’re worthy of a loan or an investment opportunity. If you have some crypto assets and an internet connection, you can participate. You can lend out your money and earn interest, or borrow against your assets, without ever showing a credit score or asking for permission. The permissionlessness of DeFi means anyone can engage with financial services on equal footing – the code doesn’t know or care if you’re a millionaire or a grocery store clerk. Every user is welcome to the same protocols. This is a profound shift. As the KPMG analysts noted, DeFi’s power is in “removing middlemen and empowering everyday users,” purportedly democratizing finance for a broader population. No more getting “qualified” as an investor by some arbitrary metric – if you understand the risks and the tech, you can dive in.

Permissionless lending and borrowing: Traditional loans often require collateral plus a vetting process; in DeFi, many platforms will let you post cryptocurrency as collateral and take a stablecoin loan against it in minutes, with no questions asked. That means if you see an opportunity (say, to invest in another asset or to start a venture), you don’t have to beg a bank or prove your income – you self-serve your own leverage (within the limits of your collateral and the protocol’s rules). This flips the power dynamic on its head. Suddenly, a person in a developing country with a few hundred dollars in crypto has a similar ability to access credit as someone in a developed nation with a formal banking history. It’s not perfectly equal (internet access and tech savvy are required), but it’s a huge improvement in access.

Global investment opportunities: Remember those exclusive deals only for rich “accredited” folks? Tokenization is knocking down those walls. Real World Assets (RWA) going on-chain means things like real estate, commodities, or business equity can be represented as digital tokens that anyone can buy a piece of. Instead of needing $200,000 to invest in a rental property, you could buy $200 worth of a tokenized real estate fund on a blockchain. By dividing assets into digital tokens, individuals with smaller investment capacities can participate in owning high-value assets that used to be out of reach. This fractional ownership and 24/7 trading liquidity means your money is not only working for you, it’s doing so in markets that previously would have been behind velvet ropes. A recent guide on tokenization put it plainly: tokenization can “democratize access to investment opportunities” by lowering the barriers and letting people worldwide pool funds in big assets. We’re already seeing this with experiments in tokenized housing, art, even venture capital funds – all accessible in micro amounts via crypto rails.

Community and knowledge at your fingertips: Crypto also came with a culture of open education (think forums, Twitter threads, open-source research). The conversation about how to invest, how to yield farm, how to manage risk – it’s all happening in the open, on social media and online communities. Admittedly, there’s a lot of noise and nonsense to sift through, but the information is out there like never before. The same internet that popularized memes of dog coins also hosts countless free resources on budgeting, investing, and wealth management. In other words, the knowledge gap that was so carefully maintained is finally shrinking. People are waking up to alternative financial strategies, sharing ideas, and learning from each other. It’s becoming harder to keep the average person in the dark, and that’s a good thing.

Flipping the script: All these developments point to a simple but exhilarating fact – the old script is no longer the only script. We the people have new tools at our disposal. With a bit of learning and courage, you can step off the hamster wheel and start building your own flywheel of wealth. Imagine a world (very soon) where a young adult, instead of being forced into crippling student loans, can partially fund their education by leveraging their skills online and investing early in projects or assets they believe in. Or where a family in a country with unstable currency can preserve their savings in a decentralized stablecoin and even earn yield on it, instead of watching inflation eat their hard-earned money. These aren’t hypotheticals; they’re already happening in pockets around the globe.

Now, let’s be clear: crypto and DeFi are not magic wands. They come with their own risks and learning curves. Financial empowerment isn’t as simple as downloading an app – you still must educate yourself to avoid new kinds of traps (rug pulls, volatility, scams, you name it). But the critical difference is access. The door is open. The playing field is being leveled. What you do with that is up to you, whereas in the past you might never even have had a chance to play. As one World Economic Forum piece noted, the world of money is changing significantly, and knowing how to benefit from it is crucial. The change underway is that you can be an active participant in finance, not just a consumer of financial products.

We started with the claim that the world is built on financial illiteracy – and for a long time, it was. But it doesn’t have to stay that way. A small mechanism change, fueled by knowledge and new technology, can empower millions to rewrite their financial story. It starts with shedding the fear and ignorance around money. Read the books, follow the blogs, ask the questions you once felt too embarrassed to ask. Knowledge truly is power here – the power to spot predatory schemes, to say “no” to bad debt, and “yes” to opportunities that grow your wealth.

Crucially, this empowerment is no longer gated by the old guards. Crypto and decentralized finance have opened a door that cannot easily be closed. With permissionless tools and global networks, the advantages that once only the rich or well-connected enjoyed are becoming available to anyone willing to learn and participate. The trapdoors in the system are being replaced by trap door exits – exits from the old cycle into a new way of doing things.

Imagine a near future where it’s commonplace for an average person to have a portfolio of tokenized assets from around the world, earning passive income; where taking a loan doesn’t mean a trip to the bank – it might just be a few clicks on your phone, with transparent terms and no bias; where being “financially literate” is as basic an expectation as being computer literate. That future is one we can build, and we’re already seeing the foundations laid down in real time on blockchain networks and in online communities rallying for financial education.

The bottom line is this: we can flip the script. The cycle of work->debt->pay->repeat only continues if we blindly accept it. With knowledge, we can choose the alternate path of work->invest->leverage->grow and break free from the debt traps that once ensnared us. The world may have been built on our financial illiteracy, but brick by brick, block by block, that world is changing. And we’re not just along for the ride – we’re in the driver’s seat now.

So ask yourself, which cycle will you follow going forward? The one that keeps you running in place, or the one that sets you on an upward spiral? The information and tools are out there for the taking. The choice, and the change, is yours to make.

Sources:

1. Meineke, M. (2024). Half of US adults lack financial literacy, survey shows. World Economic Forum.

2. World Economic Forum (2025). Buy now, pay later: How financial education can break the debt trap.

3. Jani, J. (2020). Escaping the Rat Race: What School Failed to Teach You About Money (YouTube video transcript).

4. SmartAsset (2025). How to Use Debt to Build Wealth.

5. Solomon, A. (2025). Breaking The Wealth Barrier: Why The SEC Should Redefine ‘Accredited Investor’. Crunchbase News.

6. Homebase (2023). Understanding Real World Assets on Chain.

7. KPMG (2022). DeFi and the decentralisation illusion.

8. Pyth Network (2024). How DeFi Empowers Financial Inclusion and Accessibility.

9. Next Gen Personal Finance (2025). States with High School Personal Finance Requirements.