[With a new year upon us, you have a fresh opportunity to make significant financial progress. Here are 10 reminders as to why you should make it a priority to attack your debt load in 2016 as never before. —AP]
Before we examine 10 warnings against debt, let’s look at the opposing theological positions concerning debt. One extreme is to assume that the passage “Owe nothing to anyone except to love one another” (Romans 13:8a) is a command to avoid all debt at all times. A few even label debt as a sin. The opposite extreme assumes that debt is acceptable, normal, and often God’s way of meeting our needs as He promised to do. My view is that debt is not a sin to avoid, but a dangerous tool which must be used with extreme caution due to its potential for enslaving people in financial bondage. Following are 10 reasons I believe debt is extremely dangerous and should be used, if at all, with great care and after much prayer.
- Debt presumes on the future.
Scripture clearly says, “Do not boast about tomorrow, for you do not know what a day may bring forth” (Proverbs 27:1). When you commit yourself to payments over time, you are assuming: no pay reductions, no loss of job, and no unexpected expenses. Those are dangerous and improbable presumptions.
- Debt lowers your standard of living in the future.
Money that you borrow today must be repaid over time along with the cost of renting the money, which is interest.
- Debt avoids facing life-style decisions.
It allows you to make the decision of whether you can afford to buy an item by focusing on the low payment rather than on the cost of the item. The question of whether you can afford it should include all the cost: purchase price, operational expense, and finance charges. Credit is dangerous because it is too easy to say yes to low payments over time and ignore the real decisions—can I afford it, and do I need it?
- Debt places the awesome power of compound interest at work against you.
If you borrow $100 on your credit card and make only minimum payments, do you know how long it will take to repay the loan? Would you believe up to 30 years? Items charged on your MasterCard can cost you seven to eight times the purchase price!
- Debt may delay God’s plan for your life.
Or it might cause you to forfeit a blessing God had planned to give. Before you obligate yourself to payments give God a chance to provide your needs.
- Debt evades the necessity of distinguishing wants and desires from real “needs.”
In our home we have what we call the “I want list.” The “I want list” has two rules. First, no more than five items are allowed on the list at one time. Second, we have to wait 30 days after an item is put on the list before it can be purchased. You would be amazed at how many wants and desires fade over the 30 days and at the amount of impulse buying that is eliminated! This simple idea has helped to transform me from a chronic impulse buyer into a much better steward of His assets.
- Debt encourages impulse buying and overspending.
The chief financial officer of a national credit card company said that consumers will spend 27 percent more on plastic than they would with cash or check. Any merchant who accepts plastic will verify that consumers will spend 25 to 30 percent more with plastic. That is why businesses are willing to pay a fee of 1 to 7 percent of each purchase you make on plastic for the privilege of accepting credit cards.
- Debt and credit cards stifle creativity and resourcefulness.
If we want something today, we charge it rather than “make do” with what we have. We feel entitled to what we want, when we want it, so we automatically head to the store or buy online, never considering a simpler, less expensive choice: “doing without.” It is not fashionable today to resole our shoes, repair our cars, or mend whatever wears out; we simply replace them.
- Debt and credit cards eliminate margin in our lives.
Plastic becomes our margin. Rather than planning what we need and allowing a margin for errors or overruns, we “charge” ahead and spend, thinking that if we must write a check that we don’t have sufficient funds to cover, we have overdraft protection with our credit line. Your credit card is not an asset! It is a potential future liability which becomes a liability when you use it.
- Debt teaches your children bad habits.
Your children will have a casual regard for using credit cards, obtaining car loans, and applying for student loans. When I began counseling young people, I was astounded by the size of the debt load many had accumulated. They had graduated from college by using loans and living to the limit of their credit cards. They had never considered paying cash for transportation or anything else, and began adult life with a mountain of debt that creates years of financial bondage.