That's A Lot of Zeros
By Ed Gungor
August 14, 2012
With the average four-year graduate owing around $22,500 for student loans plus $3,173 in credit card charges, ordering your finances should be a priority before you commit to two-plus additional years of school.
SOME THINK DEBT IS SIN, PERIOD
They cite Bible texts like, “The rich rule over the poor, and the borrower is servant to the lender” (Proverbs 22:7). And since we should only be “ruled over” by God, they claim we should never borrow money. This may be an overstatement, but these texts certainly show debt is dangerous and should not be recklessly handled. In fact, debt should make us nervous—for a number of reasons.
The main reason debt is dangerous is because it is too easy to spend borrowed money like a drunken monkey. It’s money we haven’t invested the “sweat of our brow” for—it came easy. And the old adage, “easy come, easy go,” really is true.
Second, spending borrowed money ends up demanding more “sweat” than waiting to spend money you’ve earned. This is the case because after you spend the borrowed money, you have to pay back both the principle (the amount originally borrowed), plus interest. Interest really expropriates the sweat and is ultimately the gateway into the land of the stuck, financially speaking. Always remember that borrowing money is expensive—it costs more money than what you originally borrowed, and the longer you owe the money, the more it costs.
Most people are unaware that financing an item in order to procure a cheaper payment does not help them in the long haul. For example, if you have a credit card with a $6,000 balance, the credit card company will only demand a small monthly payment of about $150 (sounds good so far). But $50 of this will go to cover the interest, and it will take you 210 months (or 17 years) to get out of that debt. Over that time you will have spent thousands upon thousands of dollars in interest while the value of the item you purchased has long been zero.
WHEN BORROWING IS BAD FORM
Here are some situations where you should fiercely avoid going into debt:
Paying your everyday expenses. Unless you are in an emergency, you should never borrow money to pay your monthly bills. If you do so, you will dig yourself into a deep hole that will be extremely hard to get out of.
Borrowing for all your “optional” spending. In the past several decades, our expectations of what is normal have changed so drastically that what used to be viewed as a luxury is now seen as essential. Our standards have skyrocketed. (Consider that not too long ago a 1,200-square foot house used to be considered standard for a family.) Many borrow money to buy perceived essentials like iPhones, designer sunglasses, flat-screen TVs, new cars, etc. Americans are so used to expecting these standards that we can no longer afford our lives. The quest to do whatever it takes to get whatever we want (including throwing that longed-for-item on an 18-percent credit card) seems so … necessary.
THE ROOT OF BAD DEBT
The root of bad debt is the hatred of delayed gratification. For whatever reason, we moderns don’t want to wait for the stuff we want; we want it now. Though we all recognize life takes time and a bunch of sequential steps, we seem to forget that when it comes to purchasing something. A baby first learns to turn over before she sits up; she crawls and walks before she runs. There are no shortcuts. Each step is important and each step takes time. If you want to become a concert pianist you must learn to read the notes, do your scales and play “Chopsticks” before you can play Mozart in a symphony hall. Life has a law of progress that must be honored—there are steps that cannot be skipped. But from fast food lines to get-rich-quick schemes to fast diets to getting in shape in 30 days or less, Americans are obsessed with getting things quickly. We can barely endure the microwave minute. It is this rabid love for speed that makes us most vulnerable to consumer debt. Let’s be honest, we all love the sound of “buy now, pay later.”
Yet the secret to financial strength and success is a commitment to employing boring things like patience, determination, persistence, courage, fearlessness, steadfastness and loyalty. But these things are not very sexy. Add on top of this the popular feeling that life-owes-me-what-I-want-’cause-I’m-so-awesome-and-I-want-it, and you have complete justification for buying all you can as quickly as you can. After all, aren’t you worth it?
And let’s not forget the concept of reward and recognition. Here you are, weary from spending four years in school—you’ve worked so hard, sacrificed so much. Sure, you have $30,000 in school debt, but you deserve to treat yourself after all those tests and papers. You’re about to enter the work force, so you can afford to treat yourself to that new gizmo and some sweet wheels, right? Who cares that it might drown you in debt—after all, you have waited so long for those purchases, at this point they look much more like must-haves than luxuries.
Though debt can create a bad-news-bears scenario, there are times when borrowing is the wisest thing to do. Wise borrowing is a way to get the money you need in order to invest in a future—a future that would not be available to you without such an investment.
For example, if you can’t afford to pay for college, borrowing money in order to go is a wise option. According to data from the Census Bureau, people (on average) with a bachelor’s degree make about $23,000 more a year than people with high school diplomas.
The most recent figures available show college graduates made an average of $51,554 in 2004 compared to the $28,645 for adults who had high school diplomas. Getting an education means you will probably make more money per hour of work than if you don’t get that degree. This means borrowing money for college can actually make your future sweat worth more.
There are other good reasons to borrow money: to buy a home, to buy a dependable car, to start a business, to deal with an emergency, to pay off debt at a lower rate, etc.
But again, make sure the cost of borrowing is overshadowed by the opportunity the borrowing creates for you.
God wants us to trust Him with every part of our lives, not just the spiritual parts. Jesus was the one who said entry-level faith embraces the idea that God is a provider. He told His followers that God provides for the birds and flowers, and since we matter more to Him than birds and flowers, He has our back (Matthew 6).
Though we are to trust God to help us in our financial lives, that doesn’t mean we are not to do all we can to make sure our financial lives are in order. When talking about God’s provision, Jesus said we are to seek God’s Kingdom (His influence) and God’s righteousness—which is doing things “right” (or God’s way).
Doing what’s right includes things like the commitment to spend less than you make (learning to budget). It means employing patience in your purchasing choices. It means being wary of borrowing money and fostering a commitment to pay off debt as quickly as possible. It also means working to improve yourself so you bring more value to the marketplace.
The improper use of money can be a threat to your faith. Jesus claimed: “No servant can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money” (Luke 16:13). Serve God, live well and always wait a minute and think it through before you make a purchase.
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