Money and Wealth (Part 22) – Debt (Part A) – 14 Reasons to Avoid Debt Like the Plague

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Money and Wealth (Part 22) – Debt (Part A) – 14 Reasons to Avoid Debt Like the Plague

Debt

1. Debt has been the American way for many decades, but it didn’t used to be that way.
   1. A short history of credit in America.
      1. “We usually forget, though, that debt has not always been a way of life. In the scope of American history, debt is still relatively new. Our great-grandparents pretty much believed debt was a sin! They thought it was morally wrong. As a matter of fact, I have an old Sears catalog from 1910 that says plain as day, ‘Buying on credit is folly!’ Can you imagine Sears telling you that today?
      2. “Sears wasn’t alone in the anti-debt stance, either. Have you ever wondered what the ‘J. C.’ stands for in J. C. Penney? It’s named for the founder, James “Cash” Penney. He never allowed credit to be offered in any of his stores while he was alive. It was only after his death that credit cards and store credit slipped into J. C. Penney’s business. And now, old James ‘Cash’ is spinning in his grave.
      3. “Henry Ford hated debt so much that he didn’t allow the use of credit at Ford Motor Company until ten years after the other carmakers were making car loans. With Henry long gone, Ford Motor Credit is now a huge part of the family business.
      4. “So our great-grandparents thought debt was a sin. Our grandparents weren’t quite as strict, but they still thought it was really stupid and only borrowed on a few things. In 1950, Frank McNamara changed the whole financial landscape of the country with a little piece of plastic called Diner’s Club. He had made deals with several restaurants in New York City, who all agreed to accept this single form of payment across all the different businesses as a “convenience” to the consumers. Right then and there, the credit card was born.
      5. “A few years later, in 1958, a little bank on the West Coast, called Bank of America, sent a mailing out to about sixty thousand of their customers that contained a similar piece of plastic called the BankAmericard. That same year, a new company emerged to “help” consumers make easy payments, and American Express was born. Now, of course, American Excess is a way of life, but then, our grandparents were a lot less trusting. Our parents were more accepting, though, and they started borrowing on even more things. Credit cards started popping up more often, and in 1976, BankAmericard changed its name to Visa. Heard of them? Ten years later, in 1986, Sears got into a big dispute with Visa, which resulted in Sears branching out and taking Visa on head-to-head with their new card, which they called Discover. Discover quickly became the most profitable division of Sears, so a while later, when Sears was in serious financial trouble, selling off the Discover brand was one of the things that saved them from bankruptcy.
      6. “I usually don’t dive into the history of debt in this kind of detail, but I personally find it fascinating. Credit practically didn’t exist, as we know it, just fifty years ago, but today, we can’t imagine living without car loans and credit cards! The thought of actually paying with cash at a department store has become somewhat of a novelty. Can you imagine that in 1970, only about 15 percent of Americans had a credit card? Today, 77 percent of all adults have at least one card, and the average cardholder has more than seven cards! It feels like the Visa brand has been around since the dawn of time, but Visa as a household name is just a little over thirty years old. Again, that’s some incredible marketing power.” (Dave Ramsey, Dave Ramsey’s Complete Guide to Money, pp. 79-81)
   2. I seem weird to most people because I refuse to go into debt for anything, but 115 years ago, I would have seemed normal to most people.
   3. If you follow the Biblical teaching of staying out of debt and actually paying for everything you have, people will think you are strange and may even speak evil of you (1Pe 4:3-4).
   4. But those people who think you are strange are all broke, and who cares what broke people think of you!
   5. “Albert Einstein said, “Great spirits have always found violent opposition from mediocre minds.” (Dave Ramsey, The Total Money Makeover, p. 16)
2. Americans are in debt up to their eyeballs.
   1. On average, American households have $6,140 of credit card debt. Missouri households have an average of $5,539 of credit card debt. (Merry Christmas… Here’s The Average Credit Card Debt In Every US State, com, 12-25-2024)
   2. “Bankrate’s analysis points out that when making only minimum payments, it would take more than 17 years to pay it off the national average debt: $6,140.” (Ibid)
   3. Do you remember the old commercial which went as follows? “I’m Stanley Johnson. I’ve got a great family. I’ve got a four-bedroom house in a great community. Like my car?  It’s new.  I even belong to the local golf club. How do I do it?  I’m in debt up to my eyeballs.  I can barely pay my finance charges. Somebody help me.”
   4. That commercial describes most Americans.
   5. See pages 19-22 for more statistics on how indebted Americans are.
3. Debt destroys the lives and marriages of young people.
   1. “Financial expert and author Larry Burkett used to say that modern couples spend the first five to seven years of their marriage trying to attain the same standard of living as their parents―only it took their parents thirty-five years to get there. That’s how most couples start out these days. Out of school with some student loans, one or two car loans, a new house on crazy payments and no equity, a houseful of furniture on 90-days-same-as-cash, and a pretty lousy income. In fact, the average household income for a twenty-five-year-old couple is only $27,047. With that kind of intense financial stress on a young marriage, is it any wonder why the divorce rate is so devastating for couples in their first few years of marriage? They’re starting their lives together with a boat anchor around their necks. They don’t stand a chance.” (Dave Ramsey, Dave Ramsey’s Complete Guide to Money, pp. 78-79)

4. Reasons to avoid debt like the plague
   1. You pay more for everything because of interest.
      1. For example, a house costs over twice as much with a 30-year mortgage than when one pays for it in cash.
      2. “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” (Albert Einstein)
   2. You acquire things you don’t need.
   3. You do not learn contentment (Heb 13:5).
   4. You are a bad example to others.
   5. You enslave yourself (Pro 22:7).
      1. The next time you sign your name on a loan application or swipe your credit card when you know you will not pay it tomorrow, just imagine a pair of handcuffs being placed onto your hands and a chain being attached to them with a heavy steel ball attached to it that you will carry around until your debt is paid.
      2. Braden, remember this when anyone encourages you to borrow money or take out a loan for anything except possibly your first home, or when anyone tells you that you should get a credit card. – Think of the handcuffs and the ball and chain.
      3. “Proverbs 22:7 says it clearly, “The borrower is the slave of the lender.” [Ramsey is not using the KJV.] SLAVE. A slave can’t go where he wants or do what he wants, because he is always working for somebody else. He can’t make his own decisions, and he isn’t free to become the person he wants to be. That’s exactly what debt does to you. When you go into debt, you aren’t using someone else’s tools; you’re submitting yourself to a new master. It doesn’t get any clearer than that.” (Dave Ramsey, Dave Ramsey’s Complete Guide to Money, pp. 94-95)
   6. You will never acquire much wealth.
      1. “Why are so few people in America affluent? Even most households with six-figure annual incomes are not affluent. These people have a different orientation than does Johnny Lucas. They believe in spending tomorrow’s cash today. They are debt-prone and are on earn-and-consume treadmills. To many of them, those who do not display abundant material possessions are not successful. To them, nondisplay-oriented people like Johnny Lucas are their inferiors.” (Thomas J. Stanley, The Millionaire Next Door, p. 36)
      2. You may look like you have wealth if you have debt, but it will only be the illusion of wealth.
   7. You restrict your freedom.
   8. You bring extra stress into your life.
      1. Debt is risky and dangerous.
      2. “Remember the old proverb, “Out of debt, out of danger.” (H. Jackson Brown Jr., The Complete Life’s Little Instruction Book, #895)
   9. You will end up doing things you wouldn’t normally do due to desperation (1Sa 22:2).
   10. You put your assets at risk as collateral (Pro 22:26-27).
       1. The Bible calls collateral a pledge (Exo 22:25-26; Deut 24:10-13; Eze 18:7; Pro 20:16).
       2. Never use your house as collateral (which is what people do when they take out a home equity loan, otherwise called a HELOC or second mortgage) or anything else that is essential to your survival (Deut 24:6).
   11. You will be at the mercy of unmerciful men who will take all they can if you can’t pay (Job 24:3).
   12. You are a burden on others.
       1. You could be a financial burden on others.
       2. If nothing else, you will be a mental and emotional burden on others who worry about your financial situation.
   13. You can’t help others in need.
   14. You are part of the problem.