Avoid the Use of Debt

Does the topic of money trigger feelings of excitement, anticipation, peace of mind or rather fear, dread, or even panic? As I look to the future, I have come to the conclusion that economic uncertainty is our new normal so we need to be prepared to weather it. So how do you practically maintain a sense of calm when the next crisis may be lurking right around the corner?

Let me begin with this illustration. When we bought our first home we decided to move our 30-gallon fish aquarium across town — without draining the tank. While it wasn’t among the smartest things we have ever done, we did learn some valuable life lessons as we watched how the fish responded. After carefully setting the fish tank on the front seat of the truck, we slowly began our short journey. In spite of how cautiously my husband tried to drive, the water in the tank sloshed violently splashing all over the front seat. What was fascinating to watch, however, was that while the surface of the tank was literally forming small white caps, the fish in the tank had instinctively dropped to a water level in the lower part of the tank oblivious to the turbulence just a foot above them. They rode out the chaos unfazed by the wild ride.

In last month’s column I briefly touched on five fundamental principles that cultivate a sense of financial contentment. Let’s explore one of those five principles that will help you prepare to live below the white caps regardless of what’s going on around you: Avoid the use of debt.

Solomon warns us in Proverbs 22:7 that “the borrower is servant to the lender.” One of the most basic and powerful tenets of good financial health is the limited and wise use of debt. From a biblical perspective, borrowing is not prohibited. However, we are cautioned to carefully consider the many consequences of our borrowing decisions. Besides limiting future financial options, there is the heavy burden debt can bring into the marriage and family, the discord and discomfort between family and friends when a well-intentioned loan has gone unpaid, the crushing burden of student loans and credit cards…and the list goes on. The consequences multiply exponentially when storm clouds gather — economically, relationally, psychologically and spiritually.

Here are some questions to ask yourself when considering taking on debt:

Does this make economic sense? Will the economic benefit be greater than the cost?

What is your underlying motive for taking on this debt?

Will this fulfill a goal in your life that cannot be accomplished in any other way?

Can you defer this decision until a later date?

Do you see a responsible way to pay this back in a timely manner without violating your other financial priorities?

Do you have other assets that could be sold to satisfy this debt if necessary?

If married, are you and your spouse in agreement with this decision? Don’t gloss over this one!

If this involves family or friends, does it have the potential to damage the relationship if anything goes wrong?

Is there a sense of peace as you consider this option?

Where you find yourself today isn’t nearly as important as where you head in the future. If you are dealing with consumer debt, eliminating it can provide an immediate tangible return on your investment not to mention a tremendous sense of financial freedom. Next, consider a long term plan to reduce your future financial obligations by paying down loans on appreciating assets like your home. Then, exercise great caution when taking on more commitments that will leverage future resources. Use the questions discussed above to begin your evaluation. If you don’t feel you can be objective, seek wise counsel from trusted people in your life — parents, friends, or professionals. Debt presumes on the future so handle these decisions with great care.

Reducing or eliminating current debt while taking steps to cautiously manage future debt will help you avoid those inevitable white caps on the surface of your life. It can truly be an exciting journey with benefits on so many levels! So take a deep breath and jump right in.

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