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Tip #6 Good Debt! Bad Debt!
Owe no man anything, but to love one another, for he that loveth another hath fulfilled the law (Romans 13:8).
“The rich ruleth over the poor, and the borrower is servant to the lender” (Proverbs 27:7).
I was asked the following two questions: What is debt and is there such a thing as good debt? Let's review the definition of debt.
Wikipedia defines debt as "an obligation that requires one party, the debtor, to pay money or other agreed upon value to another party, the creditor, with interest added to payment. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase."
In other words, debt is owing a creditor a predetermined amount of money that has interest attached to it, along with an agreed upon payment plan. With these types of debts are also penalties for late payments and for being in default for failure to re-pay the debt.
Personal loans and credit card debt are very risky! We have good intentions of repaying the debt, but let's be real! Life happens! Along comes unexpected financial demands such as health issues, family issues or car problems, which causes one to put these types of debt on the back burner to repay at a later date. When we fail to pay debt back as promised, we will receive, "torture" calls daily from the creditor, and the loan(s) will go into default causing one to have negative hits on their credit report.
In my opinion, there is no such thing as good debt! Whenever we borrow money whether for a home, car loan, vacation, luxury items, racked up credit card debt or personal loans we become a slave to the lender.
Now if the question were asked, "are there good investments?" My answer would be, “yes!” The purchase of a home can be a good investment, if one has properly prepared financially and emotionally for purchasing a home. Homes rarely depreciate in value, whereas a car depreciates in value the minute you drive it off the car dealer’s lot. Credit debt and personal loans are poor investments, they only add sorrow to the borrower and never add value because we purchase items that will no longer be in our possession and we end up paying for something we don't have in our possession. With interest rates for these types of loans at 23% to 27%, I would advise individuals to run! This is poor debt and not good wisdom short or long term!
I would advise, "don't be a servant to the lender!" When thinking about accruing credit card debt or personal loans, read the scriptures above. My recommendation, if you need to use a credit card, only purchase what you can pay off at the time payment is due. For example, if you are going to charge $200 in credit card debt today, can you afford to pay the entire balance off when payment is due? If not, don't use the credit card, save for the purchase, then buy it at a later date. Most times when we wait to purchase an item, we usually change our mind about it. With this type of rethinking, you will avoid emotional spending.
Tip #7 Disciplined: Learning to be disciplined in the area of money can be a challenge when one is used to spending without a plan. Establishing a financial plan is a great step for becoming disciplined. Individuals disciplined in the ways of spending will have control over their money instead of their money controlling them. A disciplined individual will plan before spending, plus being disciplined has great benefits.
Tip #8 Moderation: Christmas is slated as a major holiday for retailers. A time in which they strategize to make large profits from consumers. This is also a time Believers/consumers need to be wise in remembering what the true meaning of Christmas is about - it's not needing about materialistic fluff.
When God fed the Children of Israel manna in the wilderness, He instructed them to take only what was needed for their family. God wanted them to learn to avoid living an excessive lifestyle and to be content with what He provided for them. This is called living with moderation and contentment. Those that gathered too much, the excessive manna turned into worms and smelled. Using credit cards for Christmas is an unplanned venture and is hazardous on one’s finances, plus it will take months or years to pay off - now that's excessive living, which has no return on investment! Plus, it has the smell of potentially turning into unpaid debt
Then the Lord said to Moses, “I am going to rain bread from heaven for you. The people are to go out each day and gather enough for that day. This way I will test them to see whether or not they will follow My instructions.
(Exodus 16:4 HCSB)
Money is a tool.
- To purchase products or services.
- To barter with others.
- To wisely invest
- To help others
- To tithe
Practicing moderation is a good way in controlling your finances and not having your finances controlling you!
Tip #9: Planning: When establishing a financial plan, having a mission statement is a good idea to start with. Your mission statement is your vision or dreams you want to accomplish in life. The written mission statement should be no more than a paragraph including your life's purpose. See examples below:
Example One: I want to further my education as a chef learning how to good delicious meals with only 6 ingredients at low cost. Once accomplished, I would love to start a non-profit, preparing meals for low income seniors at minimal cost.
Example Two: Obtain a job in computer tech field. Save enough money to purchase first home for me and spouse, set up a vacation fund for yearly vacations, and start a monthly Bible study in our new home for new Christians.
Your mission statement should include your faith and personal endeavors, because that is what our lives are composed of! Once you pen your mission statement to paper, you now have a map for your future goals. To be continued in Tip #10
Tip #10 Goal: With Tip #9 you were ask to record your mission statement, which is your vision. Now that you know your vision for your future, let's turn that vision into workable goals. (For financial sheet template click here).
In Example One on Tip #9, the individual’s vision was to:
Further his education as a chef learning how to cook delicious meals with only 6 ingredients at low cost. Once accomplished, start a non-profit, preparing meals for low-income seniors at minimal cost.
To turn his vision into goals, it would be to:
Goal 1: Enroll in Culinary School to perfect his skills as a specialty chef.
Goal 2: Establish a specialty food line using six ingredients only.
Goal 3: Setup a non-profit to help seniors eat healthy at low cost.
Once goals have been established, now it’s time to write a workable plan using action steps. For example, action steps for Goal 1 could be to:
- Research affordable Culinary Schools within a 50-mile radius (near his home).
- Compare tuition costs and how many months to finish.
- Research major restaurants in his area that would hire a newly graduated chef.
- Research if the qualifying schools offer job placement after graduation.
- Do the math to learn if able to go to school full-time and to work part time to maintain current living expenses.
Written dreams/vision gives one a roadmap for their future personally and financially. Dreams without a plan is just that, a dream!
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