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So the authentic advice is, live within your means, except when it's smart to borrow. "Live within your means' is a good suggestion but it has no economic foundation," says Lusardi. "Maybe this advice is what it takes for people to do the right thing. But let's not be judgmental about what people do."
Laura Lusardi is author of the book "Money & Happiness" and blog of the same name.
Wise advice. Regardless of what we were taught (OWE NO MAN ANYTHING!!!, THE BORROWER IS SLAVE TO THE LENDER!!, ETC., ETC.), I have believed for years that there is no adequate "one size fits all" policy concerning debt. Now that I am debt free I can speak from experience on both sides of the issue. I had plenty of debt when I was in a growning stage but it was manageable. For example when I owned multiple rental houses,it was a wise use of leverage to have those mortgages which turned out to be profitable later on. Rent paid the debt even if the houses never escalated in value (which they did). Renters paid off those houses for me, thank you very much. If I was forced to pay cash I would have never been able to expand.
The same could be true of a college student who might borrow so she can get an education that will benefit her down the road. And there are lifes emergencies that come up unexpectedley in which borrowing may be the best course of action at that time.
Generally I believe most consumer debt is not good or necessary. And yes, I believe most people need to live within their income level period. But to make a doctrine out of it and condemn or punish anyone who borrows is shallow thinking. I believe the better course of action is to teach financial responsibility and trust people to make their own decisions and stay out of their business.
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Comments
How does a young man or woman get the financing in todays world to start a competative commerce business?
We have in the last 100 years moved from horsecarts to rocket ships. From the paper computations to computerized tracking at every level, yet financing or DEBT is like the law of gravity. For any idea to succeed it must have lift and overcome drag, hence the business plan or the how does it fly?, manuel.
We throw millions at stock offerings of fortune 500 companies, and our laws are structured in such a way that our retirement is vested safely in Wall street, but what about ol main street, and the local dreams?
I once read to not owe any man anything. When I was young that is what was taught. I also later heard that if you pay your debt then you do not owe anyone anything. Interesting. I can't read borrowing is wrong. The old Testament is clear to not charge interest to your brother but the gentiles are fair game. I think it comes down to paying your honest debt and not cheat your obligation. Keep your word.
Life is good....legalistic religious dogma is bad no matter what flavor or denomination.
John
Thanks for posting that.
What a great study. Thanks for posting that, John. I was just about ready to get into Romans 13:8, how it is taken out of context to teach the sin of debt. Maybe I was asleep during my Corps years because I do not remember being told not to get into debt. I was awake when Dr. taught us Romans 13:8 and the context being the gift ministries.
When it comes to finances, I try to practice the principles of believing. I know that God is my supply. I know that He will do exceeding abundantly above all that I ask or think. And I am thankful that He has prospered me.
Romans 14:22,23 Hast thou faith? have it to thyself before God. Happy is he that condemneth not himself in that thing which he alloweth. And he that doubteth is damned if he eat (or borrows), because he eateth not of faith: for whatsoever is not of faith is sin.
Indeed it has been discussed in detail Mike. Chris Jordan did an in depth detailed study of what the Bible says about debt including the context of that oft misunderstood verse. His exhaustive study was awesome and answered most questions. It's conclusion was interesting and made common sense.
The study was given to those who were in charge of making decisions about debt policies that seriously affected peoples lives but it was ignored. Too bad. I didn't ignore it. I read it and absorbed its logic and still have a copy. Here it is if anyone wants it. Skip to the conclusion if you dont have time to read it all. Very interesting.
Agreed. "When your outgo exceeds your income, then your upkeep becomes your downfall" . I also try very hard to avoid biblical exegesis discussions online. That being said, the context for "owe no man anything" is rarely discussed. There - I said it and I think I will leave it at that.
Thanks for input Mike. I know in the business you are in you are most qualified to speak to this issue. Baiscally, I totally agree with you. Well said.
Common sense is the key. Even Uncle Harry in his simple manner used to say the only thing you should go in debt for are a car and a house. That doesnt mean you buy a brand new fancy car or a mansion. Go into debt wisely and pay it off as fast as possible. Even Uncle Harry said debt is ok. Didn't he? Yes he did.
But decades later when quoting wise old Harry, the gist of the aanswer was that "Today things are more evil than they were back then so no debt is acceptable now."
Financial principles, like math, do not change for the most part. They work for saint and sinner and across generations. And if I recall, Harry was at one time a millionaire and financed the whole Way Ministry in its early beginnings.
I'll go with his sage wisdom, thank you very much.
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