Perhaps you imbibed some of the same lessons about debt that I did when I was growing up. Lessons like . . .
- “Debt is foolish at best; near sinful at worst.”
- “The borrower is slave to the lender.”
- “Interest on debt will kill you.”
And so on.
The practical results of this kind of wisdom or counsel:
- “Stay out of debt!”
- “Make do with what you’ve got.”
- “Pay cash if at all possible.”
- “If you’re going to use a credit card, use it ‘the same as cash.’ Pay it off each month.”
And let me say: these words of wisdom stood me in good stead for much of my life. I am grateful to those who taught them to me and who instilled them so deeply in my gut. I wish far more Americans lived by these principles.
Despite having been raised in an environment surrounded by the kind of counsel I have just summarized (most of which counsel I received from my parents), I realized my parents always held one ace up their sleeves—an ace that not everyone else who shared their values was willing to play.
- “If you have to borrow, then pay off your debt as soon as possible!”
For what might you feel the necessity to borrow? To acquire a car (used; at a good price); to buy a house; to get a quality education.
And paying things off quickly?
I found that my dad ignored this piece of advice in one circumstance. For some reason, Dad always held a mortgage on his home. And he never made a move to pay it off quickly.
I asked him about that apparently aberrant behavior, and he “explained” it with references to inflation. “The government will always inflate the currency, so the longer I hold my mortgage, the less expensive it becomes to pay off.”
And there was some logic to what he said.
At the same time, I noticed that holding that mortgage seemed to make him a bit nervous or insecure. Even while he was employed, I seem to recall he would express concern that he might lose his job and be unable to pay the mortgage. And then, after he retired, the mortgage continued to weigh upon him.
In contrast to my parents, who, as far as I’m aware, lived according to their principles (including the principle of the ace up their sleeves), I know of at least a few people who refused to play the ace. They refused to borrow for anything. Not a car. Not a house. Not education. Even when they had the ability to borrow, they simply refused. They considered the statement in Proverbs 22:7 about the borrower being enslaved to the lender as the absolute final word. If cleanliness is next to godliness; debt of any form is next to sinfulness.
I looked upon their apparently principled stance with some deep respect, but in my heart decided they were too extreme. I would play the ace at the appropriate time.
When Sarita and I got married, we realized we shared very similar perspectives on money. If anything, she was raised with a slightly stricter view than I was.
We came to realize that when my parents said “Make do with what you’ve got,” they were talking about buying decisions. Sarita’s parents applied that kind of wisdom not only to buying decisions, but to what my family would have never thought twice about. It was behavior that I was raised to think of as simply being “neighborly.”
I’m talking about things like being in the middle of making a cake and realizing you’re short an egg or half a cup of sugar. Or finding you need a tall ladder to get something down from a tree.
My mom and dad would never think twice about going to neighbors to borrow those kinds of things. But Sarita’s parents: No! They were going to make it on their own. “Make do . . . or do without.” No borrowing.
Move forward thirteen years into our marriage. We had never owned a home. We had never been able to afford even a down payment in northern New Jersey or Southern California where we had lived to that point.
But then we moved to Colorado, right after a severe recession in the oil industry. House prices were within our range.
Due to our unusual financial situation (having had no regular salary for years), we couldn’t qualify for a normal mortgage. But, it turned out, the house we wanted had an assumable mortgage. As long as we made the down payment, nobody cared whether I could prove my income.
And so we bought the modest house that we live in even to this day, some 25 years later. We took on the mortgage and didn’t look back.
However, in keeping with our principles, we did not follow my Dad’s path. The moment we acquired the house, we set out to pay off that mortgage as quickly as possible.
Now. Move forward a few years, and . . .
Next Time: How I came to believe that all debt isn’t bad. Sometimes, debt can be good. Indeed, sometimes it can be very good.
Meanwhile: What are your beliefs about debt? How did you acquire them? (Who taught you?) How would you summarize your beliefs in a few words or sentences? Most importantly: How do you act (or fail to act) on your beliefs . . . and why? Are you consistent in your actions? If not, why not?