So What's the Problem with Debt?

As the second installment in this series on the steps to financial freedom, I would like to discuss the subject of debt.  Specifically, I want to put the focus on the problems that debt brings into our lives.

So what's the problem with debt?









Debt allows us to get things quicker than we would be able to otherwise, right?  That's got to be a good thing!  I mean, young adults can go to college when neither they nor their parents have any money.  We can lean on our credit cards to help us make ends meet when there is more month left at the end of the money.  We can always drive a new car without having to sacrifice (ouch!  pain!) to save for it.  These all sound like good things!  What's the deal?

One problem is that when we go in debt, we trade a lot of our future for a little of our now.  A nice vacation funded by debt lasts a week, but the debt obligation for that vacation may last for months or even years into the future.

Interest payments drain the purchasing power from our paycheck.  Whenever we borrow money, we pay back more than we would have if we had paid cash.  For example, we thought we got a great buy in that car we bought for $14,000 with a book value of $15,000.  However, we really took a beating because we bought it on credit.  After interest payments, we really paid $16,000.

Debt repayment obligations cause lost opportunities.  This is a huge!  Being loaded down with debt payments locks up our future income such that we can't take advantage of opportunities when they arise.  Here are some hypothetical examples.

• some great investment property becomes available at a killer deal
• that dream home we've always wanted goes up for sale
• there is a wonderful young couple in our church who wants to adopt but needs help with travel expenses
• An elderly widow in our neighborhood is struggling to pay her utility bills

If we are shackled with debt payments, we have to say "Bummer. Can't do that right now."  These opportunities and others just like them will fly right by.  Instead of the joy we could have had, we'll only be left with regret.

Debt brings unnecessary RISK into your life.  We always assume our income is going to stay the same as it is now or get better.  We rarely consider what would happen if we had a negative event like a layoff, unexpected illness or injury, etc.  I'm convinced that most of the time people would decide against going into debt if they spent a few minutes thinking about the potential down side.

And lastly, "the borrower is slave to the lender" (Proverbs: 22:7).  Debt places us in the role of servant to a master other than God.  It takes our focus off of Him.  Debt is a huge distraction and God wants our undivided attention.  He does not want us to have other masters.  Anyone who has ever been overwhelmed with debt payments will testify to the fact that it is more difficult to worship God while we have the anxiety, pain and frustration in our life that comes with living paycheck to paycheck (or worse).

Next up in this series:  "Annual Budgeting".