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What you can and can’t afford

BY RUSS CROSSON AND KELLY TALAMO


GREG AND ANNIE COULD TALK
 about anything. Communication was a strong point in their marriage, but they struggled when it came to discussing their budget. The root of the problem was simple — they had different definitions of “freedom.” For Greg, freedom was having whatever they wanted. For Annie, freedom was having what they needed without debt.

Tension grew with every budget discussion. Annie listed their monthly expenses and found ways to reduce them. Greg countered with their combined monthly income, citing that they could tithe and save, even if they kept spending the same amount.

“Listen, Annie!” Greg once shouted in frustration. “It’s right here on paper — combined income of $110,000. We can easily afford what we have. You should be thankful for the blessings we can afford.”

“Blessings?” Annie questioned. “Is that what you call $1,000 in monthly payments? All income is a blessing, Greg. But going into debt for things we don’t need is voluntary slavery.”

How could two intelligent people have such different perspectives? They viewed their money through different lenses. Greg looked at the numbers through the world’s lens; Annie saw them through the lens of God’s Word. Have you ever heard yourself agree with Greg’s perspective? Unfortunately, many of us have been fooled into believing that “as long as we can make the payments, we’re fine.” But, that’s a lie.

It’s easy to minimize the power of debt because your income is greater than your payments. On paper, that makes total sense because we have a sufficient “margin” for the extras. But our lives are never lived on paper. They’re lived in the reality of car repairs, unexpected expenses, medical bills, and more.

The Borrower and the Lender
Proverbs 22:7 reveals an important economic principle: “The borrower is slave to the lender.” But, as much as we say we believe God’s Word, we sometimes turn a deaf ear to this verse — and look to the world instead.

Behind every debt is a master. The fact that we’re able to pay on time doesn’t make the lenders go away. It only makes them a little nicer to you. Try missing a monthly payment, and watch the lender’s attitude change. Quit paying a debt, and see how free you are.

Monthly Payments
Despite reality, most people don’t see monthly payments as a bad thing. They see they can make the payments, and they presume they always will. Why should anyone wait to have something, when they can buy it today with a loan?

People want to possess everything that once took their parents 30 years to build (but without 30 years of work). And they’re busy trying to keep up with their neighbors. They buy things, even if they can’t really afford them (“afford” meaning you can pay cash). As Will Rogers once said: “We spend money we don’t have [borrowed money] to buy things we don’t need, to impress people we don’t even like.”


 

The World’s Lens
The world doesn’t help us, either. Commercials bombard us with the idea that we “deserve it.” And they make everything seem easy to obtain. I recently received a flyer promoting gas grills for warm-weather cookouts. I observed that the flyer never listed the grills’ prices. I saw $15.11/month, $24.78/month, $28.17/month, and so on … but no total price. And on top of that, it never mentioned the interest rates!

At the height of the real estate market boom, I received an imitation check in the mail from a bank. It said that, due to rising home values in my area, I qualified to “get ahead” by combining my mortgage and other debts — plus, I could get an additional $44,000 in cash.

These ads are illustrations of how the world tries to make us feel dumb by not living its way. Words such as “smart,” “savings,” and “getting ahead” are designed to fool us into believing lies about money.

The Consequences
Unfortunately, we use the ease of credit cards and payment plans to immediately have things without currently paying for them. Think about that. We live in a time when things aren’t really paid for. We can buy almost anything with a payment plan: refrigerators, microwaves, cell phones, and so on. We let the world fool us into forgetting that debt is debt, and it must be paid back.

Consider this: if I owe $2,000 on a credit card and make only the minimum monthly payments, it will take 32 years to pay it back! That’s right — 32 years to pay it back by making minimum payments. Why? Because most of the payments are going toward interest. Although the cost varies with each credit card company, remember that these creditors allow us to make minimum payments for a reason: it maximizes their profits.

Delayed Gratification
Borrowing today sentences us to a restricted lifestyle in the future. The wiser choice is to live within our means. Instead of gratifying a desire by buying something now, we need to be willing to wait. We need to know what our priorities are.

Looking back, there were times when my wife and I could have even paid cash for an item, but we had higher goals (such as building an emergency fund and saving for our kids’ education). By employing the principle of delayed gratification, our financial lives stayed in better balance, and we had peace of mind.

Is Debt Always Bad?
At this point, you may be wondering if debt is ever okay. All debt can create bondage and should be feared. But consumer debt should be your worst fear. Generally, debt may make sense for items that could increase in value (like businesses and real estate).

However, our economy has experienced financial meltdowns that teach us that even “safe investments” aren’t immune from the dangers of debt. Millions have seen the value of their homes quickly (and without warning) fall below the balance due on their mortgages. This means that you should exercise caution, even with “good investments.” Be sure that if you have debt tied to a business or real estate, you can afford it if it fails.

It is possible to live without dangerous debt (and that includes car loans). It requires discipline, but it is possible. If you can’t pay cash for a consumer item, don’t buy it. Wait. Save. Pay cash. Making payments is not the same as being able to afford the things you want. c

Don't Be Fooled

Don't Be Fooled

Through anecdotes and enlightening explanations, Russ Crosson and Kelly Talamo will help you gain a new perspective on your finances. The Truth About Money Lies will help you make wiser financial decisions based on biblical truths.

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