Christians today are generally polarized into two opposite groups. One feels that the Word of God forbids any and all kinds of debt at all times (see Romans 13:8). Some of these even feel that debt is a sin. The other group assumes that debt is an acceptable and normal way of life that God often uses to meet the needs of His people. Neither of these viewpoints is totally accurate. Although debt is not a sin, it also is not a normal way of life, according to Scripture. Rather, debt is a dangerous tool that must be used, if at all, with extreme caution and much prayer due to its potential for enslaving people in financial bondage (see Proverbs 22:7).
Why debt is dangerous
The following are reasons why debt needs to be treated with extreme caution.
- Debt presumes on the future. When people commit themselves to payments over a period of time, they are presuming that there will be no pay reductions, no loss of job, and no unexpected expenses. That is an improbable assumption (see Proverbs 27:1).
- Debt lowers future standards of living. Money that is borrowed today must be repaid over time along with interest, which means that those things purchased with credit will cost more “tomorrow” than they did today. Therefore, the standard of living will have to be adjusted to compensate for the added expense.
- Debt focuses on fa√ßade decisions rather than real-life decisions. Debt encourages people to make decisions based on whether they can afford a monthly payment, rather than on whether they can afford the total cost (purchase price, operational expenses, and finance charges) of the item. Debt makes it too easy to say yes to low monthly payments while ignoring the real cost of items.
- Debt leaves people at the mercy of the power of compound interest. If consumers pay the minimum monthly payment on a $1,000 debt at 19.8 percent rate of interest and never charge anything else on that account, it will take eight (8) years to pay back the $1,000 and they will pay $2,023 for the privilege of charging $1,000. In some cases, items charged on nationally accepted bank credit cards can cost upwards to eight times the original purchase price of the item by the time the bill is paid off.
- Debt could delay God’s plan. God said that He would provide for His people’s needs. Debt allows needs to be met now, from a means other than through God’s provision. Debt provides instant gratification, at the expense of financial freedom, rather than waiting on God’s perfect plan and His perfect timing.
- Debt clouds the line that separates wants, desires, and needs. Needs are necessary purchases such as food, clothing, shelter, medical coverage, transportation, and others. Wants involve choices about quality of goods. Discount shopping versus specialty shopping, lobster versus chicken, or a new car versus a good used car, and so on. Desires are those things that can be purchased only after all other obligations are met and only if there are surplus funds available to purchase them. Debt allows desires to become wants and wants to become needs.
- Debt encourages impulse buying and overspending. The chief financial officer of a national credit card company said that consumers spend on the average of 25 to 30 percent more when they charge than if they purchase with a check or cash and that a great majority of those extra purchases are the result of impulse buying. Unrestricted debt assumption and credit cards have allowed people to buy immediately beyond the means to repay, without sacrificing needs and necessities.
- Debt stifles resourcefulness. In a society that lives by the premise of “I want, what I want, when I want it,” the need to be resourceful—mending clothing, resoling shoes, and changing oil—in order to save money is no longer relevant. It is more convenient to purchase new or to charge services simply by “putting it on plastic,” and then paying for it later, regardless of interest or finance charges.
- Debt eliminates family financial planning. Rather than planning for the future and allowing for a margin of errors, overruns, and changes to dictate future financial development, debt eliminates the necessity for future planning because the course for the financial future of the family will have already been set: pay the debt that has been accumulated.
- Debt teaches children that the world’s method of managing money is normal. Debt causes children to have a casual regard for using credit cards, obtaining loans and mortgages, and keeping vows to pay the bills. For this reason, we have children who have graduated from college by borrowing for education expenses and living to the limit of their credit cards. They have never considered paying cash for transportation or anything else and have begun adult life with so much debt that they have to work for years just to pay for the debt accumulated during their college years.
Debt-free living is still God’s plan for His people today. The blessings of becoming debt free go far beyond the financial area. They extend to the spiritual and material realms as well. No one who is financially bound can be spiritually free. The effects of financial bondage on a marriage relationship are devastating. Currently 50 percent of all first-time marriages fail, and the primary reason for the failure is financial incompatibility. Therefore, it is to all Christians’ advantage to strive to become debt free.