To borrow or not to borrow, that is the question.

Today’s blog will provide some thoughts regarding the use of debt. There are many different opinions on this subject. Circumstances and stages of life certainly play a role in these decisions. For example, a younger couple will most likely need a mortgage to buy a house, but those approaching retirement are usually better served by having their home paid for.

Let’s look at some points of consideration regarding debt:

• Never over-extend yourself on a large purchase (vehicle, home, business or farm) that’s just too expensive. Live within your cash flow means.
• Avoid using debt to fund an immediate consumptive purchase (e.g. a large trip or vacation).
• Don’t put any purchases on your credit card unless you have the funds to pay off the entire card balance immediately.
• Consider a 15 or 20-year mortgage or paying ahead regularly on your 30-year mortgage. This will save a substantial amount of interest paid over the life of the mortgage and you will own your home more quickly.
• After a large debt has been paid off, be very intentional about using that extra cash flow wisely. Consider increasing your savings, investing, or charitable giving vs. consumption (raising your standard of living).
• For those of you contemplating holding a mortgage for adult children or grandchildren, consider giving them a gift towards their down payment to help them get a traditional loan instead of being their “bank.” From our years of experience, this approach usually has a happier ending. They will build their own credit rating and should develop good payment habits.

Finally, it’s always prudent to seek the wisdom found in timeless Biblical truths. Scripture doesn’t prohibit the use of debt or call it a sin; however, it does clearly communicate that avoiding debt is the “best way.” The following are just a few of the references that address the issue of debt:

• Proverbs 22:7
• Psalm 109:11
• Deuteronomy 15:4-6

Decisions you make regarding personal debt could significantly impact the success of your financial plan. Contact us today; we’d be glad to discuss your specific questions and provide you with objective recommendations.