Sunday, July 15, 2012


Two men were bemoaning their financial situation. Said one: “Every time I catch up to the Jones’ they refinance.” “I don’t care about the Jones,” said the other, “I just wish we could afford to live the way we are living now!”

Somehow, we are caught in a belief that we can juggle our way out of debt. On a credit card bill for $182.90 I received this week, a cryptic note in red told me that making a minimum payment of $7.00 each month, at 20% annually, would take four years and four months to pay off the debt.

The danger of revolving credit on plastic is that debt increases silently until only the minimum can be paid each month. Eventually even the interest itself is more than we can afford, so the debt continues to increase, even without more spending.

This is crippling not only large numbers of people, but also an increasing number of countries particularly in Europe. Greece is beyond the ability to ever pay its debts. Spain and Ireland are not far behind, and riots at austerity measures make any recovery more distant and unlikely.

But even worse, the refusal to take whatever measures are necessary to pay the debts, displays an entitlement mentality that cannot comprehend prosperity is earned, not a reward for living. Those who have grown up in prosperous times come to assume it is their right to enjoy it.

In the middle of the last century, as the world rebuilt and restructured following two world wars, western prosperity was built on human hard work to recover from devastation and the accompanying poverty. That in turn provided easier and better living conditions.

Today’s prosperity is built, not on human industry, but on borrowing from the future—have now, pay later. Now is the later when payment must be made; increasingly by individuals, but also by nations. Any failure of the world monetary system will likely be a gradual spreading collapse, not a sudden catastrophe like the Great Depression.

The Bible enjoins us to be debt free, the borrower is always obligated to the lender. Those who are debt free are better able to withstand financial insecurity around them. We never finally paid our mortgage debt until our late sixties. It should have been a primary financial aim in life.