First Person: Why I Never Borrow Money

This is a very good article I found.

Steve Thompson
Associated Press
October 22, 2010

Like many 20-somethings, I made a lot of financial mistakes before I finally grew up. Nearly every dollar I spent through eight years of college and law school was borrowed before I actually earned the money to pay for it. Between student loans and credit cards, I graduated with significant debt. And the crushing weight of that debt is why I never borrow money now.

Debt Leads to Depression

This is not a scientific fact that I've verified, but rather a conclusion I drew after crawling out of debt for more than 10 years. Every time a bill arrived in the mail or someone called to ask why a payment was late, I grew more withdrawn and disheartened. I felt like a tire with a slow leak, and I often wondered if it would ever end. To borrow money is to impose upon yourself an unnecessary burden -- both financially and emotionally.

Debt Becomes a Habit

Safe within the comfortable bubble of college, the real world never intruded to remind me that borrowing money would one day lead to consequences. It was painfully easy to pull out my credit card to make a purchase or to apply for yet another student loan. The money I earned went directly to pay for the debt I had incurred, though it was never sufficient to cover all of it. It became a habit for me to use my income to pay off debt rather than to fund the necessities of life.

Debt Provides False Security

Because I knew that I had a credit card to pay for the things I wanted, there was no reason for me to stay in my dorm or apartment rather than go out with friends or to put off a purchase until I had saved the money to buy it. During those years in school, I never felt financially strapped. Then, upon graduation, the money I'd borrowed became an albatross I thought I'd never shake.

Debt Creates Stress

This seems like a given, especially if you've ever accumulated a massive amount of debt, but when you borrow money, stress is a constant companion. For years, I lived in fear of losing my home and everything else. I worried about whether I'd be able to cover utilities after paying on my debts, and I was always looking for ways to make a few extra dollars. It's no way to live.

Saving Is Rewarding

Now, when I want to buy something expensive, I save my money. My wife and I have a separate savings account that is devoted to vacations, electronics, conferences, and anything else we want to do. We don't borrow money to obtain the things we desire; we save for them until we can afford them. And it's far more satisfying than if we just plunked down our credit cards.

Saving Makes You Think

When I was borrowing money hand over fist, my purchases were never carefully considered. I took the caveman approach to spending money: Want, Find, Buy. Now that I never borrow money, every purchase gets run through my mind many times during a period of weeks or months. Often I decide it isn't worth the effort, and my money goes toward more worthy purchases.

There Are Exceptions

What if my child needed an expensive medical procedure for which I didn't have the cash? I'd borrow money. What if my car broke down and I didn't have the money to fix it? I'd probably borrow money.

There are exceptions to every rule. But my goal is to continue saving money until I've stowed enough cash in the bank to wipe out all those exceptions. In my opinion, there is no greater security on earth than the knowledge that I don't have to borrow money, ever, to take care of my family.

Wisdom in Food Storage

Storing food for emergencies is not only wise and brings peace of mind, but is also a hedge against inflation and protection against shortages.
Example: Two years ago I could buy a 15 oz. can of pumpkin on sale for $.79. Canned pumpkin has a shelf life of 2.5 to 3 years. If I had purchased enough pumpkin two years ago for use 2-3 years out, 1) I would have had pumpkin for the holidays last year during the shortage, 2)I wouldn't be spending $1.35 for a can to use this year during the continued shortage.
Hopefully the price will come down next year; it's not likely. But if it doesn't, I am buying enough at $1.35 that I will use next year in case it's $2.00! You may ask, "Well, that's just dumb, because what if the price comes back down? You will have wasted all that money"? When was the last time you saw a product drop 50% in price? I'm willing to gamble it won't!

Live without extravagance

Warren Buffet, one of the richest men in THE WORLD, lives in a five-bedroom house he bought in 1958 in Omaha, Nebraska for $31,500.
I don't know him well enough to say he doesn't live without extravagance in other aspects of his life, but I admire the aforementioned fact.
In today's world, people seem to be out to get as much as they can as quickly as they can. We used to keep up with the Jones and now we have to one-up the Jones.
I believe that the Lord blesses us with all things. I also believe we are accountable before Him for the way we use what He has blessed us with.
Do we use our assets for extravagance? To prove something to ourselves or others? To live only in the moment and give no thought for tomorrow? To help only ourselves, giving no thought for "our neighbor"?
At the judgment bar of God, when He gets out our financial/fiscal records, where will we stand? Did we stand in a great and spacious building and point fingers at others who had less than we did? Did we wear fine-twined linen with little children in our midst wore rags and no shoes or winter coats? Did we pay our tithes and offerings? Did we cheat our employer? Our neighbor? Our creditor?
Do not judge others, only yourself? Where do you stand?

Inflation in the near future??

It is likely that inflation and higher interest rates may be coming. Obama has flooded the economy with cash and these two results are likely to happen as a result. One as a consequence of more money in the system to buy the same number (or less) of goods and one is a consequence of trying to reign money back into reserve.

Do you have major purchases in your near future? You may be better off now to go ahead and make the purchase.

For an example: we have a very old furnace, air conditioner, and water heater. We know they will not last much longer. Every summer we hope and pray that the air conditioner will last one more season.

If we buy now we can take advantage of low prices, low interest rates and a tax credit.

If we wait until we have a problem and are forced to replace them at the last minute, we may have to buy them with inflated prices at high interest rates. In addition, the tax credit ends this year.

We do not have the cash now, and likely will not in the next couple of years. We are better off purchasing them now however and saving ourselves the headache of dealing with an urgent need and paying more due to inflation at a higher interest rate.

Are you going to need a car? Now may be the time.