Foundations of Finance

When I watch my favorite tv show I inevitable have to watch the commercials too (I don’t have tivo). About 50 percent of the commercials I end up watching are “Get out of debt!” ads. Everyone is trying to help us get out of debt. Well, I have special remedy that will cost you absolutely nothing! Don’t get IN debt! That’s the answer.

Publilius Syrus said, “Debt is the slavery of the free.” Today, unfortunately, debt is rampant in our country. According to one study, about 43% of American families spend more than they earn each year, average households carry about $8,000 in credit card debt, and personal bankruptcies have doubled in the past decade. Those are some pretty scary statistics.

All too many of us enter into debt agreements for silly and selfish reasons. Whether it’s credit card debt due to absurd amounts of shopping or buying a house that we can’t afford and is too big for our needs anyway. A very simple and evident way to keep from having huge amounts of debt is to not get into that debt in the first place. Multiple credit cards, spending money we don’t have on “toys” and other unnecessary purchases can lead to large debt very quickly.

There are obviously some good reasons to get into debt. I can see three that are legitimate: (1) buying a house (a house you can afford!), (2) buying a car, and (3) education. Those three things are worthy reasons for borrowing. There are also some situations that we don’t anticipate or expect that may require money that we don’t have right on hand. Emergencies can’t be predicted but they can be planned for. Getting money matters in order and knowing where money is going is a big part of being prepared. When irresponsible debts are created a major factor of money control is lost.

An American Abolitionist named Wendell Phillips said, “Debt is the fatal disease of republics, the first thing and the mightiest to undermine governments and corrupt the people.” Although I do feel that there are some occasions where going into a small amount of debt is reasonable and in some cases necessary, I agree that if our debts as individuals aren’t kept in order and under control, debt can and will become a “fatal disease”.