I know many of you think Jamel and I have some supernatural grace when it comes to debt and spending money. In your mind, there’s no way we can understand your “necessity” for debt and no way you can live this thing with the advice we hand out.
Maybe our ideas sound so radical to you that you conclude that we don’t want anyone to have nice cars and homes or stylish clothes. Well, let me give you just a little insight into the mind of half of the Black household.
First off, my lack of stylish clothes has more to do with my lack of style than my disdain for clothes. I’ve never been much for shopping and when I do, I’ve had a history of missing the bull’s-eye, even though the hubby has helped me to greatly improve in this area over the years. Nevertheless, I did struggle with busting the clothing budget a time or two while we were getting out of debt. What I found was that shopping beget more shopping. This girl that hated shopping began hitting the stores every few days because she purchased one pair of shoes. I always had to purchase something else to match the new item I bought. I remember when Jamel decided to do away with his clothing allowance to speed up the process to freedom during one of these sprees. What essentially happened was my allowance doubled for about three months before he discovered it and called me out on it. Since I lack moderation, I tend to go all or nothing to kick superfluous habits. At first, it is hard. But, as time goes by, it’s really not that big of a deal. Fast forward, years later, when I could buy just about any article of clothing/accessory I want. I’ve been meaning to buy shades for weeks to help me deal with this blinding sun and I haven’t so much as laid eyes on a pair, not because it’s not in the budget or because I’m exercising self-control or denial; the reason I don’t have a pair is I haven’t felt like shopping for anything in months now. I know: foreign to my shopaholics. I’m not saying you will ever be like me. We’re made from different cloths, but I am saying that if you have a need to cut back to meet your long-term goals, you can do it and after several months of diligence, you just may find yourself in control of your shopping for the rest of your life.
I love viewing open houses. I really do. I’ve always dreamed that one day, one of those big, brand-new houses would be ours. There was a time when I had to stop viewing houses because the temptation to borrow and buy was too great for me. I’d see one and say, “I want it now. It’s going to be sold before we have enough money buy it outright.” Thank God for a man who knows how to stay focused. I’m over it now and as the money grows and we draw closer to buying the house I’ve always dreamed of, I’ve become conflicted. Let’s say I had the money to buy my dream home in my hands right now. Do I really want to hand it over to a banker when I’m perfectly fine living in the paid-for house I’m in right now? Or do I want to let that money continue to make more money so that in a short time I could double my money? Or, maybe I could quit my job and spend some significant time traveling around the world? All of a sudden, I’m not so sure about the decision. But that’s the beauty of being debt-free: I have all the way until I release the money to change my mind. I mean, the main reason I–being debt-free for several years now–continue to work is like many of you, I want the big home, too. The difference between those who have chosen to fulfill their home dreams now through a loan and me, is that I have the freedom to abandon that dream at any moment and to pick up another. And that my dear friends, is priceless.
It’s interesting how we Americans justify our desires, and trick ourselves into believing they are actual necessities. I thought about how I used to live in a one room cell (I mean dorm room) with another full grown man and shared a bathroom with a couple dozen other guys for an extended stay at Alabama State University. Many of you have had similar living situations. You ate cafeteria food that was less than “gourmet,” even though that word was in the name of the company that served your school. You shared a land line telephone with your roommate and the two guys next door. You also walked or biked wherever you needed to go. It was the simple life, to say the least, but you managed, and even had fun in the process.
Fast forward four years (let’s get serious, five and a half). You graduated from college, struggled to find that entry level position in your field of expertise, lived in a one or two bedroom apartment, and drove a used Honda Accord. A little later you married the girl of your dreams. Now this is where the brain damage kicks in for lots of guys. Somehow getting married translates into “You need to buy a house.” All of a sudden, the same guy who used to lived in one room with one other person in college “needs” to buy a house because he now lives with one other person. Never mind the fact that your apartment, while not worthy of MTV Cribs, has a living room, a bedroom, a kitchen, and a bathroom. None of which you have to share with your neighbors. All of which makes this place at least seven times better than your previous living arrangement, wherein you dwelled for several years. So, the pretty face, slim waist, and other unmentionable delights convince you that you need to buy a house because that’s what grown ups do. You can barely afford the monthly rent for your apartment and you have no savings, so the only option to buy the house that you so desperately need is to borrow money in the form of a 30 year mortgage. A 5, 7, 10, or 15 year mortgage are all out of the question because you could never make the payments. So you take on 30 years of servitude (Proverbs 22:7) because you tricked yourself into believing you needed something that you merely desired.
Don’t get me wrong, I’m not suggesting you never buy a house. But I am suggesting you consider the true reason you’re making such a huge move. If you and the girl of your dreams can’t manage to live in close quarters for a few years while you build a firm financial foundation, you’re probably going to have bigger problems once the financial grizzly bear of a mortgage hugs the honeymoon out of you. Think about it. You lived with some random stranger for four or five years in a dormitory. How much easier should it be to live in a small apartment with the most precious gift God has given you since the crucifixion? And again, I’m not suggesting you do it forever (although I’m not against it). What I suggest is using your young adult years to set yourself up for an unbelievable financial journey through middle age to a money-is-no-object retirement.
I can’t tell you how many times I hear people in their 40s, 50s, and 60s, telling me they wished they were in my current financial position (in my low 30s). The majority of these middle-lifers regrettably spent their 20s and 30s overspending on the desires that they duped themselves into believing were needs. Every year they dug deeper holes of debt by buying bigger houses than they needed, nicer cars than what would get them there, fancier clothing than was necessary, and spoiling their children in the same manner. In hindsight, they see the foolishness in their decisions. Young people, learn from your elders, even when they mess up.
If you work hard, have some foresight, and spend on the basics on the front end, home stretch will prove to be a much easier ride for you than it will be for normal people. Don’t be broke. Be different.
Today my wife learned that her government job would be deemed “non-essential” if the government can’t get their acts together before the weekend. That means she would be indefinitely laid off without pay. What was her reaction? “Good, I can get some things done with the downtime.” It’s usually in situations like these when the sagacity of Life Without Loans makes a tangible difference in our lives. To hear people discuss how they were going to pay the bills, fend off lenders, and make it through a possible furlough, seemed almost like watching a movie. You understand the seriousness of the situation that the people are in, but you don’t have the same worry, doubt and fear because you know that their lives is not your reality.
While it may seem insensitive to use such a time as this for a teaching point, it’s in times like these that people perk up to the truth. Proverbs 22:7 says, “The rich rules over the poor, and the borrower is the slave of the lender.” People don’t see the truth of that statement until hard times come. In times of plenty, I hear people telling me how silly it is to pay cash for cars, college, and cottages. They tell me it’s impossible to live without loans, and how much further they would be if they used “leverage.” But in times like these, the wisdom of God makes all other advice seem as foolish and risky as it really is. Sure, we don’t live in a half million dollar house, we don’t drive the fanciest cars, or wear the finest rags. However, we could do so if we lived like most Americans with similar household incomes. Instead we choose to live within our means. That means, if we don’t have cash, we don’t have. Simple and plain. We store up in times of plenty, so we can have in times of famine. We learned that from a guy named Joseph. He used that strategy to lead a government into prosperity through seven years of famine. But Joseph had the privilege of knowing which years would be plentiful and which would be lean. However, I haven’t seen the future. I didn’t see a government furlough coming, and I have no idea of how long it may last if it does come. But what I have seen is that when people borrow money, and they depend on weekly or monthly paychecks to keep their lifestyle afloat, the ship often sinks when an emergency strikes. Seldom can an American family make it through a month without a paycheck. In one of the richest societies in history, most people are two paychecks away from bankruptcy. The $900 dollar mortgage payment, the two $400 car notes, the $200 dollar student loan payment, and the $200 dollar credit card payment quickly eat away at a $3,000 take home pay. And you haven’t even eaten, put on clothes, or kept the lights on! It’s already tight with your “faithful” paycheck from your “secure government job,” but how is it going to look without it?
I want my beloved wife to have the time off she desires to take care of some things away from the office. However, there is a part of me that wants to see the government get their acts together and pass a budget so the children of the over-leveraged family won’t have to suffer the consequences of conventional American wisdom. I also have a part of me that wants people to go without for a minute so America can get a much needed wake-up call to financial responsibility.
As you can see, I have mixed emotions on the issue. And that’s probably because, for me and my house, it’s business as usual. No matter what happens, we trust God to supply today’s needs. And if we wake tomorrow, we do it again.
Peace & Thanks,
Jamel Black
Personal Finance Coach
?Better is the little that the righteous has than the abundance of many wicked. For ?the arms of the wicked shall be broken, but the Lord ?upholds the righteous. The Lord ?knows the days of the blameless, and their ?heritage will remain forever; they are not put to shame in evil times; in ?the days of famine they have abundance. But the wicked will perish; the enemies of the Lord are like ?the glory of the pastures; they vanish—like ?smoke they vanish away. Psalm 37:16-20.
It’s been a little while since my first post on this topic, but I came across an article on Yahoo! written by a guy currently living what Lenny and I discussed in our interview. I won’t do any commentary here, but read it and get out of it what you can. Click here for the Yahoo! piece.
Peace & Thanks,
Jamel Black
Personal Finance Coach
Some of the world’s richest people fall victim to the wrath of borrowing. People who make $20k want to live like they make $60k. People who have $20mil want to live like they have $60mil. Live within your means. If you don’t have cash, that means it’s not within your means. You know what I mean? You probably disagree, but I’ll be here with open arms to help you clean up the mess when your debt catches up with you. And I won’t even say, “I told you so.” That’s just mean.
I normally quote Biblical scriptures that deal with money issues, but for those who are not convinced by scripture, here are some quotes from America’s richest people.
Bill Gates said, “Leverage is a very dangerous thing.”
Warren Buffet said, “…keep enough cash around so I feel very comfortable and don’t worry about sleeping at night…You always want enough so that no one else can determine your future.”
Now, Jesus on rich people and salvation. This is not directly related to the quotes above, but it’s for you to understand that my ultimate goal in teaching financial literacy is not for people to get rich, but for people to learn to handle money God’s way and be free to do what pleases Him. Being wealthy can be very dangerous if we don’t have God’s power which enables us to put money in its proper place.
And when he was gone forth into the way, there came one running, and kneeled to him, and asked him, Good Master, what shall I do that I may inherit eternal life? 18 And Jesus said unto him, Why callest thou me good? there is none good but one, that is, God. 19 Thou knowest the commandments, Do not commit adultery, Do not kill, Do not steal, Do not bear false witness, Defraud not, Honour thy father and mother. 20 And he answered and said unto him, Master, all these have I observed from my youth. 21 Then Jesus beholding him loved him, and said unto him, One thing thou lackest: go thy way, sell whatsoever thou hast, and give to the poor, and thou shalt have treasure in heaven: and come, take up the cross, and follow me. 22 And he was sad at that saying, and went away grieved: for he had great possessions. 23 And Jesus looked round about, and saith unto his disciples, How hardly shall they that have riches enter into the kingdom of God! 24 And the disciples were astonished at his words. But Jesus answereth again, and saith unto them, Children, how hard is it for them that trust in riches to enter into the kingdom of God! 25 It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God. 26 And they were astonished out of measure, saying among themselves, Who then can be saved? 27 And Jesus looking upon them saith, With men it is impossible, but not with God: for with God all things are possible. 28 Then Peter began to say unto him, Lo, we have left all, and have followed thee. 29 And Jesus answered and said, Verily I say unto you, There is no man that hath left house, or brethren, or sisters, or father, or mother, or wife, or children, or lands, for my sake, and the gospel’s, 30 But he shall receive an hundredfold now in this time, houses, and brethren, and sisters, and mothers, and children, and lands, with persecutions; and in the world to come eternal life. 31 But many that are first shall be last; and the last first. Mark 10:17-31 (KJV)
When making purchases, understand the difference between what you desire and what you need. It’s extremely foolish to go into debt, or as I like to call it, slavery, for something that you don’t need. For example, you need transportation. You desire a brand new BMW. You need shelter, you do not need a 2500 square foot house, unless you’re the Duggars. You need to eat. You desire filet migon. You need clothing. You desire Ralph Lauren. You need to communicate. You desire an iphone. Get the picture?
The Apostle Paul told Timothy, to be content with food and clothing (1 Timothy 6:6-10). I’m not saying it’s wrong to have nice things, but there’s no way I’m trading liberty for luxury. Over and over I tell you, the rich rule over the poor and the borrower is slave to the lender (Proverbs 22:6). The principle remains the same for both small and large purchases. Know that God will supply all your needs according to His riches in glory in Christ Jesus and He will give you the desire of your heart, if you delight yourself in Him (Philippians 4:19, Psalm 37:4). The Master of the universe does not need a bank to provide for His children. God owns the world and everything in it (Psalm 24:1, 50:12). Don’t believe He needs financing to take care of you. He’s bigger than Bank of America, Citi, Chase, the Federal Reserve, and the entire global economy. When He had over 5 thousand to feed, He took a kid’s sack lunch and made it more than enough (Matthew 14:13-21, Mark 6:34-44, Luke 9:10-17, John 6:1-13). The provider He was then, He is now. He doesn’t change (Malachi 3:6).
Jamel Black
Personal Finance Coach
Foresight Christian Financial Coaching
Wisdom from the world, “If you’re a parent, all your debts — including mortgage payments, credit cards, car loans and education loans — shouldn’t eat up more than 35% of your gross pay.” – Liz Pulliam Weston (Click the link with caution, I just didn’t want you to think I made this stuff up.)
What!
Just imagine if you could invest 35% of your income instead of sending it to the bank. According to the U.S. Census, “Real median household income was $49,777 in 2009.” If your family could invest or save 35% or $17,421 per year, you’d be a millionaire in less than 20 years if you average 10% return on your investments.
My advise to teens, never borrow money. To 20 somethings, use your 20s to get out of debt, your 30s and 40s to invest and grow, and be a millionaire by 50…all while making the median household income. Warning, your broke friends and relatives will mock you and call you crazy. It’s okay, that’s a sign you’re doing it right.
Wisdom from God:
The rich rules over the poor, and the borrower is the slave of the lender. Proverbs 22:7 (KJV)
The LORD shall open unto thee his good treasure, the heaven to give the rain unto thy land in his season, and to bless all the work of thine hand: and thou shalt lend unto many nations, and thou shalt not borrow. Deuteronomy 28:12 (KJV)
There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up. Proverbs 21:20 (KJV)
“It’s stupid to guarantee someone else’s loan.” Proverbs 17:18, Contemporary English Version (CEV).
I’m not sure how accurate this translation of Scripture is, but it grabbed my attention the first time I heard it. For the more conservative Bible scholar, the KJV says, “A man void of understanding striketh hands, and becometh surety in the presence of his friend.” See, it just doesn’t “POP” the way the other one does.
Whatever translation you fancy, let’s unpack this thing and try to figure out why cosigning is such a terrible thing. For starters, when someone needs a cosigner, someone in the business of selling loans has already reviewed this persons credit history and come to the conclusion that your broke half cousin-in-law, I mean the person in desperate need of financial leverage, can’t be trusted on their own to pay the money back. So the lender needs someone who they can trust, someone with good credit, to agree to repay the loan in the event the original borrower does not.
For me, that would be enough, but I know you’re far more loving, merciful, and generous than am I, so I’ll continue. The same banks that send credit card offers to dogs, dead people, and 4-year-olds do not trust this person to make good on the debt. The same people who spend millions of dollars trying to get 18-year-olds living on student loans to borrow money, will not lend to this person. But you…your tender heart wants to believe, “He just needs a little help to get on his feet. He’s ready to turn his life around and start being responsible. Besides, he needs the car or he won’t be able to get to work.” RUBBISH! PURE RUBBISH!
Please don’t kid yourself. I know you love this person and it’s very hard to say, “No” to a loved one in need, but here are the facts. There is a very high probability that your beloved, with his great intentions, will stick you with the bill. That’s why he needs a cosigner in the first place; because professional lenders don’t believe he’ll pay up.
Don’t get trapped in the guilt trip of not being there when they need you, either. If you truly love that person, find the nicest way possible to say, “No.” Please understand me, I’m not being mean, but I am trying to save your relationship. If you are absolutely sold on the idea that whatever this person needs is a necessity, just give them the money. If you don’t have it to give, you don’t have it to give.
When the original borrower doesn’t pay the bill, you’ll be stuck with the payments. Now picture Thanksgiving dinner. You’re sitting across the table from someone who owes you money. You look at their family dressed all nice in the new clothes they bought with the money they owe you. And they act like it’s all good. And you try to convince yourself, “It’s the principle, not the money.” But the principle is, “THAT GUY OWES ME MONEY!” So you don’t talk to each other for years, and you can cut the tension with a plastic knife whenever you two are in the same room. All of this because you chose to sign a note that you knew they could not pay.
People usually cosign for others out of a genuine desire to help, but more harm than help comes out of these deals far too often. The truth is this. A person usually needs a cosigner because they have a proven track record of misbehaving with money. When someone cosigns, they enable the person to continue in that misbehavior and they also set themselves up to be the a potential victim of the same. And if you don’t know, the closest people to the debtor are the farthest down on the payback list. They know how much you love them, what they owe you doesn’t show on a credit report, and they’re pretty sure you’re not going to sue. You’ll just stop talking, be upset, and hopefully get over it.
Again, I’m not sure about the CEV’s accuracy, but Proverbs 11:15 says, “It’s a dangerous thing to guarantee payment for someone’s debts. Don’t do it!”
But what if I’ve already cosigned for someone? If you’ve already cosigned for someone, take this advise from the CEV’s rendition of Proverbs 6, “My child, suppose you agree to pay the debt of someone, who cannot repay a loan. Then you are trapped by your own words, and you are now in the power of someone else. Here is what you should do: Go and beg for permission to call off the agreement. Do this before you fall asleep or even get sleepy. Save yourself, just as a deer or a bird tries to escape from a hunter.”
Life Without Loans! My loans, your loans, or anybody’s loans!
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