Lesson 2 Debt and Borrowing

1. Lesson 2 Debt and Borrowing

2. Introduction: Key Principles Principle #1 The wise Save while the foolish Spend: Pr 21:20 There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up. Principle #2 Debt equals Slavery: Pr 22:7 The rich ruleth over the poor, and the borrower is servant to the lender.

3. A. Consider the facts about debt in our society today: 58% Males 66% Females 87% Single Moms List Debtas the #1 stress factor in their lives!

4. Now Americans carry an average credit-card balance of $16,061 per household, of those that have credit cards.

5. If your credit card balance is $8,000.00, and you make the minimum monthly payment at 18% interest, it will take you 25 years, 7 months to pay off the debt. You will also pay $15,432 in interest charges (almost twice the balance), bringing your total to $23,432.

6. If you didn’t have your credit card payment of $218 a month, and instead you invested that money in a 12% savings plan (historical stock market return), you could retire in 25 years with $1.3 Million Saved!

7. TRAGEDY: Christian households fail financially due to high debt at nearly the same rate lost world, even though Bible teaches foolproof debt management principles!

8. I. Learn God’s view of taking on debt A. Biblical Debt Debt is frequently discussed in the Bible, never strictly forbidden, is also not once encouraged. The Bibles direction to avoid borrowing is a Biblical Principalnot a commandment. Remember - Biblical principals do not define sin – are God’s attempts to keep us on track - out of trouble Breaking Biblical principals does not result in punishment, it results in Suffering consequences for our Bad Choices.

9. B. Gods overall statement about debt: Pro 22:7 The rich ruleth over the poor, and the borrower is servant to the lender.

10. C. The borrower WAS servant: Biblical borrowing is where you borrow and can pay back the money as scheduled and, are certain that if necessary, you could cash out and payback the entire debt At Any Time. The important issue is not the debt, it’s Servanthood Most Important Question: Can you at any time answer God’s call to drop everything in your present life to serve God some where else without being bound by debt?

11. II. See the reasons why people over borrow ! A. No self control = easier to borrow than say no: Women under 30 listed shopping as most favorite past time, older ladies listed shopping in the top 3. Men however are responsible for fewer purchases, but add to family debt the most: Cars, motorcycles, bass boats, vacation homes at the lake……

12. The lack of self control is a sign of these times. 2 Tim 3:1-6 2Ti 3:1 This know also, that in the last days perilous times shall come. 2Ti 3:2 For men shall be lovers of their own selves, covetous, boasters, proud, blasphemers, disobedient to parents, unthankful, unholy, 2Ti 3:3 Without natural affection, trucebreakers, false accusers, incontinent, fierce, despisers of those that are good, 2Ti 3:4 Traitors, heady, highminded, lovers of pleasures more than lovers of God; 2Ti 3:5 Having a form of godliness, but denying the power thereof: from such turn away.

13. B. Lack of trust – We have seen that God knows all our needs and promises to fulfill them. Too often we borrow first without even asking God to give us what we need. C. Lack of education on good buying practices- decision making is a learned skill D. Sophistication of Marketing

14. E. Due to Covetousness Webster’s Definition covetous: Marked by Inordinate Desirefor wealth or possessions or for another's possessions or Having a craving for possession <covetous of power>

15. Our NT –has 2 strong’s numbers that directly correlate with Webster’s 2 points above: philarguros fil-ar'-goo-ros From G5384 and G696; overly fond of silver (money) pleonekteō pleh-on-ek-teh'-o From G4123; to be covetous, that is, (by implication) to over reach: - get an advantage, defraud, make a gain. (Taking advantage of other people esp poor)

17. 300SL Gullwing

18. F. Covetousness is Sin 1 Cor 5: 9 ¶ I wrote unto you in an epistle not to company with fornicators: 10 Yet not altogether with the fornicators of this world, or with the covetous, or extortioners, or with idolaters; for then must ye needs go out of the world. 11 But now I have written unto you not to keep company, if any man that is called a brother be a fornicator, or covetous, or an idolater, or a railer, or a drunkard, or an extortioner; with such an one no not to eat.

19. The sin of covetousness is so bad that God says that we should not even be hanging out with covetous people. Eph 5:3 But fornication, and all uncleanness, or covetousness, let it not be once named among you – pretty strong Col 3:5 Mortify therefore your members which are upon the earth; fornication, uncleanness, inordinate affection, evil concupiscence, and covetousness, which is idolatry:

20. Christ warned: Luk_12:15 And he said unto them, Take heed, and beware of covetousness: for a man's life consisteth not in the abundance of the things which he possesseth.

21. My Car and Philosophy when I was 25

22. Look at what God says about the Laodicean Church age in Rev 3:14: 14 ¶ And unto the angel of the church of the Laodiceans write; These things saith the Amen, the faithful and true witness, the beginning of the creation of God; 15 I know thy works, that thou art neither cold nor hot: I would thou wert cold or hot. 16 So then because thou art lukewarm, and neither cold nor hot, I will spue thee out of my mouth. 17 Because thou sayest, I am rich, and increased with goods, and have need of nothing; and knowest not that thou art wretched, and miserable, and poor, and blind, and naked:

23. Psa_10:3 For the wicked boasteth of his heart's desire, and blesseth the covetous, whom the LORD abhorreth. Eph_5:5 For this ye know, that no whoremonger, nor unclean person, nor covetous man, who is an idolater, hath any inheritance in the kingdom of Christ and of God.

24. Personal application; Realize the root of covetousness is PRIDE. PRIDE = Self before GOD! God Commands – Put OFF Covetous Purchasing!

25. G. See that the opposite of Covetousness is Contentment • 1Ti_6:6 But godliness with contentment is great gain.

26. Look at Paul’s example in Phil 4:11: Php 4:11 Not that I speak in respect of want: for I have learned, in whatsoever state I am, therewith to be content. Php 4:12 I know both how to be abased, and I know how to abound: every where and in all things I am instructed both to be full and to be hungry, both to abound and to suffer need. Php 4:13 I can do all things through Christ which strengtheneth me.

27. III. Normal Debt in America:

28. Americans average $ 51,939 income / household = means after tax truly spendable = $38,900 /yr = $3246 / month spendable income. If $797 per month goes to interest, we get to spend only $2449 on our living needs! Which makes it easier to live $3246/mo or $2449/mo?

29. Our average monthly interest now equals a 33% CUT in spendable income! This is the same as making only $36,700 gross / not paying interest – instead of $52,000

30. From my counseling experience we see the worst forms of debt among them are: Student loan debt Car loans Credit Card debt Home equity loan debt (almost always tied together with credit card debt)

31. Here is how debt has grown in America:

32. 99% VS. 1%Becoming a Rich and Poor nation

33. 99% VS. 1%– becoming a Rich and Poor nation Rich = few Americans who stay out of debt & are investing and building wealth (God’s way) Pr 21:20 There is treasure to be desired and oil in the dwelling of the wise Pro_13:22 A good man leaveth an inheritance to his children's children:

34. 99% VS. 1%– becoming a Rich and Poor nation Poor = those sunk in debt and wasting 1/3 or more of their income on interest …. and investing almost nothing. (Satan’s Covetous Way) Pr 21:20 There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up.

35. What If……… • If that same family above had no interest payments except the house, that $4841 per year for 35 years of marriage would add up to $145,180. • If invested in a 401K or mutual funds and got 8% that $4841 per year would grow to a fantastic $714,867.48!

36. IV. 8 Steps to Financial Peace: 1. Give God His share first –Tithe – ALWAYS! 2. $1000 Emergency Fund 3. Pay off all debt but the house – smallest to largest debt – emotion – not math! 4. 3-6 months living expenses – rainy day fund – most laid off at some time in life 5. Invest 15% of household income into Roth IRA’s and pre-tax retirement like 401K’s at work – start as early as possible. 6. College Funding - $11,000 per year state school. 7. Pay off Home Early – yields unbelievable financial freedom 8. Build Wealth!

37. III. 2 types of borrowing discussed in the Bible: A. Scriptural borrowing for your self: 1. This is where you safely borrow money, control the asset, and could raise the money to payback the debt if you had to. (Remember the goal is to stay out of bondage)

38. a. Examples: Purchase land and use the land as full collateral on the debt Purchase a house but put up enough down payment that you can always sell the house for enough money to pay back the debt. 20% is a good number Borrow money for any purchase but have an investment account that could cover the debt.

39. b. God’s Minimum standard for biblical Borrowing PS 37:21 The wicked borroweth, and payeth not again Romans 13:8 Owe no man any thing… c. Falling behind in payments is also breaking a pledge and therefore also wrong.

40. 2. Wrong way to borrow • Borrow money but have no way to pay it back if it became necessary to do so. (Wrong - risk of being in bondage to someone other than God)

41. a. Examples: Student loans – I think the most crippling of all debts

42. Credit card debt exceeding the cash value of assets that could be used to pay it. • 125% home equity loans with no reserves to cover the debt, if the debt was called due. • Owe more than a car is worth (upside down) with no reserves to cover the debt, if the debt was called due. MANY church members in trouble – when conditions changed!

43. B. Surety 1. Surety is making someone else’s debt sure (or guaranteed) so God says watch out! a. Pro 17:18 A man void of understanding striketh hands, and becometh surety in the presence of his friend.

44. 3. The Keys to correct Surety: a. Only sign if you would gladly pay the billanyway

45. IV. Biblical Borrowing A. Necessary borrowing– Homes – Can’t have a reasonable one without debt Make a down payment that makes you “sure”. Make certain to put down enough that you could still sell your property at the “worst case imaginable market value” = 20% Most financial lenders will lend you up to 40% of your monthly net income – when 30% is the maximum recommended for a balanced budget in most “AVERAGE” Christian families.

46. B. Cars –I personally don’t think cars should be purchased on credit. Horrible investment! Decision is between you and the HS.

47. Would you like to buy your cars with a guaranteed 31% discount $25,000 car @ 4.0% for 48 months = $27,364 Paid = $2364 Wasted $25,000 saved over 48 months @ 5%= $30,387 car purchased = $5,387 interest Total saved by not financing= $7751 …….or 31% of the car value!!!!! How do you do it: get ahead just once !!

48. C. Student Loans Student Loan Facts: $1.26 trillion in total U.S. student loan debt 44.2 million Americans have student loan debt 1 out of 6 student loans is in default Average monthly student loan payment (for borrower aged 20 to 30 years): $351 66 percent of graduates from public colleges had loans (average debt of $25,550) 75 percent of graduates from private nonprofit colleges had loans (average debt of $32,300) 88 percent of graduates from for-profit colleges had loans (average debt of $39,950)!

49. Dissatisfaction with Student loans: