Brother, do you have an extra 3/4 of a million?

Debt:

Ok, let’s get the ball rolling. I wanted to start with this one because this is the biggee. This part of our world is ½ of the entire retirement, lifestyle freedom question. I was spurred by this thought last night when my 15 year old asked me a question last night he said…”Dad, I know you have a line of credit (LOC) and I was wondering we I could tap into that and make a purchase to start my career.” To be honest, I was impressed. My son often talks about developing his career. I do respect the desire for sometimes needing some capital to get things rolling. So, I asked him how much he’d like to borrow?
“$750,000” he said without the slightest sense that there might be a problem, but sensing our reaction he quickly added, “I would pay you back an extra 1% per year over your costs.” You see, he wanted to buy a farm, and knew there were a lot of costs, so it seemed logical that his dad would fork over ¾ of a million dollars, especially (if his son, would offer such an attractive return if he was successful).
My lovely bride, Julie, started to launch into my son about his own his own foolishness. I stopped her and instead told him a couple stories.
My parents back in the 1970s moved to Idaho. My dad was working for Dutch Boy paints, had a good job and a growing family with two boys, so after much looking they decided to take the great plunge. They bought a house in a new development area in the “burbs” of Boise, Idaho. The cost I think was about $25,000. How long did they expect to pay on this? 30 years.
My own story, I was a financial planner at The Bank of Nova Scotia. I had a lovely wife and 7 children. We were renting an acreage, but we knew the owners were eyeing the place to sell. They could use the cash, so we hunted. We found another acreage about 45 minutes from Saskatoon, with a 1970s house on it and 15 acres. I had some cash saved, but had to borrow $135,000 from my own bank to buy the land. I set up the amortization over 40 years.
So, I asked my son. If I positioned us to pay out our own home over 40 years and you want me to loan you 5 times that, how long do you think it would make sense to pay that out over. The math problem was fairly simple. (40 X 5)…There was a long pause. Finally, the answer came back, “about 200 hundred years…give or take a bit.”
“Excellent,” I answered (I do know the subject is more complex then that, but I was just trying to simplify this for my son), “and what do you think the chances are that you will be working that farm for 200 years?”
(silence)
“Now Josh,” I wanted him to get the visual on this, “today it’s raining. There is not bringing in the crop from those fields that still have crops, right (he nodded). Tonight, the forecast is for snow, right (yup) so if those farmers need that crop to pay their bills, how are they going to do it?” (no answer)
“So Josh,” I wrapped it up for him, “if you can’t pay the debt you owe me one year because one out of the 200 years of paying this debt you get bad weather, then I would have to take over the farm. I don’t want to be a farmer…ever, but especially at 150 years old.”
Now I have picked on my son a bit. He knows I love him and have no ill intent, but it does show has easily we tend to get ourselves tied into debt.
When I was a financial planner, when people would want to look at their whole financial picture, especially as they reached retirement, we would have to run through their debt load. Many a person found out their retirement dreams had to be adjusted because of the debt they carried. Some, fortunately, also found when we ran the numbers that they could retired immediately if they wished. Their age was not the determining factor (generally) they quit they day job if they had the cash flow. One half of that equation is the debt.
The other day I was at a local department store, and dutifully I was asked at the till “will this be on you store’s name credit card.” I said what I often do. “It will be if you refuse to take cash. Normally, the clerk chuckles and says “oh, we still take cash.” but this one tried to reverse, “sure, we don’t take cash.” (of course, she was just joking). That store’s credit card presently is charging 28.5% interest on their card. Can you see why everyone at the till is told that they have to ask this to every customer. Amazingly enough, no one seems offended. In fact, some even do it, especially if there is a small price reduction of some “loyalty bonus program” associated with putting it on that card.
Think about what God’s word says on the matter:

Proverbs 22:7 “The rich ruleth over the poor, and the borrower is servant to the lender.”
Would you chose to make yourself a servant (slave)? That what happens when you borrow.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
Again, good counsel. If we do trust God, then we really need to pay attention to how we handle the resources He has given us.
I am sure we’ll talk more about this at a later point.