I have a pastor friend who God has given great wisdom in the area of personal and church finance. His name is Rick Blue. A short while ago he sent some thoughts about going in debt. Many people consider debt to be bad and for most of us it is bad. But Rick helps us understand how debt can be good. Here’s what he says:
It is true that the Scriptures caution against debt, and rightly so. But, there is good debt and bad debt. Good debt is debt where there is a reasonable opportunity to recover the principle and interest at a future date. There are at least four ways in which borrowed money can be recovered.
1. Housing
The equity in a house over time far outweighs renting. In addition, often the appreciation in value is equal to the interest paid. Tax deductions also enter into the equation.
2. Transportation
Most everyone needs transportation to get to the workplace. The generated income far more than pays for the transportation. (You do not need a luxury vehicle to get to the job!)
3. Education
The average income for a college graduate is twice that of a high school graduate. Student loans can be a blessing if not overdone.
4. Business
Borrowed money used to initiate or expand business can generate returns far greater than the amount borrowed. (This applies to church building and expansion as well.)
All of the above depends on having one’s finances under control and a good spending plan. Never borrow for consumer debt. Consumer debt will consume you! A good rule of thumb is that your monthly debt payments should be less than one-third of your monthly gross income.
The best way to be ready for future expenditures is to save money today. The more you have on hand, the less you will have to borrow.
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