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From All is Safely Gathered In: Family Finances:
Quote:Avoid DebtSpending less money than you make is essential to your financial security. Avoid debt, with the exception of buying a modest home or paying for education or other vital needs. Save money to purchase what you need. If you are in debt, pay it off as quickly as possible.
From
Guide to Family Financein the Aprin 2000 Liahona:
Quote:With the exception of buying a home, paying for education, or making other vital investments, avoid debt and the resulting finance charges
From Self-Reliance and Family Well-Being on the church’s website:
Quote:Avoid debt, with the exception of buying a modest home or paying for education or other vital needs.
From the Provident Living website:
Quote:Avoid debt, with the exception of buying a modest home or paying for education or other vital needs. If you are in debt, pay it off as quickly as possible
The first four hits from a Google search. Any questions?
Quote:Any questions?
Nope. I’m glad “other vital needs” (and “vital investments”) is included, since that leaves it up to us to decide what is vital.
Yeah, I know what SD is discussing probably is not meant to be included in that phrase by those who wrote it, but if what he is discussing is, in his mind, a “vital investment” – and if he’s not spending more than he’s making in his standard lifestyle, I think, for him, it absolutely fits the actual descriptions, even if it wasn’t envisioned in the initial wording. I’d be willing to bet that pretty much every GA has some investments – and that they don’t see that as prohibited debt. (and I’d bet every one of them who started a business, for example, did so with initial debt – even though a business is not included explicitly in the lists either)
Again, the real point, I think, as with lots of other things we discuss, isn’t the actual wording; rather, it’s how we choose to interpret the wording and how worked up we choose to get over the wording. For me, the “other” allows me to make up my own mind without any sense of going against instructions in this case. I’ll go against instructions in other cases when I don’t accept those instructions (either in certain circumstances or in general), but this is one case where I don’t have to do so.
I avoid debt, except in cases that I believe are exceptions and “other vital needs” / “vital investments”. SD does, as well. In this case, we both are following the actual, recorded advice of the Church – no matter what other members, even leaders, might believe about our actions.
Okay, here’s one more. The quintessential talk on this is from Elder Wirthlin in 2004: Quote:Some debt—such as for a modest home, expenses for education, perhaps for a needed first car—may be necessary.
… and here is how it is interpreted by some internet person, repeated in one form or another in a multitude of places:
Quote:For the past several hundred years, Mormons have been taught to stay out of debt. It’s drilled into us. Our prophets and leaders talk about it all of the time. The only exceptions for our debt aversion are to finance a modest home, an education, and maybe a first car.
All other debt should be strictly avoided.And the debt we do have, we are counseled to pay off as quickly as possible.
This is a pretty accurate representation of what is the
de factochurch stance on debt. Home, education, car. Yep – for those who want everything spelled out and ignore the expanding disclaimers and wording. I won’t argue with you at all about that. It is the de facto view of many in the LDS Church. I don’t know where you guys are living, but I’ve never lived in a ward where there was a problem with people not going into enough debt. And I’ve never known any LDS who had a problem taking out “positive” debt. I’ve never heard of anyone not taking out debt to start a small business, or get an education.
And we need to acknowledge this view on debt isn’t just an “LDS” thing either. Popular (Christian) financial advice giver Dave Ramsey has this to say:
Quote:Myth:Debt is a tool and should be used to help create prosperity. Truth:Debt isn’t used by wealthy people nearly as much as we are led to believe. Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you’re in debt, then you’re a slave because you do not have the freedom to use your money to help change your family tree.
According to a USA Today article about debt, 78% of Baby Boomers have mortgage debt, 59% have credit card debt, and 56% have car payments. It takes a lot of will, discipline, courage and help to slay the debt monster. But it can be done. Imagine how much you could put toward retirement if you just didn’t have a stinking car payment? This is how the wealthy really build their wealth. Debt is dumb. Welcome to the real world!
When training for my first career in real estate, I was told that debt was a tool. “Debt is like a fulcrum and lever,” allowing us to lift what we otherwise could not lift. We can buy a home, a car, start a business, or go out to eat and not be bothered with having to wait. I remember a finance professor telling us that debt was a two-edged sword, which would cut for you like a tool but could also cut into you and bring harm.
The myth has been sold that we should use OPM (other people’s money) to prosper. The academic garbage is spread really thick on this issue. We are told with sufficient snobbery and noses in the air that sophisticated and disciplined financiers use debt to their advantage. Careful there, you’ll get a sunburn on your upper lip.
Consider the Risk
My contention is that debt brings on enough risk to offset any advantage that could be gained through leverage of debt. Given time—a lifetime—risk will destroy the perceived returns purported by the myth-sayers. I once was a myth-sayer myself and could repeat the myths very convincingly. I was especially good with the “debt is a tool” myth. I even sold rental property that was losing money to investors by showing them, with very sophisticated internal rates of return, how they would actually make money!
Boy, what a reach. I could spout the myth with enthusiasm, but life and God had some lessons to teach me. Only after losing everything I owned and finding myself bankrupt did I think that risk should be factored in, even mathematically. It took my waking up in “intensive care” to realize how dumb and dangerous this myth is. Life hit me hard enough to get my attention and teach me.
http://www.daveramsey.com/article/the-truth-about-debt/ Keep in mind that LDS Church leaders and Dave Ramsey are forming their opinions from interactions with many, many different people from all over the country (and world), and their perceptions are strongly influenced by this. And given the choice between what we have now (with consumer debt and the problems many Church members have) and having a Church where the member have absolutely no debt (not even mortgages and student loans), I would choose the latter.
Romney recently gave advise to students about going into debt, borrow from your parents. Another interesting view from a member of the church.
Mike from Milton.
cinepro wrote:
The myth has been sold that we should use OPM (other people’s money) to prosper. The academic garbage is spread really thick on this issue. We are told with sufficient snobbery and noses in the air that sophisticated and disciplined financiers use debt to their advantage. Careful there, you’ll get a sunburn on your upper lip.Consider the Risk
My contention is that debt brings on enough risk to offset any advantage that could be gained through leverage of debt. Given time—a lifetime—risk will destroy the perceived returns purported by the myth-sayers. I once was a myth-sayer myself and could repeat the myths very convincingly. I was especially good with the “debt is a tool” myth. I even sold rental property that was losing money to investors by showing them, with very sophisticated internal rates of return, how they would actually make money!
I agree with this — totally. This OPM concept you keep hearing about is irresponsible in my view. If you use OPM to the point you can’t service the debt through your regular income or savings during times of employment, that’s dumb.
I personally believe in a combination of using OPM and YOM (Your Own Money) to the point that you might have to accept a lower return on investment (due to having a sizeable stake in the asset you are buying, which hurts the denominator), but one that is still higher than a savings account and compensates you for risk. Mine have been turning out a return of 9% to 14% in this economy, and the return is heavily affected by factors under my control.
As they say, when it comes to investing, you can either eat well, or sleep well. Eat well by getting a nice handsome return without using any of your own money, but shouldering risky debt. Or you can sleep well knowing that if all Hellman’s Mayonnaise breaks loose (you lose your job, your get sick, economic situations affecting your investment turn unfavorable), you can still meet your obligations and still enjoy from positive cashflow from your investments.
That is my philosophy. Everyone thinks I’m stupid when I tell them that’s how I do it, but I believe debt can be wonderful if limited.
SD, if your philosophy works for you, it’s not stupid. Mike from Milton.
I still maintain this is a breath of fresh air, at a time when international governments and media are doling out the opposite advice, despite the fact we’re all in trouble because of it. Debt becomes serious, when it’s used to finance addictions especially gambling.
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