Friday, January 29, 2010
Ever heard of a guy named Frank X Macnamara? War hero? Famous old tv or movie star? Politician? Nope....Macnamara deserves our gratitude and applause for inventing the modern credit card. Three cheers for that guy! In 1950 Macnamara started a small company with his lawyer and Alfred Bloomingdale called the Diners Club. The first charge card that wasn't connected to a single business, but rather the individual shopper. And we all know what happened next, right? Along came some competitors in the late 50's...some small no-name companies called American Express and Bank Americard [Visa]. Everyone starts using them to purchase everyday items cause it was easier than lugging that heavy, cumbersome, bulky cash around. Eventually the banks get greedy and issue interest bearing cards, then the consumer got greedy and decided he needed things he couldn't afford and needed them immediately. And all of the sudden we were at the end of the 20th century and the average american household was carrying around 14,500 dollars in consumer debt!
Raise your hand if you still have absolutely no idea why America just led the world into the worst financial meltdown since the Great Depression?
Now I understand that the concept of credit has been around about as long as humanity and certainly much longer than money, but DEBT is a 4 letter word in my house. Callie & I were insanely fortunate to grow up with parents who did a phenomenal job of blueprinting how to save and spend only what you make. We both went to college's we could afford with scholarships we earned and no student loans. Our cars have always been bought with cash. We pay off our ONE credit card at the end of every month, and in the five years we have had it the balance has never rolled over. The only reason we have that is so about twice a year we can fly for free with the miles we build up. Novel idea right? Actually the bible says pretty clearly that "the borrower is a slave to the lender." in proverbs. We're not really excited about slavery so we make concious decisions, even when they mean "sacrifice" or "discomfort" that protect financial freedom for our family. We hold tightly to the words of Paul in Romans 13 "Owe no one anything, except to love each other."
A lot of people think that some debt is O.K. In fact we've created a culture in the United States where going into COLOSSAL LIFE-LONG debt seems like the only possible way to own a home. I don't want to turn this into a math lesson, but have you ever considered what you might would do with the interest you pay to a bank on a 30 year fixed mortgage if you didn't have to pay it? What if you waited a few more years before you decided you HAD to own a home, rented modestly, saved tenaciously, and payed cash for your home. Well.....the 1st thing that would happen is that you would instantly save about the cost of your home in interest. For example if you buy a $200,000 house at a 5.5% rate you'll pay $208,000 dollars in interest for a grand total of $408,000. Do you see where I am going here?
The 37th book of Psalms says “The wicked borrow and do not repay, but the righteous give generously;” How about being a giver and making a difference in the lives of people who have nothing? When the tsunami hit a few years back, or the earthquake in Haiti, when our neighbors in New Orleans were all living in the Superdome, or when you heard about the massive poverty and oppression happening in Darfur you couldn't help. Why? Cause debt, interest, and the banks OWN us. I know lots of people weren't as fortunate as Callie and I to have the blueprints of money management laid out for them, but what's stopping you from flipping that switch now? I guess you gotta start with answering the question.... Isn't debt a 4 letter word? What's your answer?