July 5, 2007

future debt

Posted in debt, money, newspaper, opinion column, saving, spending at 7:52 am by weiszguy

My column from this week’s Greenhorn Valley View:

So the thing about debt is, it presupposes on the future.  Let me illustrate.  You want a new computer.  In fact, you need a new computer.  Your old computer was created before the dinosaurs and has about as much memory as one.  So you start looking around and find the latest screaming fast machine that will have people drooling for blocks around.  The only problem is – gulp – it costs way more than you have on hand.

Not to worry!  It can be yours for only $55 a month!  Why, you could find that much between your couch cushions!  What can be a little harder to discover, however, is that you’ll be paying only $55 a month for four years.  If you do the math, you’ll discover that you’re going to end up paying a lot more for that computer than if you had just bought it outright.

But the interest on that debt isn’t my point today.  My point today is that you do not know what the future holds.  Sure you have the $55 right now, but will you next month?  How do you know?  Will you be able to make the payment one year from now?  How do you know?  What if you lost your job?  How soon could you find a new one?  Would it pay as much as your old one?  What if you or someone in your family suffered a major injury?  Where would you get the money to cover it?  Would you end up defaulting on the computer loan?

Here’s another idea.  Instead of buying the computer now and paying for it for the next four years, why not pay yourself the $55 a month?  That way you could pay cash for the computer, not have to pay any interest, gain the interest the money makes sitting in your savings account, get an even better computer (because you’ve waited awhile to make the purchase), and the best part is, if you suffer a job loss or medical emergency, you just stop paying yourself for the computer, and all the money you’ve saved is available for the emergency.  Not to mention the very real, but intangible, benefit of peace of mind that comes from not being enslaved to anyone through your debt.

Give the debt free life a whirl.  You’ll find the benefits well worth the wait.

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2 Comments »

  1. Sarah Hite said,

    I enjoy reading your financial columns in the Greenhorn Valley View. Much of what you write in your columns agrees with the financial philosophies of Dave Ramsey–you may want to check him out at http://www.daveramsey.com if you haven’t already. The Greenhorn Valley Baptist church is going to host his Financial Peace University starting this month.

  2. weiszguy said,

    Thanks for the input, Sarah. Always glad to hear I have a fan!

    Yeah, Dave Ramsey is one of the big personal finance writers, especially in Christian circles. A lot of writers are opposed to debt, including the people who wrote the Bible. That’s actually the main reason I don’t like debt, i.e. because the Bible speaks ill of it.

    I haven’t done Financial Peace University, but I’ve done the Crown Ministries Bible Study, which is also excellent. I know Ramsey’s work, and it is good. I know you’ll get a lot out of FPU!


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