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There are various products on the market that can enable you to build credit which will typically involve getting into debt. In F.O.F. Biblical Finance Class Debt - Part 2 we spend time discussing counting the cost of debt. Let's face it, borrowing money cost money through interest and fees. How do you determine if a financial product is good to use? Does it depend on how bad you want an item? Is it out of fear of missing out on an experience? Does it correlate with what people around you are doing? Answering yes to these questions could illustrate that your propensity to spend money is rooted in a lack of discipline, choosing fear over faith, and having an unhealthy concern of what others think about you.
These financial products such as credit cards, auto loans, payday loans, mortgages, reverse mortgages, etc. all have a cost associated with them; so is the cost worth it? Obviously you can find many opinions about this but let's not forget... the borrower is slave to the lender. So is buying a big screen TV with a credit card worth it? If you can't afford the TV you probably shouldn't buy it plus it drops in value right when you make the purchase. If you can't afford something why put it on credit? You'll end up paying more for it over time and the TV value continues to decrease over time. Any basic understanding of mathematics can see that's not a good financial decision, but when you make a purchase with credit does that come to mind?
I would encourage you to drop the credit cards and buy with cash. If you can't afford it, it's okay. Most things that can be purchased decrease in value so as you use credit and pay interest you are paying more money than the initial purchase price as explained above. A home on the other hand, typically increases in value, so obtaining a fixed interest rate for a mortgage and developing a plan to pay it off early can be more beneficial. Since homes usually increase in value and as the principal of the mortgage is being paid off faster the amount of interest paid over time decrease. This seems like a much better option than financing retail items with loans or credit cards.
In the paragraph above was an example of counting the cost, there are more in depth ways to do that and we'll explore some of that in our next blog post Lord willing. For now please enjoy the video and count the cost before you purchase or finance anything but my hope is you determine that cash is the best tool in most cases especially when the item you're buying decrease in value after purchase.
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