“Drowning in debt just so we can own cool stuff is not the right path for any of us.”
David Smith, of Smith Investment Management, who has previously worked for some of the nation’s largest brokerage firms, serves financial planning clients nationwide and also teaches children’s finance classes in churches.
After roughly five years of predictions that interest rates would soon be rising, there now seems to be credible evidence that they actually will be raised next month. Does this mean that now is a good time to buy things, simply because we have a few more weeks to enjoy a historically low mortgate interest rate or zero percent interest on a new car loan?
“The conventional answer would be, absolutely, get the zero percent financing or the low interest rate and buy on credit” he told me. “My heart answer is no, don’t do that, pay cash, get out of debt and stay out of debt. Frankly, I think that God has made us in such a way that we make better decisions when we have little or no debt. If you believe that there is a possibility for a rough economy at some point in the future, as I do, and you want to be able to sleep well at night, then you don’t want to open the door to making more financial promises.”
Smith also says that when he teaches kids’ finance classes, he likes to relate present-day economic issues to the wisdom of the Old Testament. “I often start our classes by having the kids recite Proverbs 22:4” he stated. “That verse tells us that ‘by humility and fear of the Lord are riches and honor and life.’ If we’re living in humility, we don’t assume that we know what the future holds, economically or otherwise, and we don’t borrow money and go in to debt just to acquire some new toy. But there is an interesting corrolary to that as well. Sometimes the opposite of an idea is easier for kids to grasp, and I think the opposite of Proverbs 22:4 would be to say ‘by pride and fear of man are poverty, dishonor and death.’ I try to show kids that we shouldn’t live in fear of not having the latest coolest stuff that our neighbor might have, and then letting that drive us further in to debt.”
Listen as David goes further in-depth on interest rates, debt, and the economy: