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4. Indentured Servants with Smallpox: Dealing With Debt

Alistair Huong
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Alistair Huong

Executive Director of AudioVerse

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  • December 31, 2015
    3:00 PM
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This message was presented to the Jew I see twenty fifteen come from Chosen. In the other resources like this visit us online at W W W G Y C web than Heaven in this last session Lord you know this room is warm. Our mayor heartburn. Even warmer with our fervor for Jesus and for his work. And for the finishing of the work so he can come back and pray Lord you will give us the wisdom. Particularly as we deal with this issue of debt that we can learn how best to manage this. For your glory and guide us. Help us to stay cool and alert and made this information still be relevant. And practical for us as we take it home to use it. We pray these things in Jesus name. A man. OK So session for. We are talking about indentured servants with smallpox. All about debt. So I have included in every presentations I just mention this again. Forgive me if you heard this for the fourth time. But saving the chrome dot com. Are my wife an online personal finance blog and get the information. By visiting the website. You can subscribe. It can be sent directly to your inbox. Or you can download the handouts on the she Y.C. app. It also be available for download later on when the messages are released. Or you could get all the handouts and I even have links for specific articles that we've written that's relevant to the topic at hand. So you want to check out saving the crumbs. She wants the app to us the website and later on audio verse as well. So where do we get the title. Indentured servants with smallpox was from the Bible in the spirit of prophecy. Problems twenty two seven says the borrower is servant to the lender. And it's not a very kind word servant is actually more like a slave. And then here evidence home says be determined never to incur another debt deny yourself of thousand things rather than run and dead this has been the curse of your life getting into debt. Avoid it as you would the smallpox. So you're a servant of the lender and you have smallpox. If you've got debt. That's the mental picture that I have. And so I don't I don't like debt. That's one of the reasons why I paid off my house in two years which I'll talk about in this presentation. It's not that it's wrong to have a mortgage. And it's not that you have to pay off your Alice in two years that's not my point. But is just because I just detest the fact of being a slave. And having no freedom. And having smallpox in a financial sense. We just decided. We just got to get rid of it for our own peace of mind. But. The point is dead is bad. OK the Bible scripture Aussie is clear. Debt is no good. However it's not quite across the line to become a sin either. How do I know this we share this quote earlier today I'll review it again pollution ministry page to a nine paragraph or through five. Ellen White writing. I now asked it. I now write to ask you if you will let me have the use of two thousand dollars to help me in bringing out books that the people need. If I should fall into conflict before the lawyers appear my sons would carry for the work of circulating my books according to my plans. When the expense of issue my books is lessened. The sales will soon pay up all my debts. So Ela what actually did have some debt. But this passage here. Actually gives us some clues as to what forms of debt. Are sometimes permissible. OK. So we're going to talk about that right now. What are the rules for debt. We know when debt is OK. Versus when is not OK. There are just tools. Simple to remember just two rules. Number one. You should never borrow money for something that goes down in value. This is very basic math. OK. If I offered you a five dollar bill and say you need to pay me ten dollars to get it. What would you do. You would never do that would you. But guess what by borrowing money to buy something that goes down in value we're doing the same thing. We're paying more than something is worth a spend then that thing actually decreases in value. So it's a fundamental mathematical thing. You don't want to you don't want your money to go down in value. We're supposed to be growing our talents for the sake of the Kingdom of God not letting it go down the drain by paying interest and then also on top of the depreciation. And number two is where Ellen whites. Council comes into play. You remember that she said. If I should fall in the conflict. The books will pay off the debt. The sale of the books will pay off the debt. So she's not borrowing money just to spend the money. It's an investment she was investing in something that would ultimately pay the debt off it secured in a sense of the word. So borrowing is acceptable. Only if what you're buying can pay off the debt. Another way to say it is debt is OK on things that will increase in value or generate an income. So that at the end of the day the debt. Can be paid off with whatever you spend the money on to purchase. Does that make sense. The two rules. Never buy. Borrow that money for something that goes down in value and borrowing is acceptable. Only if what you're paying for can. In the end. Pay off the debt that you incurred. To pay for that. So what about these is an i Phone an acceptable thing to borrow money for know about a vacation. Know what about the car. If you are here in the last session you already know how I feel about this. The answer is no. So let me just look at the math with you for a moment. Interest in depreciation this is the mathematical side of things why we should borrow money for things that go down in value. So the new price of an i Phone. Sixteen gig i Phone six S. six hundred fifty bucks. The price after one year. And these are actual real prices in one year you can expect that for the cost four hundred dollars. If you pay ten percent interest to buy the six hundred fifty dollars phone you would have paid seven hundred fifteen dollars. But the difference is three hundred fifty dollars. So you. In one year you paid seven hundred fifty dollars for something that's worth four hundred. So you say you're not willing to pay me ten dollars for a five dollar bill but what's the difference. What's the difference. Now the vacation is a slightly different thing because it's not a product and a vacation is an experience is recreation. It's for your spirit to recharge so I'm not saying don't go on vacation. Right. Recreation is important but just realize because there is absolutely no value that you can sell it for later. All the more reason not to pay interest for it right. So please by all means you need to take a break right. But just don't go into debt to do it. And then the car. Right. I talked about this a lot of ready let's say the car cost thirty thousand dollars in a year. Is depreciation. Twenty four thousand dollars three hundred. If you pay ten percent interest which. You know I don't know if people really pay ten percent interest but using this as an example. The difference is eighty seven hundred dollars. Do you know what. I drive a Honda Accord and eighty seven hundred dollars could buy two of my cars. So in the depreciation and the interest cost in one year in this hypothetical scenario. You could have bought me two cars. And what would you have gotten. You have one car that's worth a whole lot less than what you paid for it so borrowing money to buy a car I have a post on this. It's called driving off a cliff with a car loan. You can. You can read all about it on our blog. So paying interest on the preaching assets there is no surer way to lose money and English proverb says a fool and his money is soon parted and here. The definition of a fool I would say is someone who forgets how to do math. And interest in depreciation is just basic math that we need to apply. So a few thoughts on credit cards. I think we can go through a whole seminar talking about debt without time on credit cards. The fact is credit cards are not dangerous. In and of themselves. OK. Credit card use without self control is dangerous. It's just like a gun. A gun in and of itself is not harmful. It's someone using it without proper training and not self control. That's dangerous. So a credit card is like a weapon of mass destruction. That you have in your back pocket. At all times. And so yes it is risky. It is a risk a potential risk. And the risk is ultimately within the self control area of of the individual user. So if you listen to guys or Dave Ramsey which I appreciate a lot of what he says you know this is a little bit different than what he believes. Dave Ramsey says no no credit cards whatsoever any time under any circumstance. It's almost like you know. An addictive drug. I think is the way he views it. I don't agree with him one hundred percent but nevertheless I do give him this. You can live without credit cards. You do you do not have to have credit cards. To survive in modern day society I think that is a myth that comes in the marketing. Engines of those banks that issue the credit cards. However credit cards on the other hand do have benefits. So I'm trying to straddle this line here if you are you will credit cards in and of themselves are not bad wrong. Immoral whatnot. Improper use of them is. You can live without credit card so if you choose not to. That's fine. You can. You don't have to have it. But nevertheless that's at MIT that credit cards. Do in serving in certain circumstances do offer us benefits. So things like special insurance. Price matching fraud protection. When I go or traveling I read my car on the card and. It covers my car. Sometimes extended warranties on my products. And of course reward points. OK. So there are things that credit cards are beneficial for. So what is the rule. Or one of the rules or principles guidelines for proper credit card usage number one don't buy. Don't use them to buy stuff you don't need. I think that's fundamental to any cash that we have don't spend money on stuff that you don't need. And how do we know we need something what we just talked about a spending plan. OK. You can plan for it. Have your life event plan and your savings plan. And just plan ahead for stuff that you want to spend money on. And then the second rule on this is important never carry a balance. Pay them off every month. A credit card once you miss one payment. Your credit score goes down. You start charging interest and. You know it's off to the races and. You know the sharks star smelling blood in the water. So if you violate either of these two rules. OK. If you find yourself. Using the card because it's easier to swipe a card. Then to pull out a check book or to hand over a cold hard cash. If you end up breaking either of these rules. And then also you don't pay it off at the end of the month. Cut up the car. That's where the self-control comes in right. How do I know of self-control to use the credit card Well here's how you know. If you end up spending it on stuff using it the blast of you don't need you don't have self-control. If you end up carrying a balance. You don't have self-control. It's that simple. Cut up the cards and learn to live without credit cards. I think that's an appropriate. Self disciplinary action that we can take. But if you do use credit cards. This. Now talking to the other side of this divide here. Make sure you use cars that have rewards. Because if you're going to use a credit card. Anyway. Might as well get some benefit out of it in the form of some rebates travel points Miles what not right. And also don't spread out don't get tempted and just like sign up for every car that comes in the mail because Owen there's a bonus here and a bone is there and I'm going to get so many miles here in a free hotel night stay there because what happens is you dilute all of your points and all these different cards and you never get to use them because you never reach the threshold that you need to actually catch them in. So have that. You know you got to be you self control right that's the name of the game. Have the discipline and just consolidate your card. To one or two that earns you the interest based on your usage and live by these other rules and have the self control to say if I break these rules out goes a credit card. OK And of course you're curious. My five and I we use one car. Two percent cash back card. That's all we've got. And we paid off every month so that's enough about credit cards. What if we already have debt. Paying off debt how do we do it. Number one got a look in the mirror. Right. Eighty percent personal finance this personal. Only the last twenty percent. Is financial own. The debt. Don't make excuses and don't play the victim. This is so important. Nobody forced you to sign the dotted line for a loan. You might be young and idealistic as an eighteen year old or sixteen year old or whatever when you went to college you didn't know any better. Yes perhaps. But you still signed it. We have all made mistakes made decisions when we didn't know any better. But we're still responsible for the consequences that come. So let's be mature about it and let's just understand. This is my problem. Yes. I can blame the government. I can't blame my parents. I can't blame the school. I need to address this issue. OK. Own the debt don't make excuses don't play the victim. And remember there is no alternative to making big payments. Everybody is always looking for some silver bullet. Special techniques. Services. Tricks and tips to pay off the debt. Guess what. One way or the other the banks get their due. You're still going to pay it off. You might extend it you might end up paying more interest for people to consolidate your debt and do all this stuff. In the end of the day is just fancy footwork. It might cost you more money taking more time but in the end. You're going to have to pay it back. So there's no alternative. If you want to get out of debt. You will have to pay it back and make bigger payments. Now. Sometimes you can negotiate with creditors and to get you know maybe a lower interest rate. Or they can have some sort of alternative plan to work with you but it won't eliminated that you're still going to pay it off so you just got to understand there's no secret sauce some secret trick. And a someone promises you that you're going to want to be careful. So you want to make debt pay off the number one priority in your short term saving plan then squeeze every dime out of your monthly spending plan to do it. So the credit card payment remember for frugal Fannie for you. Those who were here. She made that credit card payment number one number one. And she hammered it. And it was gone very quickly. OK. And then a lot of people ask me hey I want to start investing. But then I ask him how much debt do you have student loans and credit cards and they've got all this debt. Well guess what. Don't worry about those investments and village debt is paid off. Why. Because all the interest you're paying on your debt. Negates any earnings you have from your investments. So let's say you got seven percent interest on a student loan. That means your investments have to have a guaranteed minimum of seven percent take home. Earnings to even breakeven. So at the end of that. It's not even worth it anymore. So just pay off your debt it's a great investment you get you get seven percent off in that example. Seven percent rate of return by paying off your debts early. And then. Here is the nuts and bolts. Use the debt snowball method. If you listen to Dave Ramsey you know what he says about it I agree with him here. Debt snowball how you do. How do you do it. You want to list your debts from smallest to largest. It does make a list. How much it is smallest to largest and you do not. You do not care about what the interest rates are is purely based on the amount. Left on the balance. And then you pay minimum on all debts. Except the smallest OK So you want to keep up with the minimum payments on your on your debt payments. But you start with the smallest debt. And you poor everything you have to bury and to get rid of that debt. So focus intense effort to pay off the smallest one. Then roll all extra payments off to the next one to the next to the next. So it's like a snowball you start with a small one you get that over with and then the minimum payments there. And whatever extra you squeezed in you roll it over the next debt. And you knock that went out and they roll it over to the next one. And in essence you should be adding to this pile of snow. As you roll down the hill so here's an example of a dozen of all this person has Ford for loans. For liabilities here credit card number one credit card or two car loan. Student loan. So thirty thousand five hundred dollars total of debt. And let's say this person is able to squeeze a thousand dollars a month. Out of their budget. Towards the debt. OK. Both credit cards. Bam-Bam done in four months. OK. I think we can manage four months. It's not that long. But even with a car loan and even with a student loan. If he if this person. Only gives a thousand dollars a month towards debt. It will be paid off in three years and three months. And this is assuming the snowball doesn't grow any bigger than a thousand dollars. So if you work extra shifts. You have birthday money. You sell some stuff like the car right here maybe you sell your stuff and you get you're not going to hear the end of this. This would be even shorter so what I'm saying here is three years and three months. Is the longest. It should take for this snowball to be completely paid off. And just imagine what to be great to get rid of a student loan I mean twenty five thousand dollars might be a small Stallone these days. But even then twenty five thousand dollars is not a small sum of money. Three years. I think I can live with getting out of debt in three years that sounds pretty good to me. OK. So that's the debt snowball. Now there is another method that some people advocate and it's called this the debt avalanche. Which is you pay your debts off in the order of highest to lowest interest rate. And if you do it that way yes in theory you will save more money. Because you're paying off the highest cost in debt first. But I prefer the snowball. Over the avalanche primarily for the psychological benefits. Because if you pay off an order for highest to lowest Yes. It will result in the greatest amount of money saved we said that. But the psychological motivation of seeing the small wins helps maintain the momentum. So it just imagine in the first month. I paid off my first credit card. Yeah I can get the next one. Right. And then the next one. Whereas if the first dead you're paying off. Is twenty five thousand dollars. You know forget about these other ones I'll never get to them so that psychological aspect of paying off debt. That's the best trick I've got for you. OK. Paying off debt is the best investment. If you ever regret being debt free it's easy to end it. That's one of the best reasons. To get out of debt is. You can just try it out. If you don't like it. You can undo it. Whereas if you like say bought a house. Right as an investment. It's not easy to undo that. OK. So it's one of those things I hate. Why not just give it a try. Why do you try being debt free for a change see how you like it right. So let's talk about the two biggest debt scenarios and so this is the rest of our time together. I want to look at two of the biggest scenarios in most of our lives in which we're going to run into debt. And we're going to focus on the first one. Quite a bit more than the second. Student loans. And the home mortgage. All right so let's review our rules for debt we have two rules. Do these things qualify. Through the two rules that we have for acceptable debt. The rule number one again. Never borrow money for something that goes down in value. And number two. Borrowing is acceptable. Only if what you're paying for it can eventually pay back the debt for you. So student loans doesn't go down in value. Your education is one of the greatest investments that you can give for yourself. OK. So I just want to make that clear absence education I believe in it. Christian education. OK. Does is it able to pay itself off. Well that's the whole point isn't it right. You can get an education so you can get a job. Right so you qualify for greater earning so yes. It's not yes with an exclamation mark. Notice that. K.. What about a home mortgage. There's a home. Go down in value. Sometimes it does. Yes. We learned that lesson in two thousand they did in way but most of the time. A home at least. Still retains its value. And actually I have a whole article. Asking the question is a home. The best financial investment. So if you want to check that out you can read it on the blog. I break down the numbers comparing different houses. You'd be surprised. Owning your own primary residence. May not be as great of a financial investment as you think it still can be a good investment for many other reasons though. Let you do more research on that. So the second rule home mortgage is unable to pay itself off. At some point it's possible. Of course anything can happen there's no such thing as a risk free investment. But a home. In theory can grow in its value and when you sell it. You know even if you haven't necessarily paid it all off the equity can cover it and those kinds of things and of course you can rent it out right. So yes. But here's the caviar. Just because it's permissible doesn't mean you must. You got to remember this. Even those student loans and home mortgages. Qualify as permissible forms of debt. It's still small pox people. You understand it doesn't negate was fair prophecy in the Bible says you're still a servant of the lender. So it's still not the ideal. And of course. Who wouldn't like to get a house. You know pay off the house and not be in debt. Who wouldn't want to get an education and not have to pay. You know student loans for it right. So the ideal is always to not have debt. And so just because it permissible. And I just mention this now. It boggles my mind when people say oh you know I qualify for this mortgage for this house. And I ask oh how much you take out. You know. The maximum amount. Well look it's not free money. You can have to pay it back so just take out what you need and try to be cured of smallpox as soon as possible. So let's talk about the student loans. OK So student loans. Comes with some fine print. Number one student loans can't be discharged in bankruptcy. So you know bankruptcy is like the Get Out Of Jail Free card I can pay off my debts so I'm going to stiff everyone. Not something that a Christian should aspire to. OK. But student loans is one of those rare things where particular federal student loans. Where you can discharge. Everything else except the stone you're still going to pay it back. And what is fascinating is that the government. Because they have your best interest in mind. Right. They are trying to help you out. If you've got student loans of delinquency or you need to pay them back. They can even garnish your tax returns. Saves you the hassle Come on. You should be grateful. And just because you qualify don't take the max amount I just mentioned that because it's not free money. OK So students. Just because you qualify. Don't think that oh yeah I can just live the life now because I've got all the student loan money. It's not free. Uncle Sam comes calling. So here are some sensible questions you ought to ask when you're thinking about your career and your college education all that. What career do I wish to pursue. All right. I think that's an important question and this. You know where to go into the realm of how to know God's will for my life and that's not the burden of this message here. But you know what does God calling me to do. I think that's a that's a question for you and God's answer together. But then this is some reality check how much should I expect to earn. It's not a problem. To expect going into a career path to earn a little money. I mean that's what. That's what I'm doing. It's not that you need the maximum amount of paycheck. It's how does this. Correlate with the rest of what comes and that is how much will I owe K. and how what must I do to be debt free A.S.A.P.. Because of God calls me to a certain position. That is not going to earn a lot of money. We counting the cost. Trying to avoid debt. We should be able to look at the future and project. A little bit and say Look. I cannot afford to get this massive student loan debt because that's going to that's going to compromise my ability to do what God calls me to do this I make sense. So it's always coming back to what does God want me to do and then using practical. You know the brain that he's given to us between our years. The math that we learned in high school. To be able to put two and two to gether and say if I'm going to be a pastor. If I'm going to be a missionary and I need these skills. For the mission field for God's work. I cannot be owing a whole bunch of money. OK that's just the reality. And then we got have a plan to get debt free. OK. So these are some sensible questions to ask. So I did a little bit of homework. And I'm giving you some real data. All right to compare. So here are some common. Occupations for Aves young people. Approximate starting income. And the average debt they can expect to have right now coming out of school. OK. So as a teacher with a B.S. degree. Approximate starting income about thirty five thousand dollars average debt for undergraduate degree four years. Also about thirty five thousand dollars a national average. If you go to school that might be more or less depending on your situation. For a pastor and did forty six thousand dollars approximate starting income. Average at about forty thousand dollars. This can vary. Right because a lot of pastors. They might be sponsored and things like that so of course it might not be your case. And then a nurse someone with an R.N. nearly fifty thousand dollars starting income average about thirty five thousand. And you notice here. Looks like the nurses might actually be on to something here. But let's look at the dentist's D.D.S. average starting income if you're working as an associate about one hundred twenty thousand dollars a year. And we're like crew to be nice to earn that much money until you look at the next column. Four hundred thousand dollars. And if you think I'm exaggerating. Guess what. Of all of these columns the dentist column is the most accurate. You know why. I actually called a bit dense as friend of mine who then called the Loma Linda University School of Dentistry and these are the numbers we got from Loma Linda. OK so if you go to Loma Linda as a dentist pool student. Expect for a hundred grand in debt. Welcome to the real world. All right. One hundred twenty thousand dollars as a starting associate this is in the southern California area. So I'm going to focus primarily on the dentist because I have some cold hard data to share with you. And also because the numbers are are the most impressive I think. So let's take a look. Income versus desk if we break this down their average monthly income. All right we just divided the previous numbers by twelve. So notice the first three. Careers here. In order for them to pay off their debts a seven percent which is also about the average dental school debt at this point. All of them are paying somewhere south. Less than twenty five percent of their income. So less than twenty five percent of the income. And they can be debt free in five years. OK. For most people. I think that's fairly reasonable. OK. To pay off in ten years. The first three positions here these jobs. It's less than fifteen percent. To pay off the debt in ten years. So that definitely looks pretty reasonable I think you know it's doable I think we can manage that but the doctor here the dentist. He's got a problem. From the get out of debt in five years. It takes. Seventy nine percent of his income. Now this is the rich doctor right. A rich dentist supposedly. Supposedly rich dentist and. If you want to pay it off and ten years it's still nearly fifty percent fifty percent. And he's the one. By the way that everyone looks at and thinks he is so rich. So from my dentist friends and doctor friends and those out in the audience. Here's the message. Number one. Know what you're getting into. That's number one and number two. I'm hoping that there is some greater sense of understanding. For those that are not aware of the real situation. All right so we have a lot of avenues young people going to medical school dental school. Let's not treat them as though they are so high and above us and oh you should have lots of money. We got to understand what they're dealing with OK. So we need to have understanding for our friends. So looking at the dentist in particular we're going to focus on him now. A ten year. A twenty year and a thirty year payoff. OK. Even at thirty years he's still paying over twenty five percent of his income to pay off his loans in thirty years. Now of course that's assuming he's maintaining the level of income that he has and in theory it should go up. But the interest paid. Is really fascinating. If it takes ten years to pay off. Four hundred thousand dollars of loans and seven percent. You pay one hundred fifty seven thousand dollars in interest. If you take twenty years. It's three hundred forty thousand. And if it's thirty years. It's over five hundred thousand. And notice. This is a lot more than what the original debt was the debt was four hundred thousand but this poor dude has to pay over a half a million on top of this is just the interest. So he's paying nearly a million dollars. Offer is education so I want to introduce you to dentist the dentist is a little in the university graduate. He is a fictional character. But let's take a look at what happens and what am I trying to illustrate. I'm not just trying to pick on dentists. I'm using the dentist as an example because the numbers are shocking enough that I get your attention. Also because I have accurate numbers for this. I actually got numbers from Loma Linda. My friend and I have a testimony from an actual dentist and. What he did in a minute. But the point is to illustrate to all of us. The type of thinking that we should. Process. Before we get into debt. It doesn't matter if it's four hundred thousand or forty thousand. Right because it's the same process of thinking that we have to go through what is it. What am I going to earn. What is a reasonable rate in which I can pay it off. And how can I avoid this. Right this is what we're trying to accomplish. So dentist advances he's a typical global in the grad he graduates and. You know the associated lifestyle inflation right that comes with now having a prestigious degree. College degree and whatnot. So now he's got the big house he's married in it got a family's got fancy cars and toys expensive clothes a country club membership and higher taxes insurance so. Lifestyle inflation. And for all of us who come out of college we get our first paycheck and I while I'm never in this much money in my life I'm going to go out and I'm going to buy a bunch of stuff. Well. You might want to wait on that plan. And then their family expenses. OK. Having kids. Private schools. Music sports are lessons vacations. Supporting parents or other family members have now because a. You're a dentist you're a doctor you must be loaded. Help me out. Right that's what happens. So let's take a look. Dennis do it. So let's suppose he starts off as that associate earning six figures right we have Susie six figure income with the well very wealthy usually. But his tax. Let's say he's thirty percent state and federal income tax all rolled together. Adds up to thirty percent. Tied these being is ten percent. As a mortgage on a three hundred thousand dollars mortgage which in some parts of country by the way a three hundred thousand dollars mortgage is not that big of a deal and a lot of parts of the country. So this isn't even like a make mansion. It's a fairly modest home in certain parts. OK. Forty five thousand dollars car again for a doctor. That's not an anything terribly out of the ordinary. And then he's got travel with the family and then the private school for one child. And then the kids have lessons right so many lessons are lessons. Karate lessons whatever. And you add these things up. And by the way this is not. These are just additional things. This is not his lifestyle. This is not his living expenses. These are just additional things that now have intruded upon his life because he has the standard of living to maintain. So what's left out of the hundred twenty thousand he's got twenty thousand nine hundred dollars. All right so add that up. Subtract it. Twenty eight. So about twenty nine thousand dollars left. So at a rate of twenty thousand nine hundred dollars per year it will take Dennis. Fifty years to pay off a student loans. Four hundred thousand dollars and over this period of time in total for a four hundred thousand a loan he will pay over one point four million dollars in total. OK. And any less than this amount. Any eight thousand and his payments won't keep up with the interest meaning he would never pay it off. So this is a serious situation that he's in. And this doesn't even take into account his regular expenses which is what we've talked about. So I know this might seem like an extreme case. But if you're going to dentistry. It's not. If you are in another field. It may not be to this degree in might not be as many zeroes afterwards. But it's still the same type of thinking what am I trying to say. Don't inflate your life. If you've got debt. Make that the priority. Maintain the modest lifestyle. Pay off the debt first and then all of these other things that he wanted to do with his life. I'm not saying you can't do it. Plan for it using the tools we talked about in the last session. Planned for it. Save up for it and be patient in the meantime. OK. So that's the point I'm trying to make with just using Dennis here as the example. So how about a survival story. I mean success story. This is from my friend who I just tell you here he was a little in a university graduate two thousand. So he's a dentist. He graduated with two hundred thousand dollars in student loans that was the average back then. You know. Times have changed now. Fifteen years later. He paid off student loans and five years. He was completely debt free of everything in eight years. So the question of course you're asking is how did he do it. So I asked him because I'm picking on the dentists I figure I better have some good news to share. This is what he shared with me. Number one. He'd made a determination that he was going to pay off as dead as soon as possible. That's number one is never going to happen if he doesn't make it his goal. All right. So in your number one. He had two hundred thousand dollars in student. Dental school debt. OK. And right out of school he bought a small practice four months out of school. And a small practice means he did take out a small loan and. Does a business loan qualify for an acceptable form of that. Yeah. Is there a risk involved. Yes absolutely. But it does pass. Those two Tests and. He was shrewd business person and so he knew that he could build up the practice. So it wasn't a not uncalculated risk. He did his homework. All right. And then in years two and three he worked hard got married any bought a condo with his wife. OK. So that's just some of the life changes that happened in year four he started a second practice from scratch. So now he goes out and he started earning a little bit of money from his first practice when I started the second practice and I think he borrowed a small amount of money for that too. But he's building up from scratch. He's not spending a huge sum of money to buy a new practice. And at by this point and year for he had seventy thousand dollars left in a student loan debt. All right. And in year five he sold the first practice that he had. And he sold the condo. And the profit from that paid off the remainder of a student loan debt. So now he's got this last practice which he did have a little bit of debt left on. He worked hard from your five to verse eight. And then he sold the second practice for nearly a million dollars. This was the second practice that he started from scratch. So you. It shows you how hard you work. And then you move to the country hundred percent of the free. He moved to the country bought a house for a family in the country started a new practice in that area smaller practice. Debt free. This is a dentist. A real Seventh Day Adventists young man who has two kids now living in the in the United States. And so this is what he told. These are quoting him this is what he said he gives the glory to God he said yes dentists make pretty decent money. But what was most helpful to us was God's blessings on the right investments at the right time. And here's an important point. A lot of people may read this and say see it's because he was lucky. Is because God did it for him. It's impossible for me right. But listen. This is God's blessing. His efforts. It is not God blessing him while he's doing nothing. Does that make sense the difference. He is looking at the situation and he is working as hard as he can. He is doing the calculated risk taking of investing the talents right that God has given to him and he worked hard. Really really hard and. As a result. God made up the difference. See. God bless his efforts. And this is the point. If it is so impossible. All right if we look at a student loan debt in a so impossible. Like is impossible the pay this off. Well. Why don't you give it a shot. If you give it a shot and then a works out. All glory goes to God because you yourself said it was impossible. Right. So take the step by faith. Do what he says get out of debt. And trust that the Lord will make up to the deficiency. OK. This is the lesson from my friend. And so for the students out there I think we need to make sure we have a commitment to get that free. I think it's important for us to Visa selves in the mirror and say this is something that we've got to do. So the be debt free in X. number of years after graduation you can determine that a pledge to pay at least so much each month until is paid off. And this means I will work hard and so my debt is paid off. All right. So at this point. I need to get something off my chest. Are you ready. So we talked about getting out of debt and students and all this kind of stuff. But there is something very important and that is. If students are proverbially rights so poor. Why do many students not live like you do you understand what I'm saying. I live near Southern having a university and I am. Flower guest how some of the students can afford to eat out all the time drive the latest cars. And do all the stuff that I'm a working man and I'm out of school and like. I can't afford that how do you do it. Look there's this term called economic outpatient care. And I think this is actually an issue that is ruining and a generation. And this is something I learned from this book The Millionaire Next Door. It's an excellent book it's a research based book science based on research ng. Qualities and characteristics of millionaires the United States and you will be fascinated to learn what they're like. And one of the issues that they discussed here is this idea called economic outpatient care. Which is basically Junior is goes something like this junior feels entitled to the same standard of living as mom and dad because Mom and Dad built themselves up to be wealthy. Upper middle class or Millionaire people and Junior has grown up in that he doesn't know anything different. And so he feels like. This is the standard of living I'm entitled to. And so mom and dad subsidizes Junior's lifestyle or junior ends up just racking up debt. To maintain the lifestyle that he feels he's obligated to see that's where the economic help patient care is coming in subsidize ation of the lifestyle for mom and dad and mom and dad they don't want Junior to have to work. Oh you just go and study. They're simply trying to give him the better life than they have. They have to come a lot of them immigrants. They have to sweep floors. Wash pots and pans. Work long hours. They say my child. I don't want them to have to live that way. I just want them to be able to focus on their education. Just go to school will pay the bills. You know whatever you need will cover for you and so junior as a result. Ironically does not learn the one thing that was a source of mom and dad success. Hard work. And as a result junior feels victimized when he can't have what he wants. So this is the problem. OK And I will say it even the facts evidence you know people. OK. And so. Just last year out of our last month that you hear about the million student march. It was in the news hundreds of campuses around the country. Students were rallying together. And they were making certain demands and this is the. This is coming this is what happens when economic outpatient care. Comes to a head. OK. This is want to generation gets crippled by economic help patient care. So free. Demands by the million student march. OK you already see this free education and student debt. So these of actual demands number one. They demand. Free college tuition. Number one the man. Number two demand cancellation of all student debt. And then number three a fifteen dollars minimum wage for all campus workers. So I am a student who signed my name on the dotted line to get the student loan. But it's your fault. I demand free education. It's my right. You got to give it to me. I am an untrained unskilled workers so you better pay me fifteen dollars an hour. This is the result of a generation that's brought up. Not knowing how to work. And so this reminds of the Chinese proverb give a man a fish and you a for a day teach a man how to fish and you eat for a life time and again a spear process. In acquiring an education many students would gain a most valuable training if they would become self-sustaining. Instead of incurring debts. The Spirit of Prophecy tells us what. How we should be student loans. Or depending on self-denial. Of their parents. OK so that's dealing with the economic L patient care we just talked about young men and young women depend let young men and young women depend on themselves. And she continues next paragraph. They will thus learn the value of money. That's what we're talking about the value of time strength and opportunities and will be under far less temptation indulged idle and spendthrift habits. The lessons of economy industry self non-practical business management steadfastness of purpose. Thus mastered would prove a most important part of their equipment for the battle of life. You don't have to take my word for it. This is from the pen. Of inspiration. So this is the lesson. Dealing with student loan or student loans. Students learn to work hard. All right so let's get practically or so what are some ways to minimize those loans because yes sometimes student loans are necessary. They are permissible form of debt but the less the better. Number one. Live your wage students. Which is non. So don't pretend apply for scholarships. There's nothing. Closer to free money to look for the scholarships apply for them. Consider cheaper options. You may want to go to community college or a state school is temporarily get you generals out of the way. And then move on to get your area of expertise done the car. There's that car again. Students. If you are a college student and you're paying a car loan. Something's wrong. OK. You of all people should be driving the. The beater car. Or you can just walk or ride a bike. It's healthier. Is better for the environment better for you or car pool or live on campus or you can walk. All right. In the cafeteria eating out is beyond your pay grade. We talked about earlier this morning. Eating out today is a luxury that. Even kings and queens not long ago didn't even have Remember your education is priority. Not a relationship. Not parties. Not sports. OK. You don't have to pay thirty thousand dollars a year in student loan debt. To go and have a party. You understand. You can do that on your own time and on your own dime. Get a job or to learn to work. The work experience what Elmo just said may be worth more than your classes. Because I am working in a ministry and we look to hire people and guess what this is so true. Finding the right people who have the right work ethic is far more important than them necessarily having all the intellectual abilities or skills because a lot that can be taught. If they have the right. Heart. And the ability to learn how to work hard. And then interview your future self because remember here she is a person you're really borrowing from if you kick the can down the road. You're just hurting yourself. Remember that. And so a little bit of my experience so I grew up an after school system. And like I mentioned earlier my parents believed it was their their obligation and they really sacrifice. Really sacrifice to put both my brother and I all the way through school. Agnes ghouls all the way up through college. I went to Washington as college which by the way is much more affordable than most other avenues universities. But then I want to southern to get my master's degree. And I was on my own now. Mom and Dad is not there and I just got married. And so we decided we were not interested in getting a student loan. So I made myself. Apply for jobs all over campus all over off campus and. As it turns out it was a miracle story I don't have to share. I don't have time to share with you. The way the Lord brought me in contact with the dean of my department. On the day that school was starting I was doing my class work and I had no job and I was wondering was going to happen. I thought were going to spend all of our wedding money to pay for the first semester of classes and all the stuff. And the Dean gives me a job and not only a job. It was a job that paid. My whole way through school. But the difference or the tradeoff. Was that I had to work yes but I also had to stretch out the time it took for me to finish my program. Right that's a that's a compromise that sometimes you have to make. So I can work half the time study half the time instead of studying full time. All right. So those are appropriate things. To to consider and you know. Now I get to work in a ministry debt free. If I a student loans. It would even be an option. OK So let me inspired a little bit. I've been sort of harping on students. Once graduate imagine if you graduate or after student loans are paid off. Let's just say you live on forty percent of your earnings and you vest other sixty percent or so this is similar to what I talked about with the husband wife last session. So again assuming that eight percent in ten years the amount you've invested will be enough to cover your annual living expenses. So here's an example if you earn fifty thousand dollars a year you live on twenty thousand you invest thirty thousand for ten years eight percent. In ten years you will have around half a million. Using the four percent. Generally accepted a rate of withdrawal that's safe your investment will net you ride around twenty thousand dollars each year which is equivalent to what you were spending. Annually. So theoretically you could retire ten years after college and. You might think oh that's cute. They're actually people have done it. They're not necessarily adding this people that I can point to but there are individuals out in the blogosphere personal finance people. Retired in ten years. And of course they use their time doing things that perhaps would be the most profitable for an avenue Christian. But suppose that this was the case and you decide to be a missionary out in the developing world. Twenty thousand dollars a year. Could get you a pretty long ways. Would you think. So that's not necessarily a recommendation but it's one way to consider how if we put our mind to it there are ways to make things work. All right. I am actually running out of time so let me move very quickly through the house. Discussion. So. Buying a house. The story of our house. Of course I told you before we paid it off in two years. There is a house that's actually not our kid there. Our friend took a picture. Just just in case. So here are the numbers our house cost one hundred eighty five thousand dollars. And it's a one acre lot we have two buildings on it. And I rent out one guest house. So we had eighty five thousand dollars mortgage. We had a fifteen year fixed rate. Interest. Three point four nine percent. OK. Our monthly minimum payments were about six hundred seven dollars but we actually made payments more closer to thirty seven hundred thirty seven hundred dollars per month. And one hundred thousand dollars down payment. So you are wondering how do you pay off your house in two years well here's the secret. These last two items right here. That's all there is there is no secret sauce secret trick. We just had a huge down payment. And we made. Massive monthly payments and. So how do we do it. How do we have such a big down payment I told you my wife had this money talk with me right. When we got engaged. She had a dream to buy a first house in cash and so she's been saving up and she was graduated. So she graduated from Southern she was a nurse. She's not a doctor she's not like the typical high earning people. But she was a nurse and she saved up. Two years of nursing and then she spent seven years working in ministry. And she saved up. You know the bulk of the amount for our down payment. And then the big monthly payments nearly all of our extra savings you know we shared. We have a fifty percent savings rate. You know all of that went into the mortgage so we average sixty six times the minimum. So the secret is a big down payment and big monthly payments. And if I can summarize it even more. It's all about the savings rate. You know I've been hammering this point all day. It is how much you're able to save and how much. Able to apply. Out of your income. So here's the benefit of living. Debt free. We get to live rent and mortgage free eliminating the single largest expense in our budget. So our monthly cash flow. Six hundred dollars. I don't have to pay for it. We own our home now and so the bank so there's no risk of foreclosure. And if you remember what happened in two thousand and eight. You know that that's a very real reality. So now we have more free cash for other savings. Like say investing in a solar panels that further helps us. As an investment. Down the down the line here. We also paid off the mortgage the same month our baby was born. So if we hadn't paid it off. Our budget. With the baby would probably be much higher than where it was but it counteracted right. We have a baby on our budget now. But the mortgage. Was gone. And so that's one less thing for us to stress about and of course. We get to live in a place like this I showed you this picture. And this one down here. You know it makes it look like Tennessee is a winter wonderland. It's not. You know the great thing about the snow in Tennessee is. It's like this. And then like two days later it's all gone. That's my kind of snow. So this is the other thing. We saved a lot of interest in this is the number one reason why we want to pay off our debt so fast. With a fifteen year payoff. We would have paid over twenty four thousand dollars in interest. OK for an eighty five thousand dollars mortgage. But because we paid it off in two years. We paid. Just a little bit over three thousand dollars and we saved twenty one thousand dollars in interest. Twenty one thousand dollars in interest. How many cars could I with that right. So I need to deal with this myth. Isn't a mortgage good for my taxes. You've heard this before. Well it's a myth. Only the interest can be deducted from your taxes not the full payment. All right so if you have a mortgage payment it's only about the little slice that goes to interest can you deduct and. You can only deduct it if you itemize deductions in your tax return. And more than half the majority of people in this country. Don't itemize. So if you take the standard deduction that automatically the interest mortgage or the mortgage interest deduction. Offers you know benefits. But even if you do itemize. OK. You save more money still by paying off the loan then you get back in the tax deduction. If you do the math it's a quick went to something like paying a dollar into your in a mortgage to get twenty five cents back on a tax return. So if anybody tells you keep your mortgage is good for your taxes. You can know that they're probably not that good at math. Are. So I'm going to finish here with talking about the dream house. So how do we buy a house. All right let me just share with you one way to view this so suppose we have a dream house. Three hundred thousand dollars house out in the country with acreage and we want to do gardening with our family and all that kind of stuff. What is the best way to purchase that house. Is it better to go straight for the small house first and then pay it off early or is it better to go straight for the bigger house. And A for the. If we can afford the payments on sorry. Better get a small house first. And then paid off early and then buy the bigger house is what I meant. Or just go for the bigger house. Or is there a difference. So let's take a look. The big family and the small. All right. And they both have their eyes set on the dream house around the country three hundred thousand dollars. But the big decide hey we can afford the payments will go straight for the big house. But the small say. We're going to start with a small house. Pay it off. And then move up to the bigger house. So how does the math work out. All right. They both have thirty thousand dollars for a down payment. The Big have a two hundred seventy thousand dollars mortgage left over every thirty year mortgage. Fixed rate a four and a half percent. Their monthly payments. About thirteen hundred dollars. And after ten years. Not including their down payment they would have made one hundred sixty four thousand dollars in payments in ten years. OK. Follow me here. The small have the same down payment. But their balance is actually a hundred twenty thousand out of one fifty. But they decide to pay it off in ten years instead. And for the sake of comparison. They actually have the same rate of interest. Their monthly payment is a little bit less about twelve hundred dollars. And they pay right under one hundred fifty thousand dollars not including the down payment in ten years. OK So so far so good in the second decade. All right so we're into there twenty to twenty nine years. They're still doing the same thing the big thirty year mortgage same monthly payment. Same amount paid in the second decade. The small however they paid off their first house. Because they paid off in ten years. So they now are stepping up to the upgraded house their bigger house their dream house. And they sold the previous house for only one hundred fifty thousand dollars and I suppose of the house. Increased in value they would have gone even more out of that. Well let's just say they got the same amount out as they put in. So they have a balance of one hundred fifty thousand dollars left a mortgage of one hundred fifty thousand. And they take out another mortgage this time same interest rate. They want to pay it off in ten years again. So now the monthly payment is a little bit more. OK fifteen hundred dollars. And they pay me. About one hundred eighty six thousand dollars in the second decade. But their house is paid off. Right. So the third decade the bigs are still treading along doing what they're doing on done all along. And so the total amount. They paid for a three hundred thousand dollars home. Is five hundred twenty two thousand dollars and five hundred dollars. OK. But for the small. They actually only spent three hundred sixty five thousand dollars or thereabouts. Having bought the small hours then moving up to the bigger house. So what's the difference the amount saved right the small compared to the Big One hundred and fifty six thousand dollars. So let's break this down. All right. Both families ended up in their dream home. But the Smalls ended up paying off their dream home. A full ten years before the big six. We just think back where were you ten years ago. Ten years is not a short period of time in a certain perspective. The small as mortgage payment was lower than for the first ten years. Slightly higher for the second ten years and of course the no payments in the third ten years. OK. So what I'm saying in that point is that it wasn't a huge difference in the amount that they were paying out during the two years that they were both having mortgages. But here's the key point. The small saved enough money in total that they could have gone back and bought their first house back in cash with the surplus. So by buying smart the Smalls can own two houses and have them both paid off ten years before the big finish paying off their first. So getting an three mm house. By all means. You can get a you can get your dream house around the country just like these families did but just remember. By smart and don't let it become a nightmare. So the lesson is buy small and move up. Be in debt a short pier as you can actually pays off for the benefit. Later on. OK Don't just assume that the mortgage payment is all that matters. There's a smarter way to do this. So let's summarize a summary before I let you go. So number one never borrow money for anything that goes down in value. That was the rule number one rule number two for example that borrowing of the only of the purchase will increase in value or generate income. Because that's the only way you can pay a later just like Ellen White. Said her books would be able to pay off her debts for her credit cards are dangerous but credit card use without self-control is dangerous. Paying off debt is the best investment. And you should use the debt snowball I talked about that we should minimize student loans. Upfront. And then pay them off. As soon as possible and don't inflate your lifestyle. That's the point. Such And then don't take the maximum still on a mortgage you qualify for if it's not free money you still have to pay for and buy only as much house. As you need. And then pay the biggest downpayment can muster pay the largest monthly payment you can Those are the two secrets to my wife and I paying off our house in two years. And then buying a smaller house with a shorter mortgage. And then work up to the big one. Those are the lessons on debt from today. So thank you so much for joining us during this very warm afternoon in this room. Practical for you as for prayer and then I'll let you go father haven't we thank you for sustaining us through this warm session. I pray that the lessons we learn would be practical and helpful as we apply them in our lives and help us to avoid being in debt as a servant to the lender or dealing with this financial smallpox. Disease. You talk about. And may we be wise with the stewardship of the funds. This message was recorded at the G. twenty fifth supporting Ministry of the Seventh Day Adventist Church. Seeks to inspire young people to be bible based to download or purchase other resources like this visit us online web.

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