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03 Slaves with Smallpox: Practical Tips on Dealing with Debt

Alistair Huong
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This seminar deals specifically with the topic of debt. Is it a sin? If not, when is it ever acceptable? We address some of the most common forms of debt such as student loans, credit cards, car loans, and home mortgages. We share specific strategies for buying a car without a loan and also how to buy a house more efficiently. I also share the story (and numbers!) of how my wife and I paid off our home in two years.


Alistair Huong

Executive Director of AudioVerse



  • June 22, 2021
    3:30 PM
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In you are about to enjoy a presentation recorded at the 2021 michigan conference camp meeting held at cedar lake michigan. We pray that the Lord will bless you as you listen father in heaven. We thank you for bringing us safely together again this afternoon and we thank you for the blessings we've received in the fellowship with one another and the studies we've had and other seminars and the messages. We have heard the spiritual feast that we have truly been enjoying and we thank you for your presence in this place. Once warm, we ask that you will be with us to guide us into all truth into and to help us with some of the more practical aspects, such as dealing with money and debt to day. So teach us, we pray in jesus' name a man. So for in case some of you are joining us for the 1st time, we are doing a seminar on personal finance. And the 1st 3 sessions of this week today being the 3rd out of the 6 we'll, we're dealing with some of the more practical aspects of money the more day to day aspects starting tomorrow. So starting tomorrow for the last 3 sessions will be shifting gears a slight bit and we'll be looking at of prophecy and looking at our financial personal, financial situation and personal finance in light of our apocalyptic understanding of what is coming in the world. And so the end time finance portion is going to come. However, I will say for those of you have been faithfully attending the principles that we have been addressing in the previous few. Dave come to bear nevertheless, within the context of the end time prophecy. So I don't want to make it sound like we're going to just throw everything out, right? That's not how it works. God's principles are timeless and we can apply them throughout whatever circumstances we may find ourselves in. And so I just want to mention that, and today we are looking in particular on the topic of debt and the title you see there is slave with smallpox, practical dips, a tips on dealing with debt and saving the crumbs dot com. I've mentioned that before, it's the website where my wife and I have written about this and also audio verse dot org is a website where I am the director. But I also have some previous financial seminars available on there. And if you looked previously on your, in your program, you will see that the subtitle for this session was supposed to also include a discussion on budgeting. And in the course of preparing, i realized i'm not going to be able to do a justice to do both topics and one. And so I cut out the budgeting part. I'm sorry, I know that must really disappoint you. But on audio verse, i have a message entitled counting, the cost is from a G Y C convention some years ago, counting the cost. And that is one entire hour long session going through how to do a budget. And I'll just tell you now the way I person approach budget, it's not handcuffs telling us what we can't do. But it's a plan to help us accomplish what we want to do. Right? That's really a mental shift in budgeting and it's not about what we can't buy. It's about what we can save to what we can achieve. And so counting the cost, you can look that up and I have the slides available on there as well. You can see the tables and in the process of how I recommend budgeting. But today our topic is debt. And I want to harken back to our 1st day together where we had our quiz. And one of our quiz questions was this question is being in debt a sin? OK, so let's pick it back up right here. Our discussion on debt. Is it a sin to be in debt? publishing, ministry page 2. 09. This is what sister white rights. I now right to ask you if you will let me have the use of 2000 dollars to help me in bringing out books that the people need. If I should fall in the conflict before the Lord appearing, my sons would carry for the work of circulating my books according to my plans, when the expense of issuing my books is lessened, the sales will soon pay up all my debts. We looked at this in our 1st session, but to just recap, sister, why does not our example? Jesus is our example, but nevertheless, i find it difficult to believe that sister white with so almost nonchalantly asked to borrow money of being in debt was on the level of moral crimes as a fin. It doesn't seem to be that way. And we're going to come back to this statement to try to glean some of the principles of why this was acceptable. But that's one side, so it's not sin necessarily to be in debt. However, the bible and elsewhere in the spirit prophecy, there are some other statements. It says the bar or is servant or better translated as slave to the lender. This is probably 20 to 7. And I think this stands to reason if we owe money to someone that we are attached to them, we are obligated to them. We really have not the freedom to do whatever we want. They have a claim on us. And so average home also says this 393 page, 393, be determined never to incur another debt, deny yourself a 1000 things rather than run in debt. This has been the curse of your life, getting into debt avoided as you would smallpox. And I like to tell the joke that it's covered 19 and now nowadays avoided like you would covered 19. So is it a sin to be a slave? No, joseph was a slave. The children of israel were slaves for hundreds of years. It's not a sin to be a slave, but should we aspire to be a slave? No. And the same vein, is it sinful to have smallpox or cove id or to be sick? clearly not. And so what are we seeing here on one hand? Yes, sin may not be on the moral level of a crime like breaking one of the 10 commandments. But on the other hand, it's analogous to having a terrible disease or being in the condition of a slavery. You don't want either of those thing, right? So the summary really is, debt is bad, but not a sin. It is something like sickness. You want to avoid it. It's something like the condition of being a slave. You want to avoid it, right? And that's also where we derive the pile of our message this afternoon. Slave with smallpox. Interestingly enough, we, the American public really are a nation of slaves with smallpox here, a few stats for you. The average household debt in 2020 was $149000.00 and $149230.00. The average car loan is $28000.00. Average stood alone balance. So it might be more than one loan. 58400. $68.00. Average credit card balance. $6700.00 and credit card interest per year on average is $1155.00. As been said, that debt is as american as a, as apple pie. And I guess it kind of is true. Now looking at this, I crunched, i looked up these numbers a few years ago and back then the average credit card balance was significantly higher. And everything else has gone up, and I'm like, why did credit card debt go down? And I looked it up and apparently the stimulus money that came through the coven relief bills, was good for something because people actually did pay down their credit card balance. So there was some, there is some sliver of good news in these numbers because otherwise the credit card balances were significantly higher in previous years. But nevertheless, we are looking at significant debt load on the American household. And American population. Forbes magazine tells us the statistics. 63 percent of americans don't have cash to cover $500.00 emergency. Nearly 2 thirds of americans cannot pay $500.00. If that were to happen. 56.3 percent have less than a $1000.00 in their checking and savings account combined. That's more than half. And so this tells us that the majority of americans are one the paycheck away from catastrophe living paycheck to paycheck. We've heard that saying it actually is a real thing. And it affects and not just the lower class, the poor classes. It actually affects people all the way up the income levels. I know for a fact my, I have family members, i work as medical professionals in the hospitals. And last year you remember a lot of hospitals were going through difficult times. Nurses and medical professionals were fer load, sometimes without pay and there were very what you would consider middle class or even moderately wealthy and affluent. People who were in panic mode because they did not know how they were going to survive without this, you know, constant drip line of, of income coming in every 2 weeks. And so this is not just talking about the poor. This affects people even with higher levels of income. So the question today is, so when is it okay to have debt? So we live in a world in which debt is very commonplace. Is it ever appropriate? Is it ever acceptable to have death? So let's answer this question by looking back at the statement from l white and publishing ministry. So page 29, it says this, and notice the different highlighted portions. I now right to ask you if you will let me have the use of 2000 dollars, what was ellen white borrowing the money for? To help me in bringing out books that the people need. All right. If I should fall in the conflict before the lord's appearing, my sons would carry for the work of circulating my books according to my plans. When the expense of issuing my books is lessened, the sails will soon pay up all my debts. So what kind of loan was sister were looking for? Was it a living loan? Was it a credit card? Was it just a line of credit for me to just pay my grocery bill with? It was for a very specific purpose shows barring money to print books that would then be sold at a profit. You see what she's doing here? What she's borrowing money for, actually will have a return. Ok. So the rules for acceptable debt are 2 and they're basically 2 sides of the same coin. Number one, never borrow money for something that only goes down in value. That is, in other words, what we call a depreciating asset, right? There's appreciating and then there's depreciating. So if you're buying something that only goes down in value, that is not something you should be paying with interest right by on interest. Number 2, as a flip side, as a borrowing is acceptable, only if what you're buying can pay off the debt, right? Whether through the appreciation of what you're buying, or if it's income generating, then that is what the world would deem quote, unquote, good debt. Have you ever heard this term? People say that good debt versus bad debt. Now having said what we've said and seen what is said in the bible about, you know, the borrower leaves the lender and smallpox, and all of that is difficult for me to call any debt good debt. I like to just refer to it as acceptable debt. It's ok some time as o L A. Why it's royalties? And the net profit from her books would pay back the debt that she took out. So applying these 2 rules was she borrowing money for something that only goes down in value? No. And as she borrowing money for something that can pay back the debt eventually. Yes, she can. Yes she does. She was doing that. And so let's take a look at some examples here. Do they pass these 2 debt rules stood alone. Is that a yes or no? That the path A stood alone, the idea behind a student loan is that you are take borrowing money to increase your earning potential in the future. That's the idea. But as yes with conditions you understand, not any student loan and not just any amount of student loan would be reasonable. Because you know, the proverbial underwater basket weaving degree. If you pay a $100000.00 for a prestigious university to get that degree, it is unlikely to be a good return on investment. Yeah, that's what I'm saying. But if you're an engineer or you're a doctor or dentist or nurse, you know some of those things. You can do the math to see if I'm going to pay this amount. And this is the starting earning wage. And this is how much I can earn. It can pay back the loan and you are improving yourself. All right, for the next one. What about a home mortgage? Does it pass the debt rules? Yes or no? Yes. And again is within certain conditions, right? Just because you can, doesn't mean you must. So we'll talk about buying a house in a little bit. But about a new iPhone. Yeah, I'm glad. I'm glad you guys were clear on that one because the value of your iphone will only go down in value. What about a car loan? So here's here and I knew someone was gonna say that. So in the most traditional use case, right, like I'm just buying a car from my personal use to come you back and forth from work or for school, whatever. It's a depreciating asset, a car we proverbially, like we know at the moment you drive off the lot, it goes down in value. And of course, you know, the joke is, oh my car is a classic. Know your toyota, toyota carroll is not a classic right? But the car loan might be appropriate if, let's say you were in business, right. And you have a vehicle that actually generates income. So there is obviously some, some leeway in there. But for most people, for personal use is what I'm referring to. A car loan is doesn't pass, it doesn't pass the rules because a car that depreciating asset and it doesn't pay back the loan. There is a question That's a good point. We're actually going to talk about that in just a moment. So that we are living in a very fairly unique situation with the price of used cars. So hold on to that point. We are going to talk about how to buy a car in just a moment. So the point here is just because some debt is permissible, it doesn't mean that you must borrow the money, right? Because it's still smallpox and it is still subjecting ourselves to a condition of slavery. So let's talk about some of these types of loans more specifically. So let's talk about the student loan 1st. So when we look at a stood alone there are some fine print that we need to remember. The 1st point is the federal student loans are not talking about private student loans right now. Federal student loans cannot be discharged in bankruptcy. So there are, there's only 2 ways that you get out of your student alone from the federal government. Number one is you pay it off and number 2, you know what it is. You die. And I think I know which of the 2 I prefer. So federal stood alone cannot be discharge of bankruptcy, and uncle sam is so kind. He will even save you the step of sending them the money. He'll garnish your tax returns, and sometimes your income, if necessary, to return the money to his coffer. And so just because you qualify for student loans, don't take the maxim out. This is I for, I would wish that this was common sense advice, but unfortunately it's not, I have heard on more than one occasion, people nonchalantly say, I took a max amount. I mean, they're the boasting, right? They're actually bragging about it. They took a maxima, the students', federal loans and, and they're like, oh wow, look how much money I have. And oh, and then I took out a living loan and I begin to sort of melt in my seat when I start hearing that like, no, you don't know what you're doing with your life because that's what it 8 free money. And did you know that Mr. White actually has something to say about student loans. Let's take a look in the book education pitch 221. In acquiring an education, many students would gain a most valuable training if they would become self sustaining. Instead of incurring deaths. Or depending on the self denial of the parents, let young men and young women depend on themselves. They will thus learn the value of money, the value of time strength, and opportunities, and will be under far less temptation to indulge idle and spend $3.00 tablets. The lessons of economy, industry, self denial, practical business management, and steadfastness of purpose, thus mastered, would prove a most important part of their equipment for the battle of life. So sister white doesn't just say hey, don't just count a student loan to get your way through school. Learn to depend on yourself and learn how to work. And in fact, she says, what you learn from working may actually be more valuable than the education you get from the books in your degree. And just to tell you my story, i mentioned on the 1st day that I was able to make a get my master's degree from southern without any debt. So the story starts the summer before my wife and I got married. This was back in 2010, and you remember 2010 was the gc session in Atlanta. And my wife, she was my fiancee at the time. We were going to get married in the fall, but I had, are enrolled, i was going to do a masters program at Southern and we were driving to Atlanta. And on the way we're going to stop a southern turn in my paperwork and my application, those kinds of things. And so I, we were driving down, I 75, we ride on campus. I came into the business office of the business school and I was talking with the advisor and then a voice shouts from across the room. Hey, you over there, I turned around and there's an elderly gentleman comes bounding across the room. Big smile on his face and he says, were you driving in a white honda Accord? Going south bound on I 75 yesterday around 3 o'clock in the afternoon and I thought are you an angel? Like who are you? How do you know that? Because yes, and he said, ah, my wife and I, we were driving on the freeway and we looked over and we looked at the 2 of you. And we said those young people looked like adventist and I bet they're going to the g. C. Session in Atlanta, that's what he said. And he looked at our license plate and we had a little frame around the license plate and it had the word loma linda on it because that's where I'm from. And he said, I, for sure, there avenue stand because they're from low, melinda, and then he says, and here you are in my office, the very next day. What a coincidence and my wife and I looked at each other like idle. This doesn't feel like a coincidence. Feels like something more than that. Fast forward we get married in the fall. I start my graduate program in January in the dead of winter. We had moved to the college. The area with the intent of working. I was planning on working while going through school. I had applied in multiple places, nothing. And we had a kind friend letting us stay in their basement apartment until we figured out like, what can we afford? We don't want to just rent any old place that we can't afford it. And you know, the, the thought start creeping in my mind. Maybe we will need to take out loans for this. My wife was looking for work as well. And so school has started. I was a weekend, nothing was opening up and I was sitting there doing accounting homework, nothing worse than doing accounting park while wondering where we are going to find money to pay for their degree. And so I was there and I get an email from guess who. The gentleman that I saw in the office that day, 6 months or so earlier. And you know who he was. He was the dean of the school of business. His email was one line. Have you found a job? I responded to him so fast. There was smoke coming out of my keyboards. And he said okay, come see me my office right now. So I set great what an excuse not to do my homework. The dean needs to see me, so I drove over back to campus, and long story short. There was a brand new graduate school graduate assistantship opening up working for him, specifically under him. And I was the 1st person that came to mind. Why do you think I was the 1st person that came to mind? Perhaps there was a divine appointment some months before in the summer on I 75 head of South florida, atlanta. The angels of god were putting a thought in this man's mind. And so yesterday, at the conclusion of our talk, i mention we might be struggling, but bring our loaves and fishes to jesus. Well, that's what I did. I said, lord, jesus, i am willing to work. I'm willing to be a greeter or walmart. I'm willing to scrub toilets, i don't want to go into debt, i'm willing to do what it takes. And so he opened opportunity. There were some cost involved. I wasn't able to just go full time. I had to extend my program a little bit. And that this may not always be feasible in all circumstances, but within my context, instead of taking one year, it took me 2 years. I didn't have any vacation, all of the breaks i was working. And I had to work, you know, on the shoulders even of the summer and winter breaks. And I had to spend a lot of time on campus when I could have been home with my wife. And there are these types of things that when I look at the situation, I say praise the Lord. I was willing to give him the meagre loaves and fishes that I had. And he returned to me a graduate education with no debt. And my story is certainly going to be unique. Your story is probably going to be unique. But the point of the matter is if we take god at his word, there are important equipment that god can give us if we choose to rely on ourselves. So hope that was a little inspirational for some of the young people out there, or maybe parents and grandparents. You can pass that on for the the young people. You don't always have to go for the student loan 1st. Right? That doesn't have to be the 1st option. All right, let's talk about buying a car now. Ok? buying a car without a loan. You guys are very high and audience because I have had audiences where I say it is not appropriate. Well, we shouldn't borrow money to buy a car and I feel like they're about this the OWN me. So maybe you guys feel that inside and you're just holding it in. Appreciate that. But let's talk about this. All right, so average cut the average car payment the United States is about $500.00 for 68 months. Okay, so if you add that up, total payments are roughly $34000.00 total and that's done roughly makes sense, right? Most of the, you know, cars on the road, the general price range, right? average is probably about 3034000. Maybe a little less, you know, once you include interest. But here's the secret to buying a car without the law. Ok, you ready for it? And that is if you can afford the car payment after you make the purchase, you can afford the payment before you buy the car. Have you ever considered that when people go into the dealership and they sign on the dotted line, and now they're like, oh, I've got a $500.00 payment every month. Somehow the money magically appear. Where was the money just a month before? Something the something change in our life when we find a dotted line, something changes is because now we have a master, right? No man can serve 2 masters. You cannot serve god mammon. Well, we've got the lender basically with the, the chain around us or the ball in chains and you've got to make your payments. So that's, that's really all there is to it, right? Pay yourself your car payment and then go to the dealership. So let's break this down. So buying a car, step number one, be willing, and this might be the hardest step of all be willing to drive a cheap, temporary car. And that's the key. We're temporary now. Forever. Be willing to drive a cheap, temporary car for a while. Number 2, while you pay your self, the car payment. That's just a fancy way of saying save up, right? And then use the amount that you have saved, plus the equity in your car, to upgrade to a nice car in cash. And then you just rinse and repeat. And just like our, our brother said right in the front here use cars are going for a pretty penny these days. Right? So this can actually, your car may actually be worth more in a twist of events than, than normally, it would be. So let's put some numbers to this. All right, number one, let's say we buy a $2000.00 temporary car. All right? And we start with that. And then we save the $500.00 per month. The average payment you fill in the blank, whatever the payment is for you for 12 months. So now you save the $6000.00 plus you have the equity in your car. You sell that temporary car, which by the way, when a car is only worth $2000.00, that is unlikely to be much of any depreciation. Even if you put on another 1015000 miles over the 12 month. And you buy 7 or $8000.00 car and then you save again $500.00 a month for another 12 months now. Yes, $6000.00 at the end of 2 years now you can upgrade sell the other car right? With the $6000.00 you added together roughly $1214000.00. And youve upgraded in just 24 months from a $2000.00 car to a roughly $12.00 to $14000.00 car. You do that another time and you're up to almost 20 grand and you can imagine you can just continue doing this and you're continuously getting a nicer car each year without ever going into debt. Or the other way to do it. You just buy your $2000.00 temporary car, you drive it for 68 months or you save the $500000.00. And then if you take your $34000.00, you have enough cash then to buy the entire fleet of vehicle. Not that I will recommend you do that, but that's just to make a point. If you've driven a 2000 the car for 5 years, you're probably going to be fine driving. Another used car because your teeth have change, right? But if you do want to go out and buy a brand new, know $30000.00 car, whatever you have the cash to do it, then you never borrowed money for it. And so buying a car is like buying a depreciating asset, or it is a depreciating asset, purchase it as you would a tool that would never increase in value. So I would, I never recommend people to borrow money to buy a car. All right, so what about if we already have debt? How do we pay it off? So a couple points here. We need to own the debt. Don't make excuses and don't play the victim. Because I just flows us down. If we're just busy, you know, pointing fingers and making excuses, we're not making progress on getting out of debt. And there is no alternative to making big payments. Sometimes you might be willing to go shake. You might get, you know, less than a dollar, right? Per dollar that you owe, that you have to pay back, but it rarely eliminates the debt. That's debt forgiveness and that's a rare thing. Now make debt, pay off the number $1.00 priority in your short term savings plan, and I squeeze every dime out of your monthly spending plan or your budget to go towards your debt. And don't worry about other investments until your debt is paid off. This is a common misconception. People often ask me, I have debt, can you recommend an investment that I put my money in that can explode in value? That then can help me bury my debt quicker. That's a very dangerous way of thinking because it doesn't take into account risk, right? Because if you're looking for a high rate of return in your investments, it always comes with the risk and the cost. Or rather, the investment actually go down and value over time, and then you're up a creek without a paddle, you've got your debt over here and you've got your investment to have lost value over here. Now there is one mild exception. And that is, if you have a home mortgage with a fixed rate, low interest rate, then sometimes it is appropriate to invest in other things, even while you have a home mortgage. Especially right now with interest rates as low as they are. And so on the last point here, we want to use the debt snowball method to pay off your debt. So what is the debt snowball? Right? Let's take a look at it. When we take a does snowball as we list our debts from smallest to largest buy balance cave, the smallest amount owed to the largest amount owed, and we make minimum payments on all of the debts. Accept the smallest one, and we have focus intense effort on the smallest debt and we pay that off 1st. And then you roll all of the extra into the next smallest one and you tack them one out of time. And so let me give you an example of a debt snowball. So this person has 2 credit cards, a car loan and a student loan of $30500.00 total. And if they have a $1000.00 a month to apply towards the debt, you notice immediately one month in month one, they will have paid off credit card one. And in 4 months, both credit cards would be done. So it would feel, even though on, you know, when you sum up the total of the dollars owed, it's not halfway. But the way that's listed in your list, it feels like you've made half. You're halfway there, right? You've been able to scratch 2 things off after one month. Bam, i'm 25 percent done. It feels like and then 4 months later back feels like I'm halfway done. And this is you might be thinking, well that's just a mental game. It it. And this is called behavioral finance. And there have been research done that there are certain, if you think or sees with human instinct and Human emotions that prevent us from making the most rational decisions. And so, yes, there are other methods we'll talk about one in a minute. That you might see much more money on an absolute level, but to maintain the momentum and the, you know, the energy of being able to pay off everything. This method tends to work the best, and so a payoff in about 39 months or 3 and a quarter years using the debt snowball. So people frequently ask, okay, well why don't you pay off the highest interest rate debt 1st? Because if you do the math, you will, you will said the most money doing that way. But it's really the psychological motivation of seeing a small winds adding up at maintain the wind in your sale. You feel like you're making progress as opposed to being stuck on the massive debt. And you just making payments and making payments for months or years at a time. And you still got these 3 other debts hanging over there. You just feel like you're not getting anywhere and it's easy to give up. But, and either in either case, it's better to pick one or the other rather than just going and not paying it off at all. Right? So that is ultimately the point. And I always like to tell people this paying off your debt is the best investment. If you regret being debt free, it's easy to undo it. You can always go back into debt. Not so easy. Getting out of that easy to get back in. And there's one other point I forgot to mention about investments versus paying off your debt. So let's say you have a credit card with 25 percent interest rate. How much do you have to earn on your investments over here in order to just break even with what you're being charged with? interest over here. 25 percent. Right. That's how math worked out. So if you have an investment over here, that's ernie. 25 percent and you have a credit card that is charging interest. 25 percent. You're just breaking even. Right. And so if you are able to pay off that credit card at 25 percent interest, you have just earned a 25 percent rate of return on your investment. So in that sense, paying off your debt really is one of the best investments and in his risk free, it reduces your risk when you do that. And so speaking of credit card, let's talk about that next. Talking about debt, we have to talk about credit cards. And with apologies to dave ramsey, i know you know who he is and he has very strong views on credit cards. This is one area where I diverged from his teaching credit cards. I don't believe credit cards are dangerous, they're just pieces of plastic or just numbers, digital numbers in your account. But credit card youth without self control is dangerous. Just like everything else and personal finance is not the financial side. That's the problem is the personal side, that's the problem. But having said that, I do admit it is possible to live without credit cards. You don't have to have credit cards because I've heard people on the other extreme. Say that to you like oh, you've got to have credit cards. No, you can live without them. Ah, but also I do have to admit that credit cards have benefits. So there's cashback, there's points, and rebates and things of this nature. And also there's purchase guarantees and extended warranties, rental car insurance, travel per for a lot of those types of things. So proper credit card usage. There's really 2 main points that we need to remember when it comes to using credit cards appropriately. Number one and this is goes without saying, I hope, but don't use credit cards to buy stuff. You don't need it. That's where the budget comes in and never carry a balance. Month to month. Pay off your card every month. And if you cannot abide by these 2 guidelines on credit card usage, then you should cut them up. Because we earlier we said credit card without self control, right? Is the problem. How do you know if you have self control and what these are the 2 rules, if you're buying stuff you don't need and or you're not paying off your card month after month. That is clear, objective evidence that you don't have the self control. So in that case, cut up the cards, the plastic surgery or as they call it, go off, you know, take it and take the auto charge right on all of your subscription, whatever online, take off your credit cards and stick with using a debit card. Or with cash. However, the flip side, if you do use credit cards, you should use your credit cards. Let me put it this way, you should charge as much as humanly possible on your credit cards. You might find that strange to hear, but it's because of the financial reasons behind how commerce is conducted to day. So you see on there, there are also rewards as well. So we'll, you know, so we're earning rewards. And I know that sometimes even guides the dave ramsey, they, they, they get on their little hobby horse and they, they make the statement that you pay less or, or rather the merchants charge you less if you pay with cash some time. That's true. Sometimes not generally the case anymore. Everybody shops on Amazon right wal mart target best Buy all of the big merchants. The dirty little secret is that the credit card transaction costs are baked in already to the prices that they list. So everybody pays them because they already know that the costs of doing business of allowing to visa, MasterCard and American Express, and discover to, to, to be able to accept them. That's just the cost of doing business. And so to insist on not using credit cards, you're actually leaving money on the table. And so there are only 2 gears if you will, to use a car analogy again, when it comes to credit cards, you either don't use them at all, like 0 or you put everything possible on the card, right? Because when you put everything else on the card, as long as you have the self control to pay it off every month, and you're only buying stuff that you need, right? Then you are getting the rebate back that would have gone to other customers or would have just gone to the credit card company. So whether it's in the cash back to percent cash back or travel points or hotel points or reward rebates, whatever you you have it, you are not leaving that money on the table in that case. And so the final point here about those rewards, sometimes we get a little trigger happy and we see all the bonus rewards, right? The, the letters in the mail like, oh, I get a bonus, 5 points or 2000 points. If I just spend this much the 1st 3 months and then it's possible, some of us might have done this. I know I'm guilty of this in the past where I end up having a bunch of credit cards with these very small amounts of rewards like scattered throughout and it's not even enough to redeem. And it become very difficult sometimes that you got even even juggle them. Right. Like which card do I use for this? Which one has the 3 percent off? That's very complicated. So consolidate your points into the few cards that make the most sense for you. Whether it's travel or gas card, or maybe it's just a cash back car, right? That's going to be up to you. But I recommend consolidating the use of your cars to just one or a few cards and then use it to death and pay it off every month. Ok, i know this might this part, my sound kind of off brand when I talk about debt. But is it clear what I'm saying? Does that make sense? What I'm trying to communicate here? Credit card. I'm not saying to use credit cards to borrow money, but to use them wisely to actually get back the points that were already being charged. Ok. Let's talk about housing now. Left. Tell, let me tell you the story about our house. I show you this picture yesterday. This is the hall, my wife and I bought back in 2013, and we paid it off in 2 years. So we are going to be very transparent and I'm going to give you my exact numbers. So we paid $185000.00. That was the purchase price of our home and it's 3 bed, 2 bath, home, 1400 square feet. We have a little guest house in the back, that's another 800 square feet or so. It's on one acre of land. Near college, still tennessee. I'm not going to give you my social security number. Ah, don't worry. And our mortgage was $85000.00. We got a 15 year fixed rate mortgage at 3.49 percent interest. You know, when I 1st put this presentation together this, this interest rate was quite impressive. But recently, if you look at this, this is like way more the way you can get nowadays. So interest rates have gone down quite a bit. And so our monthly minimum payments were $607.24. But our actual payments that we made average $3700.00 and we had a $100000.00 down payment. And so everybody always asked, what's the secret? What's the secret? How did you pay off your house in 2 years? Well, those bottom 2 lines, that's the secret. I'm sorry to bring it to you, there was no magic pill or magic secret financial, you know, sophisticated trick to do this. We just paid a lot of money in our down payment and our actual payments. So you must be wondering how did you do that? So the big down payment is all my wife's fault. And I say that with tongue and cheek, obviously, my wife had a dream since she was young to buy her 1st house in cash. And so since whenever she got a nursing degree and ever says she got a 1st job, she's been saving up like a crazy woman. And that's why I married her right. Best financial decision i ever made. And so after we put the down payment, so the 100000 right, she'd been saving for years before that we were both working at the time because we did not have a baby yet. And we did the math and we realize ok, we're both working. It is conceivable for us to pay this house off within this very, very short timeframe. And so we made the decision that we can knock this out and then start the family. And that will help us with our budgeting and cash flow on the other end because we would have monthly payments on the house, which is typically for most people, the largest monthly expense. And so we took half of our salary, one entire salary of our 2 working people and put it towards the house and actually a little bit more than that. And so nearly all of our savings went towards the mortgage and we average the 6 times the minimum. So that's how we did it. And it's all about the savings rate, right? saving the crumbs, that's what we're about. Gather up the fragments we talked about yesterday. And so the benefits is that we get to live rent and mortgage free, eliminating the single largest expense in our budget. And so this was really the big reason why my wife was able to stay home after we had our baby. While I was working in a ministry job. Our salary took a massive hit, but our expenses also was significantly reduce because we didn't have a health payment anymore. OK, so that was our trade off there. And we also own our home now instead of the bank, and so there's no risk of foreclosure. And it opened up our free cash flow for other savings. So we also were able to invest in solar panels. We priscilla panels on our house. And since that time, we have not paid a dime an electric bill. Our home is on electric. You know, we don't have gas or, or propane or anything like that. It's all electric. And so our solar panel, the, every kilowatt hour, gets sold back to the grid. And actually we've been building up credit and the solar power or the electric company has been paying us. So that's nice. And we were able to pay off the mortgage the very same month. Our 1st child was born and I already explained how that allowed us to have one parents stay home. And it's just one less thing to stress about. And so that's how we did it and that's how the mass shook out for us. And I want to make it clear, we do not prescribe this as a way for everybody to do, right? That's not what we're trying to say. But There are always room for improvement, right? There's, there's ways that we can look to be more efficient with our means. And if we were not able to pay off the mortgage in such a short amount of time, it was, it's unlikely that would have, we would have gone this route. I'll be perfectly frank, we probably would have been paying off the mortgage slightly faster, but not quite. That fast was still reserving some money for other type of savings along the way and we would still had a baby. Right. And those things would have still happened. But the strategy would have been slightly different, so your story may, may certainly be different. And so what about the interest? We had a 15 year fixed rate mortgage and the total interest that we just made minimum payments would have been $24000.00 for $300.00. But because we paid it off in 2 years, we paid only $3300.00 in interest, saving us $21000.00 in interest. And this is actually the hidden costs of mortgage, as most people just don't usually calculate because we don't feel it monthly payments go out. And over 15 or even a 30 year mortgage, you never knew that you know, the $21000.00 or the 200000, whatever it is. The amount of interest that we paid had left our wallets. It's an invisible cost that doesn't feel painful to us, but nevertheless the math is still the math. And so this and of course i'm comparing this with a 15 year mortgage. If it was a 30 year mortgage, the difference would have been even that more that much more stark. All right, but then there is a question, isn't a mortgage good for my taxes? All right, let's talk about this a little bit. First of all, your mortgage interest only the interest can be deducted, deducted from taxes, not your full payment. Sometimes that's easier to be mistaken. And that the duction only applies to the people who itemize their deduction. And most people don't. And if you remember in 2017, there was a tax cut and jobs act in which the standard deduction was about doubled. And so even fewer people now itemized 3rd deduction. And so mortgage, the mortgage interest certainly can help take the edge off like I'm not saying don't take the mortgage interest deduction, but to buy a house and to have a mortgage, merely to take the deduction is kind of, you know, getting it in reverse because it's like saving, like I plan on saving by paying off up or paying a dollar to uncle sam to get $0.25 back. Right. You save more by paying off the loan, then you get back in the tax deduction and my good friend ed reed. I think many of you know him, the stewardship director, north American division for some time. He has a saying, he says, if your account and tell you tells you to keep your mortgage saved on your taxes, it's time to get a new accountant. And I couldn't agree with him more. And so hopefully that answers that question. And let's talk now specifically in closing about getting the dream house. OK, so we talked about buying the car strategy for that. Here's one strategy, not the only, but one way to consider how to get the house. So suppose our dream house is a $500.00 home out in the country, and we're going to stop a country living and things of that nature later in the week as well. What is the best way to purchase that house? Is it better to buy a small house 1st paid off early, or the better to go straight for the bigger house if I can afford the payments? So this is a somewhat narrow example, but it's a common question that I have frequently asked if I can afford the mortgage payment. Should I just go for it? I just go for the the, the biggest and to go straight for the one that I can afford. Why go through the starter home and have a stair step method. Ok, we're going to take a look at the math. So gonna look at the example of the bigs and the small k 2 high, pathetic families. They both plan to get into the $500.00 country home. The bigs, decide to go straight to the 500 dollar, 500000 dollar home. And they each have a $50000.00 down payment. And so the balance of the mortgage for the bigs is $450000.00. And they're taking out a 30 year 3 and a half percent fixed rate mortgage. So their monthly payments will be a little bit above $2000.00 a month. So after the 1st decade, they would have made $242484.00 in monthly payments. Hey, this does not include their down payment. The small, on the other hand, they decide to buy a small home, 1st, pay it off early, and then move up to the big house in the country. So they buy a $250000.00 home. They also have a $50000.00 down payment, but their mortgage is $200000.00. They have a 10 year mortgage, 3 and a half percent interest. And their monthly payments are a little under $2000.00. They're pretty close, right. But more or less in the same range. And over 10 years they have paid monthly payments. $237326.00. Ok. That's the 1st decade. That's where they started. But the small notice they got a 10 year mortgage, which means at the end of the 1st 10 years, they paid off their house. Second decade, the bigs are continuing on their journey 30 year mortgage 3 and a half percent interest rate. They're still paying their $2021.00 per month. So another 10 years go by and they have made another $242484.00 in monthly payments. But the smalls, at the start of the 2nd decade, they now sell their other house, and they move up to the $500000.00 home. And they're down payment now the value of their other home, 250000. So the balance of their mortgage. Now is $250000.00. They take out another 10 year mortgage at 3 and a half percent. And now their monthly payments are a little bit higher. $2400.24. And in those 10 years, they pay a little shy of $300000.00 and monthly payments are right. So let's take a look at the 3rd decade and I will make this note here. I realized these are, this is a little bit of the back of the envelope math because there is appreciation, right? There is appreciation of all the homes are being bought and sold is difficult to predict what that is. And so the assumption is that as the appreciation goes up in the home, we're going to buy the appreciation also is going up on the home you're selling. So in the 3rd decade, the 3rd decade the bigs are finally coming to the home, stretch another 10 years, paying the same amount. $2021.00 and in total for their $500000.00 home, they would have paid $777452.00. But the small in the 3rd decade of this hypothetical story, they have no payments. They've already paid off their home. And so the total amount they paid for that home was 5 182-984-0048 difference or savings of 193400 68 dollars compared to the biggs. And you notice how they did it, they paid off, they bought the smaller house, and then they moved up to the big house and they were able to save money and pay it off faster. So the summary, both families ended up in their country homes. The smaller mortgage payment was lower for the 1st 10 years, slightly higher for the 2nd 10 years and they had no payments in their 3rd 10 years. The smallest ended up paying off their dream home 10 years before the bigs and the small have also saved nearly $200000.00 compared to the big in this example. So what was the benefit to the big? What did they get out of this? They got to enjoy the bigger home 10 years earlier at a cost of an additional near $200000.00. So the only trade off the small in this scenario was that they had to live in a smaller house for 10 years before moving up to the big house. And this is a hypothetical scenario. So the years and interest rates and dollar amounts, obviously those are going to change depending on each unique situation. But the principle remains the same. It is better to buy something, pay it off, and then move up than it is to just go straight for the big one and to make endless long, large payments over a long period of time. And so getting the dream house, it's good to buy smart and to not let it become a nightmare. I will make this final note before we conclude. I know there are some questions about the hot housing market. We are still going to talk about that. But this presentation is somewhat isolated on just the nuts and bolts of how to do it. Not necessarily taking into account some of the current events and the market dynamics are going on right now. But we are going to address it in light of some of the end time prophetic scenario that we're going to look at over the next few days. So I just wanna mention that in case you're wondering. And that brings us to the conclusion of our presentation here. And so I'm going to close with prayer and then we do have about 6 minutes or so after that for a few questions. So let's bow our heads and then we can conclude our live stream as well. Father and haven't we thank you for your presence with us as we discussed some of the more fine details of personal finance, particularly in the realm of debt management. I pray, lord, that we will be why stewards, and to look at debt in a healthy way to realize what it is, what it is not when it is appropriate, when to avoid it. And if we are in debt that we will be able to manage it in a careful and wise manner. So please guide us the remainder of this day and also the remainder of this camp meeting and help us to the stewards and managers of your means for your glory reprint, jesus. To listen to more of these presentations, you may visit the audio archives at M. I S D A dot org slash audio 2021 or search for michigan conference camp meeting wherever you get your podcast.


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