“Debt is not a tool.” These words are the subject of Total Money Makeover’s chapter 3.
No matter how much we think it is, or how much we’re programmed to believe it is, it just isn’t.
There a bunch of myths that we believe about debt. Many of these have been with us for years. Here, we’ll cover some of them.
Debt should be used as a tool to create prosperity.
Nope! In actuality, debt is risky and usually doesn’t bring prosperity at all. For some reason, in our society, we believe that wealthy people use debt more than they really do.
What could that reason be? Could be a message that’s been pounded into our brains for so many decades that it’s become a part of our culture? Yeah, probably. I talked about this in the last post.
Other people’s money. Sound familiar? OPM? How many times have you heard, in any of the entrepreneurial or business paths you’ve gone down, that it’s good to use other people’s money. Because if you don’t have any of your own, use other people’s as lever… to lift what we wouldn’t be able to otherwise on our own.
OK, I’ll admit, I’ve bought into this plenty. There were times in my life when I just couldn’t get where I wanted to go without the help of someone else, even if I didn’t know that someone else. I needed cash flow!
But ancient, holy wisdom popped in and said hello. Told me not to “buy” this belief that debt can create prosperity. There’s a verse in the Bible where God seems to show disdain for debt… Proverbs 22:7. “For just as the rich rule the poor, so is the borrower servant to the lender.”
Right again. But it’s not just ancient wisdom and the word of God that tells that debt is no path to prosperity.
It’s right here in the days of our lives, too.
75% of the Forbes 400, when surveyed, claimed that becoming and staying free of debt is the best way to build prosperity and wealth. And these are the richest people in America saying this!
Many companies today are run completely debt free,too. Among them, Microsoft and Walgreen’s.
And there’s evidence that the extreme, cultural prevalence of the OPM philosophy is about 100 years old, because way “back in the day” these three famous figures also despised and spoke against debt. Those famous figures who were anti-debt are also three of America’s biggest lenders.
Crazy how this stuff works out.
Sears, J.C. Penney, and Henry Ford. Their histories…
Sears said: “Buying on credit is folly.”
J.C. Penney was nicknamed James “Cash” Penney because he never used debt and hated it.
Henry Ford thought debt was lazy. Ford Motors didn’t offer financing until a full decade after their rival General Motors did.
Now, the merchandise that Sears sells makes them less money than the credit they offer.
J.C. Penney makes millions on credit.
And Ford Motor Credit sleeps on beds of cash.
There are plenty more myths about debt to come and as I continue to read the Total Money Makeover, I’ll be sharing them with you.
This way we can individually shake the belief in the lies about debt that we’ve “bought” and in time, collectively, shake it off as a society.