As I looked through my site stats tonight, I noticed a keyword phrase a visitor used today to get to my site, which was “Is it stupid to borrow money?”. I figured this phrase deserved a post of its own. It seems that so many people reach my site with similar questions. Young adults these days are searching for answers. They don’t know how to get ahead. They don’t know if buying “stuff” like their peers are pressuring them to do is right for them. Will spending all their money, and more by borrowing money, really make their lives better?
Should I Borrow Money?
For those looking for my answer to the question, “should I borrow money?”, the answer is no. My advice is that you do NOT borrow money, ever again. Obviously, there are people out there that will disagree with me that will likely leave their opinion in the comment section of this post, but that’s okay. My post on Reasons to Not Buy a House Even If You Can Afford It, will then stop being my most publicly mocked post thus far.
So, why not? What’s wrong with borrowing money? Well, let’s take a look at it from both sides:
Reasons to Borrow Money
Here are some reasons for borrowing money and my response, knocking each one down:
- It helps you build credit – Yes, borrowing money helps you be able to borrow more money. But if borrowing money is a bad idea in the first place, then why would you want to do more of it? It doesn’t make sense to me. The credit score is an I love debt score. That’s all it is. Sure, employers and insurance companies may check your credit score. Sometimes, that may cause them to deny you or charge you more. Perhaps you should take your services and business elsewhere. Look, I’m not saying go and trash your credit by missing payments and stiffing your creditors. I’m just saying, isn’t your financial health more important than your ability to go borrow money, especially when borrowing money hurts you in the first place?
- Interest rates are low – Yes, interest rates are at an all time low. That just means that now is a better time than usual for borrowing money. But again, if borrowing money is a bad idea to start with, then making it less bad doesn’t change the fact that it’s bad. Interest is something you pay for the privilege of borrowing money. Why pay interest when you don’t have to? Why not just save up and pay cash for whatever you are buying? The rich earn interest, not pay it. Do you want to be rich, or poor (the new middle class).
- You have to borrow money to buy a house – First of all, when did buying a house become something you have to do? Oh, you’re brainwashed into believing that buying a house is a good investment? Try Googling around on the average appreciation of personal residences and you’ll find that they just barely beat inflation over the long run. A rental house is an investment. A personal residence is an expense. It’s a roof over your head. It’s a liability because it requires work, maintenance and heating/air conditioning. Now that we know that buying a house is an expense just like rent is, we don’t have to get caught up in the hype. Saving for a house in cash is doable. People do it all the time. Thinking you can’t save for a house is not productive thinking. Yes, you can, but you likely will have to rent for a few more years. I bet it will be worth it too.
- I like to keep my savings account padded – Okay, just live below your means for a while and watch your bank account outgrow your ability to spend it. Borrowing money just to keep a pile of cash in the bank doesn’t make sense. It just means that you don’t have as much savings as you should and you shouldn’t be buying whatever you’re borrowing money for.
- I won’t be able to maintain my expensive lifestyle without borrowing money – You’re right, and that’s a good thing for you, long term. If you’re living above your means and spending more than you make through borrowing money and going into debt, do your future self a favor and stop. Can’t you hear your future self sweating bullets? He/she is begging you to stop doing this to your future. Once you cut your lifestyle and your spending, you’ll learn to stop noticing the difference at all. You’ll be just as happy living cheap as you are living high on the hog. Trust me, I’ve been through it personally.
- To go to college – This is doable without borrowing. I’ll likely get hate mail for this point alone, but please hear me out. There are cheap colleges out there if you don’t have the money or parents to help. Did you think about community colleges? No? Why not? No, they are not beneath you. They are college none the less and you’ll be more likely to be able to pay cash for it if you choose this route. So, unless you’ve considered a community college, don’t tell me that you need to borrow money for college. Another alternative is to not go to college. It’s not like it guarantees you a high paying job or anything. There are a ton of college grads in rough shape these days, with a ton of debt too yet because they NEEDED to go to college and to borrow money for it.
Reasons to NOT Borrow Money
Here’s where we get smart and start changing our mindset and future in gigantic ways. Here’s why you don’t want borrow money, ever again:
- Being in debt is stressful and it hurts you – Do some searching online and you’ll find hundreds, probably more like thousands, possibly tens of thousands of blogs that focus on getting out of debt. How many will you find on getting into debt? I’d guess very few. The common thread here is that being in debt sucks the life out of you. Why is that? Well, for starters, because, as it says in Proverbs 22:7, “The rich rule over the poor, and the borrower is slave to the lender.” Ever owed your friend money? It felt kind of weird, right? Ever loaned your friend money, in which before paying you back he spent money stupidly? As the lender in that situation, you feel some power over your friend since he/she owed you money. He or she felt it too. Being in debt is a crappy position to be in. You lose your rights, your freedom, your self worth. Being in debt hurts you.
- You don’t need the stuff you’re buying with borrowed money – What do people usually use debt for? Well, there are new cars, snowmobiles, big screen televisions, stereo systems, private colleges, houses and clothes. How many of those do you REALLY need? Likely, none. Sure you need a place to live, but do you need a 2,000 square foot house with 4 bedrooms and 3 bathrooms? I doubt it. Renting would do just fine. Do you need a brand new car? I doubt it. There are cars that run just fine that can carry you from point A to point B on Craigslist for $1,500. Clothes? You likely have a closet full of them and you’re borrowing to buy more? Not needed, obviously. You just don’t need this stuff, so why are you borrowing money for it?
- You can always find cheaper or free alternatives that you can afford – You can find a way to live without borrowing. It’s doable. Sure, I have an income and money saved so I’m far from being broke and homeless, but I believe that everyone can get by without borrowing. You just have to let go of your expensive taste. You have to hate debt enough that you’ll do anything and everything to stay out of it. If need be, move in temporarily with relatives or friends while you get ahead. You can do it without debt. You just need to open your mind to it.
- You’re on a path to a better life, not a worse one – The final and most important reason not to borrow money is because you’re on a mission to build a better life for yourself. We all are. You want to be happier tomorrow than you are today. You dream of a better year next year than you’re having this year. It’s part of our nature to always believe in future happiness and to have hope for the future. If you borrow, you’re doing the opposite. You’re setting yourself up to have a worse future than your present. Knowing that you are doing damage to the future you, how can you remain hopeful? Doesn’t it just make you sick to your stomach thinking that next year you’ll be more stressed out than you are now? Yuck, I’m not doing that to myself. From this point forward, I will make my future better than my present always. I always want to have hope and strongly believe that my hope is realistic.
All in all, I won’t say whether or not borrowing money is stupid, however I don’t believe in it and I would strongly encourage you to never do it again. If you disagree and want to borrow money, go ahead. It’s your life. But I’m living mine debt free, which means my future is going to be better than ever.