Personal Finances – Phase 7: Understanding Debt

We are now officially halfway through the series. In last article, we discussed protecting your family from hardship through building a one-month emergency fund and acquiring adequate insurance. I challenged you to review your existing insurance policies and to start building an emergency savings worth one month of your income. In this article, we will discuss what debt can do to your life.

What Shall a Man Give in Exchange for His Soul?

A prominent member of our church, Robert C. Gay (yes, I spelled it right) related the following story in October 2012:

“The Savior once asked His disciples the following question: “What shall a man give in exchange for his soul?” – (Matthew 16:26)

This is a question that my father taught me to carefully consider years ago. As I was growing up, my parents assigned me chores around the house and paid me an allowance for that work. I often used that money, a little over 50 cents a week, to go to the movies. Back then a movie ticket cost 25 cents for an 11-year-old. This left me with 25 cents to spend on candy bars, which cost 5 cents apiece. A movie with five candy bars! It couldn’t get much better than that.

All was well until I turned 12. Standing in line one afternoon, I realized that the ticket price for a 12-year-old was 35 cents, and that meant two less candy bars. Not quite prepared to make that sacrifice, I reasoned to myself, “You look the same as you did a week ago.” I then stepped up and asked for the 25-cent ticket. The cashier did not blink, and I bought my regular five candy bars instead of three.

Elated by my accomplishment, I later rushed home to tell my dad about my big coup. As I poured out the details, he said nothing. When I finished, he simply looked at me and said, “Son, would you sell your soul for a nickel?” His words pierced my 12-year-old heart. It is a lesson I have never forgotten.

Integrity is a mark of a man who has his stuff together. People will want to form relationships (business, friendships, or romantic) with a man of integrity. If you ever been betrayed by someone who you put confidence in, you know how much it can hurt.

When I was just starting college, I had this 1978 Camaro. It was a fairly cool car, but I had a 1969 Chevy pickup that I drove regularly. A good friend of mine was a newlywed because of a baby, and was struggling financially. (I was not doing that well myself as a student). He needed a car, so I told him I could sell him the car for $2,000, which was a VERY good deal for the car, and he could pay me back just $50 a month. That didn’t happen, after about three months of me bugging him, he moved of to Portland, and I saw nothing but the first $50. Maybe I was too good natured at the time, but I have seen him only once since then, where I threatened to kick his ass if he didn’t pay up. Several years later, just for giggles, I looked him up on Facebook. I guess karma caught up to him, because he was divorced, skipping out on child support (according to posts from his ex) and going nowhere in life. Talking to his mom just a couple years ago at a grocery store, he has been in and out of jail. I have no idea about the car, didn’t even bother asking.

Although it may be more difficult to carry integrity at times, over time you build a self confidence, and a confidence from others. This creates an atmosphere where you build mutually beneficial relationships, you are respected more at home, at work, and in your community. In short, your life will be easier. If at all possible, build integrity by paying debts wherever possible. If you owe your neighbor a rake because you borrowed and broke it, get him another rake. If you dented another car in a parking lot, put a note in their door and pay it back. (I did that once, cost me $400 as a college student, backed into a car at 1 am, but got a firm handshake and compliment out of the deal.)

Understand Debt

 I have little experience with consumer debt. All our vehicle purchases have been with cash on hand, and we never carried a credit card balance.   However, shortly before the housing market crash, I was fresh out of college, working a good job, expecting a second baby. The housing prices were climbing higher and higher in our hometown. In a panic, we bought, thinking if we didn’t buy now the prices would just keep going up out of our reach. This was in the spring of 2006. Within two months, the buying rush stopped. Prices stagnated, but we were happy with our new family. I kept working in my civil engineering job, creating plans for subdivisions…….

By the winter of 2008, work had become scarce. Competition for the few remaining engineering projects had become intense. My boss started cutting back on hours, so I burned up my vacation time looking for work. I eventually found a job 200 miles away and moved. For the next 6-7 years, I was chasing work during the economic downturn. All this time, we were renting out this house to different people, the market for our house continued to tank. Eventually, when I was out of work for some time (mentioned in a previous article), we ended up being foreclosed on. Thousands of dollars were pumped into this house with nothing to show for it, other than a poor credit score.

From this experience, I learned quite a bit about the pitfalls of stupid financial decisions. You assume things will continue or improve as they are. Not always. It wasn’t a few months later that our economic outlook did a complete change. Having a large debt is a form of slavery. Because of those $1,200 monthly payments, I had added stress to find work, vacations were limited, and we were stressed more as a family.

Avoid Debt

In a nut shell, debt is borrowing money that is not yours. Unless you are borrowing from friends/family, it typically comes with a financial cost. Borrowing from friends or family may make you pay in other ways. Some major purchases like a modest home, business, health emergencies or education may make sense. But going into debt for consumables such as cars, toys, or smaller consumer products is a sign that you are living beyond your means and should be wary of your behavior. Emergencies can also create debt. In order to avoid this, create a saving as outlined in the previous article, and carry the necessary insurance.

One thing you should do is think to yourself, how would it feel to be debt free. Write it down, and remember that. Then, when you are tempted to buy a bigger house than necessary, or buy a new four wheeler, recall your statement about debt.

Get Out of Debt

In order to get out of debt in a logical, efficient manner. In order to do this, you need to create a debt inventory. Go through your records, find all the mortgages, accounts, credit cards where you carry a balance that is not paid off completely, and create a chart like the following example:

Description Balance Interest Rate Min. Monthly Payment
His Credit Card $5231.47 17.25% $85.27
Her Credit Card $10625.85 18.5% $142.56
Car $3452.86 5.3% $225.54
Student Loan $26356.85 2.0% $186.54
Mortgage $225686.21 4.15% $1524.16

This week, gather up all the data you have about your existing debts and create a similar chart. Discuss this in family council to show where you stand. As you do so, hopefully you and your wife will see a vision of where you are and where you want to be.

As I mentioned before, debt is slavery. It stops you from being able to do the things you would rather do otherwise. Hopefully, this desire to get out of debt will motivate you two to do what it takes to get out of debt.

To achieve success, you will need to maintain a desire over time. Periodically review your debts and track your accomplishments. Maintain that desire to have freedom. You will eventually get there.

Overcome Impulsive Tendencies

We are two part creatures. We have our intelligent, rational side (our thinking man), and we have our more base, animalistic side (our natural man). These two parts are at odds with one another. We want something now like Veruca Salt, and end up paying the piper. These “Natural Man” tendencies include:

  • Impulsive or emotional spending
  • Ignorance or carelessness about your financial reality
  • Covetousness and comparing yourself to others

We all have made irrational spending decisions in the past. Like a hangover, it comes back to bite us, and we have regrets. Do what you can to avoid this pitfall in the future.


Like I mentioned above, create an inventory of your personal debts and discuss them with your family. In the next article, we will discuss how to use this information to plan an attack strategy that makes sense.

Author: Jim Johnson

As a man in his early 40's, I grew up on a dairy farm in an irreligious home. Disgusted with the choice of women out there, I looked into religion to find a worthwhile mate. At 23, I joined the LDS (Mormon) faith, married, became a civil engineer, and now have six children. My favorite things are puppies, long walks on the beach, and the color blue (not really).