Monday, March 14, 2011

Interest Never Sleeps or Takes a Vacation

Paying interest can greatly increase the cost of what you actually pay for an item. There are a few things in America that you can justify buying on credit. These would be a modest home, possibly a basic car, and limited expenses for higher education.

It is very easy to be talked into borrowing more than we truly need. Whenever we borrow money, we need to already have a plan in place for paying it back as quickly as possible. Any prepayments (paying more than the minimum payment due) will reduce the total interest you pay in the end.

This is one of my very favorite quotes on interest. Here it is shared by President Thomas S. Monson, President of The Church of Jesus Christ of Latter-day Saints. He also shares some other thoughts worth pondering. This talk was given in 2005 when the housing market and all the creative lending was just beginning to go a little crazy.

This is a day of borrowing, a day when multiple credit card offers arrive in our mailboxes each week. They generally offer a very low rate of interest which may apply for a short period of time; but what one usually doesn’t realize is that after that period has expired, the rates increase dramatically. I share with you a statement made by President J. Reuben Clark Jr., who many years ago was a member of the First Presidency. Its truth is timeless. Said he:

“It is a rule of our financial and economic life in all the world that interest is to be paid on borrowed money.
“Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off work nor discharged from employment; it never works on reduced hours. … Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.”

My brothers and sisters, I’m appalled at some of the advertising I see and hear advocating home equity loans. Simply put, they are second mortgages on homes. The promotion for such loans is designed to tempt us to borrow more in order to have more. What is never mentioned is the fact that, should one be unable to make this “second” house payment, one is in danger of losing his house.

Avoid the philosophy and excuse that yesterday’s luxuries have become today’s necessities. They aren’t necessities unless we ourselves make them such. Many of our young couples today want to begin with multiple cars and the type of home Mother and Dad worked a lifetime to obtain. Consequently, they enter into long-term debt on the basis of two salaries. Perhaps too late they find that changes do come, women have children, sickness stalks some families, jobs are lost, natural disasters and other situations occur, and no longer can the mortgage payment, based on the income from two salaries, be made.
It is essential for us to live within our means.
Thomas S. Monson, “Constant Truths for Changing Times,” Liahona, May 2005, 19–22

He offers sound advice that will bring blessings to our lives if we follow it.

I encourage all of you to look to your finances and determine how much is being paid out in interest each month. Create a plan to pay these items off faster than their required payment, if possible. The peace that comes from being out of debt is amazing!

No comments:

Post a Comment