The rich rule over the poor, and the borrower is servant to the lender. Proverbs 22:7
The heart of personal finance is to spend less money than you make. Whether that means making more money, spending less, or a combination of the two. Any way you look at it you cannot spend more money than you make and be successful in finance. This means no debt. You can’t borrow money for a car, and cut up your credit cards if you still have them.
Proverbs is clear on this point. The borrower is servant to the lender. Some translations go even farther saying the borrower is slave to the lender. If you owe money to somebody you are under them until you pay it back. This is why you shouldn’t lend money to friends and family. It changes the relationship. It becomes a master slave relationship instead of a peer relationship.
Debt kills a person’s ability to grow wealth and gain financial independence. The key to growing wealth is the magic of compound interest. Your money grows as it earns interest from investments, and as time goes on you start earning interest on the interest. That’s where the magic happens, and given time anybody can grow wealthy. The problem with debt is it robs us of that magic, and even works the opposite way. Visa and Mastercard are enjoying the magic of compound interest on your credit card balance.
Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay your very bed will be snatched from under you. Proverbs 22:26-27
This has played out all across the country over the last few years. Our country fell in love with debt, and people bought many things they couldn’t afford. One of those things was houses. Unfortunately many people lacked the means to pay for the houses they signed up for. Because of this they lost them, and in the process made the entire economy come crashing down with them. The principles of personal finance laid out in Proverbs are as true today as they were when they were written. Say no to debt and you will spare yourself a lot of heartache and misery.
If you missed it, check out the whole list of principles in my intro post – Proverbs Guide to Finance.