ChiefCraneMaster335
I need a structured reply with peer review and scholarly sources as…
I need a structured reply with peer review and scholarly sources as references. make sure to list all references.
Q1.
How do you manage your debts? Do you set rules or limits for borrowing and lending?
Smith (2023) defines debt management as “the process of planning your debt liabilities and repayments,” (para. 22). Managing debt poses an issue for some households. The ultimate leveraging tool can also become the weapon of mass destruction. Managing debts is a complex topic, and it’s important that we understand our scope. For now, the scope will be the household. Households use debt to pay for a house, buy a car, and purchase items on credit (Cowan, 2006, p. 80). There are other examples of using debt, however, these remain the biggest uses of debt in the modern family. Most families look to purchase a home, however, few people have $350,000+ laying around in a high-yield savings account. Thus, they take out a home loan, which will give them the funding to purchase the house. The problem is, they are now paying the bank back over the next 15-30 years, with interest. The total spend, not considering the present value of the cash flows, seems to be higher.
Managing debt is all about balancing payback ability and opportunities. In other words, you must think about how much money you make and if you can afford the debt, as well as the opportunities the debt gives you of building wealth (Smith, 2023, para. 3). A home may be a great purchase for a family who is in a comfortable spot financially. So long as they can cover the mortgage payments, they are safe. However, for the family that is stricken with poor consumer choices, they may be in for a rough financial life. Sure, the opportunity to buy a house by taking out a loan is present for the struggling family, however, they may not make enough income to cover the costly payments. Furthermore, a financially savvy family could see the opportunity to mortgage a home as a great financial decision! As it goes, if their interest payment is 5%, and they could earn 10% in the stock market, then they are better off keeping their money, obtaining the mortgage, and making a return with the money they would have put into the home. Depending on the camp you are in, managing debt looks a bit different. For everyone, though, it’s important to understand your own ability to pay the debt back, as well as your opportunity cost.
Is debt always a bad thing? Can it be a tool if we use it wisely?
Debt is not always a bad thing. Debt can be a tool to create new opportunities. Imagine debt being a lever. A lever allows you to increase an input force to provide a greater output force. If a man has $100 and wants to start a business, it will be hard for him to get the business off the ground. After all, he only has $100 to spend on inventory, PPE, and other assets. Now, if the same guy had $100,000, he could buy inventory, lease equipment, and rent out a storefront. Where did he get the extra money from? Well, he received it from a lender, someone who lent him the money with the expectation of being paid back at some point in the future. The man can start a profitable business built on borrowed money.
What was once a small input force leading to a small output force is amplified to a large output force due to leverage. Debt can also be dangerous, though, as most lenders expect to make a return on their money in the form of interest. If the businessman isn’t careful, he could take on a loan that charges an exuberant amount of interest, inevitably leading to bankruptcy. The Bible warns about debt; Solomon in Proverbs states the following: “The rich rules over the poor, and the borrower is the slave of the lender,” (22:7, ESV, 2001). Solomon explains that one can become trapped by debt, in bondage to paying the lender back. We must be weary and use discernment when considering debt as a financial instrument.
References:
Cowan, D. (2006). Economic Parables: The Monetary Teachings of Jesus Christ. IVP Books. (https://libertyonline.vitalsource.com/reader/books/9780830858866/pageid/40Links to an external site..
English Standard Bible. (2016). Crossway Bibles. (Original work published 2001).
Smith, L. (2023, February 12). Debt Management Guide. Investopedia. https://www.investopedia.com/articles/pf/12/good-debt-bad-debt.asp
Q2.
Why do you think the dishonest manager gets praised? Do you think that is right? What would you have done if you were his master?
The title of Luke chapter 16 is “The Parable of the Shrewd Manager” (Luke 16, NIV Bible) and this is the most logical reason for his being praised. It is unlikely that even an unscrupulous master would praise anyone for being dishonest and furthermore for injuring the master’s own finances. I feel that no amount of cleverness should be rewarded if done with ill intent. I believe this is at the heart of the parable and why our text states that money “can be used wisely-as long as it comes second to our relationship with God” (Cowan, p.26). There is room for moral victories in our faith, even in our failures if the intent was one for the glorification of God. A good summary of this parable is to “Use your money for kingdom purposes so that in the end your use of wealth will indicate that you are worthy of entering into heaven, this is not salvation by works, but salvation with works” (Hill, p.1093). I would have found no value in the managers remedy and observed him to only be furthering his self-serving actions.
How can you change your consumer behavior in general, and your spending in particular, for the better?
I agree with the Cowan text that “our perception of wealth is insufficient if we fail to understand that if we have the means to fulfill our indulgences and go well beyond the basic necessities, that we are in fact materially wealthy” (Cowan, p.30). Wealth is a great temptation, but so can the debt we accumulate by living to lavishly. Debt can become its own prison and take our focus away from serving God. In my younger years, I was quite impulsive which led to higher debt which required me to work longer hours and devote entirely too much time and anxiety to repay. This led to time away from my family and absence from church working on weekends. This was a hard lesson learned, but it taught me to stay within my means and there was no value in anything that put me on a path counter to God’s plan for our lives.
References
Cowan, D. (2012). Economic Parables: The Monetary Teachings of Jesus Christ (2nd ed.). InterVarsity Press. https://libertyonline.vitalsource.com/books/9780830858866Links to an external site.
Zondervan Bible Publishers. (1988). The holy bible: New international version, containing the Old and the New Testament.
