Ramsey's rent rant exposes deficit in financial peace

By John Thornton, Contributor, The Christian Post, January 19, 2022

https://www.christianpost.com/business/ramseys-rent-rant-exposes-deficit-in-financial-peace.html

Dave Ramsey ignited a twitterstorm last week on his radio show when he advised “Dan in Washington DC” that it didn’t make him a “bad Christian” for evicting a tenant who could not afford an inflation-driven rent increase. News sources including TMZ and The Wrap had a field day bashing Ramsey’s advice, at a time when rising home and rent prices are making it difficult for many people to obtain affordable housing, and when many cities are feeling overwhelmed in grappling with how to address the growing number of displaced persons.

Whether or not you agree with Ramsey’s advice, the current rent rant exposes a deep deficiency within the Financial Peace universe that has long been felt, but remains unaddressed. The issue is this: Our financial problems do not end when we get out of debt. They just morph into new ones. Wealth has an amazing power to deceive us.

When we go from a negative net worth to a positive one, money can retain it’s power over us by seamlessly shifting from fear to love. And whether you fear it or love it, money still owns you. That’s why Jesus warned,

“No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money." Matthew 6:24

Ramsey has helped thousands, if not millions, of people with his message to be responsible and get out of debt. But the deeper question remains. Have they been set free from money as a master? 

True financial peace finds its hope in God alone.

Twenty-two years ago, as a young accounting professor at the U.S. Air Force Academy, I read through the entire Bible highlighting every passage I found on wealth. I ended up with 115 pages, single spaced, 12-point font. When I classified the verses into 22 categories, I was surprised to find that debt came in dead last. In fact, I found no command in the Bible to get out of debt, except perhaps Apostle Paul’s writing to the Romans (13:8), “Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.” Indeed, Ramsey’s call to get out of debt hinges on the oft-quoted one half of one Proverb (22:7), “and the borrower is slave to the lender.” Clearly no one want to be a slave. Point taken. QED.

When it comes to debt, however, the Bible says much more to the lender than to the borrower. Specifically, God commands the lender to be merciful, to lend money to the poor without usury (Deuteronomy 3:19, Psalm 15:5), and to return a person’s cloak at night taken as security for a loan (Deuteronomy 22:13). Jesus went even further.

“And if you lend to those from whom you expect repayment, what credit is that to you? Even sinners lend to sinners, expecting to be repaid in full. But love your enemies, do good to them, and lend to them, expecting nothing in return. Then your reward will be great, and you will be sons of the Most High; for He is kind to the ungrateful and wicked." Luke 6:34-35

Ultimately, how Christians handle wealth should reflect God’s character. His “kindness, justice and righteousness” (Jeremiah 9:24). Ramsey tends to emphasize justice at the expense of kindness and righteousness. In the Parable of the Shrewd Manager, Jesus gives what I think is the most succinct command to Christians when it comes to handling money well.

“I tell you, use worldly wealth to gain friends for yourselves, so that when it is gone, you will be welcomed into eternal dwellings." Luke 16:9

When we use our wealth to love others as God loved us, we fulfill the Great Commandments. And when he gets the glory, so that people see him for who he is, we fulfill the Great Commission. In so doing, we use worldly wealth to gain friends forever.

Returning to Ramsey’s advice to Dan, he emphasized the justice that underlies any basic understanding of economics. The owner has the right to fair rents, which includes raising rents commensurate with inflation. Moreover, Ramsey twice repeated Jesus’ oft-quoted Golden Rule, “Treat others as you would want to be treated.” He even identified opportunities to exercise mercy on an individual basis—in his case, carrying a tenant who had cancer rent-free during her time of need. To this, I say, “Kudos to Dave!”

Could Ramsey improve his bedside manner to listeners who are facing difficult times? Undoubtedly. Could he focus as much on God’s kindness and righteousness as he does on his justice? This would go a long way to quell his legitimate critics—those who aren’t just misquoting him to promote their own agenda, or to demonize Christians at large. Only Ramsey knows how much of his advice was given to keep simple his message of personal responsibility and debt reduction.

Ultimately, Ramsey’s motto, “If you will live like no one else, later you can live like no one else,” is not worth the paper it is printed on for Christian who don’t understand that it is freedom from money as a master, not getting out of debt, that really matters. “What good is it if you gain the whole world, yet forfeit your soul?” It is not enough to “live like no one else” if you don’t intend to go on “to live like no one else.” And this takes wisdom, as we follow Jesus advice to use our worldly wealth to gain friends forever.

John Thornton is the L.P. and Bobbi Leung Chair of Accounting Ethics at Azusa Pacific University, and author of Jesus’ Terrible Financial Advice: Flipping the Tables on Peace, Prosperity, and the Pursuit of Happiness.

Student loan bailout foreshadows financial crisis: what should Christians do about it?

By John Thornton, Contributor, The Christian Post, July 5, 2022

https://www.christianpost.com/business/student-loan-bailout-foreshadows-financial-crisis.html

Last week the Biden administration agreed to expunge $6 billion in student debt for 200,000 students who claimed they were defrauded by the now defunct for-profit Corinthian Colleges. This is in addition to $25 billion of student debt forgiveness for 1.3 million borrowers they granted in recent months. In an effort to expedite the process, the Biden administration has erased the outstanding debt for all students who attended the Corinthian Colleges from 1996-2014, without taking the time to look at students’ claims on a case-by-case basis to determine if harm had occurred.

This loan forgiveness approach amounts to the use of federal funds to compensate for damages caused by bankrupt education corporations. In doing so, the Biden administration has set an enormous legal precedent that could reach well beyond the billions they’ve spent so far. The potential this issue has to push the U.S. into the next financial crises demands answers to the following questions:

1. Is student loan forgiveness fair?

2. How much could it cost?

3. What should Christians do about student debt?

Is student loan forgiveness fair?

As important as this question is, it is preceded by an equally important question: “Is loaning an 18-year-old a large sum of money fair?” For decades, the biggest unsung ritual that accompanies high school commencement is filling out the Free Application for Federal Student Aid (FAFSA) form. Suddenly, every 18-year-old in the country is learning how much they could borrow for college, without ever being counselled on how much they should borrow. Talk about a train wreck waiting to happen! Students who couldn’t even vote, sign a contract, or be held accountable for a felony the year before are now being offered enormous sums of money, with no track record or proof that they’re ready to handle it.

That said, when you take out a loan, you promise to pay it back. You are spending somebody else’s money, not your own. Clearly it is unfair to expect someone else to pay your debts. And it’s difficult to claim ignorance when you’ve successfully completed high school and have been admitted to college. Even less convincing is the argument that your debt should be paid by those statistically more financially disadvantaged than you. Should those who opted to forego college and directly enter the workforce be forced to pay for your oversight? Especially when you were allowed to choose your field of study?

How much would it cost to pay off student debt?

As of the 3rd quarter of 2021 (the most recently available data), U.S. student debt has reached $1.6 trillion (with 43 million borrowers having some federal student loan debt), second only to mortgage debt ($10.4 trillion), and ahead of auto loans ($1.4 trillion) and credit card debt ($800 billion). To put this in perspective (because big numbers—like millions, billions, and trillions—tend to confuse people), paying off all student debt would add $10,811 onto each of the 148 million tax returns filed in 2021, with the price tag equal to the total amount of individual income tax collected in 2019 (the most recent IRS data available). Shifting the outstanding debts of one group of people—those with outstanding student loans—who had opportunity to benefit from the use of those funds, to those who did not, would not only be unfair, but cause far- reaching harm. 

What should Christians do about student debt?  

Do your homework. College education is a product. When you choose to go to college, you are buying something. It is much like buying a house or a car, and often times even more expensive. And just as everybody knows that not all house or cars are created equal, the same is true about a college education. So stop relying on the studies that show that college graduates have higher earning potential than those with lesser educations. The generic studies you read are true, but only to the extent that they are based on broad statistics. That is, you are statistically more likely to earn more with a college degree than without one. But there is no guarantee that this will prove true for you. Moreover, not all college degrees, nor areas of study, offer the same opportunities. I have been a Bible major, a music major, and an accounting major, and while my musician friends like to say I sold out going into accounting, I ruefully respond, “I found I wasn’t that entertaining, so I decided to be useful.”

Also keep in mind that while the value of your degree may be questionable, there is no such uncertainty about the amount you owe. So before you go into debt chasing a degree, ask yourself: is there a demand for this specific degree? Do you want a career in this discipline? Are you good at it?

If college education is a product, that means somebody is selling you something. And you will only be satisfied with that product if it accomplishes what you want it to. So don’t rely solely on information from a specific college on how good they say they are in your chosen field. Check externally recognized sources, like the college reports from U.S. News & World Report and The Princeton’s Review of Best Colleges. My favorite resource is the College Scorecard, from the U.S. Department of Education, which allows you to personally compare between and within colleges and majors based on federal government data, including salaries by college and discipline.

You should also become generally financially literate. The FAFSA tells you how much you can borrow, but you should not automatically borrow the most you can. Do not go into debt without an understanding of what that debt can do to your future. Here’s my general rule of thumb for all borrowing. Never borrow for something that doesn’t go up in value. Will your college degree really increase your earnings potential enough to pay back the debt you took out to earn the degree?

As an example, I used the College Scorecard website to evaluate Azusa Pacific University and the L.P. and Timothy Leung School of Accounting, where I teach. I found that Azusa Pacific University has an average salary for 4-year undergraduate degrees of $57,796 (the national average is $47,891). A closer look shows those results are driven by a strong Nursing major ($97,162), followed by the Accounting BA ($68,256). Is this worth an average annual cost (e.g., tuition plus living expenses) of $30,744? It depends on what economists call opportunity cost. What is the next best thing you’d do with your life?

If you study these things and decide to borrow money to pay for college, prove yourself trustworthy by paying your debt. The Bible tells us to “Let no debt remain outstanding, except the continuing debt to love one another.” (Romans 13:8a) During the Great Recession, there was a lot of talk about how predatory lenders encouraged people to take out loans for homes well beyond their means. And because of complex instruments like mortgage-backed securities affording the opportunity to lend other people’s money, banks and mortgage brokers sometimes neglected their due diligence in pursuit of a quick commission, causing harm to many uninformed borrowers.

As true as this might have been—shrewd people preying on the financially vulnerable—there were many others who were not harmed by lenders, but rather piggy-backed on a socially acceptable excuse to pin their personal losses on the bankers. So when people walked away from their mortgages simply because their home prices declined, their personal dishonesty greatly exacerbated the financial meltdown. Bottom line? As Christians, we serve God, not money. And we should be honest in all of our dealings, regardless of what the world says is acceptable. Pay your debts.

“In the same way, let your light shine before others, that they may see your good deeds and glorify your Father in heaven.” (Matthew 5:16)

John Thornton is the L.P. and Bobbi Leung Chair of Accounting Ethics at Azusa Pacific University, and author of Jesus’ Terrible Financial Advice: Flipping the Tables on Peace, Prosperity, and the Pursuit of Happiness.

Biblical Finance Seminar, Cannon Beach Conference Center

How To Become a Millionaire

MILLIONAIRE: MIRACLE OR MUNDANE?

When the old game show asked the question, “Who wants to be a millionaire?” it presumed the answer was simple. Everybody. And it proposed to answer the bigger question, “How do I get there?” by being a means to that end.  The contestants were the lucky dogs who had the chance to live the dream. America was enthralled. The impossible was suddenly made possible. People watched for the same reason they play the lottery.  They dream of riches, and it’s their only shot.  They’re praying for a miracle. 

If only they knew that becoming a millionaire is mundane.  It doesn’t take a miracle. Just a plan.  With just three little ingredients—investment, rate of return, and time —anyone can become a millionaire. By multiplying those three together, you get interest. Keep doing it and you get compound interest. Interest on your interest.  And presto! You’re there. 

At the Academy, we demonstrated to the cadets that if they made an investment just $2,000 a year in the stock market each year for the first seven years after they graduated, from age 22 to age 28, and never saved another cent, earning 12% annually, they could retire at age 65 with $1.3 million. 

Of course, it helps to start early. That’s the time ingredient. Because if they waited for seven years after graduation to start saving for retirement, and then put away $2,000 every year from age 29 to age 65, they would have less at retirement than in the first scenario. Even though they made 37 contributions compared to just seven. 

And last, the rate matters.  The higher percentage, the crazier it gets.  Financial guru Dave Ramsey, in his “Financial Peace” seminars, demonstrates this with an illustration showing what an investment will grow to at 10%, 12%, then 15% rate of return over a long period of time. When challenged that he couldn’t get that rate of return, he rebuts with a great sleight of hand. “Perhaps you’re right. But what do you pay on your credit cards?”  The same principle that works for you also works against you.

At this point, you can’t help but wonder, if it’s so easy, then why doesn’t everybody do it?

Quite simply, like everything in life, there is more to doing than knowing. Take all those smart cadets, for example. The Academy was loaded with some of brightest students the world had to offer.  Students who didn’t have to pay for college, and were guaranteed jobs at graduation.  Yet when we surveyed ten 2nd Lieutenants one year after graduating from the Academy, we found that, on average, they spent close to $2,000 more than they made.  They did the exact opposite of what we taught them to do. 

How could this happen? As a faculty member, the answer was obvious to me.  Guest speakers.  Like top Academy grad Tony Tripp.  Stud linebacker, Greek god. Tony was an officer stationed at LA Air Force base, living the life. 

When a student asked him, “How can you afford a new motorcycle and a place on the beach?” Tony replied, “Hey, you only live once. You gotta go for it!”

There went the whole semester in five minutes.  Because you can’t just know what to do. You have to do it.

The recipe is simple. Earn more than you spend.  Eat less, exercise more. 

You might say to me, “John. You’re crazy. There’s no way you could live off of my measly little paycheck.” 

And you may be right.  But I’ll bet somebody in Burundi could.  Because the average person in Burundi lives off of just over $200 per year. 

Christian financial counselor and founder of Crown Financial Ministries Larry Burkett, who provided financial advice to thousands of people with a huge disparity of income levels, found that most of the people he talked to about finances needed roughly the same thing to make ends meet.  About 10% more.

The hardest thing about a budget has nothing to do with math, and everything to do with emotions.   We struggle with a budget when we get it all backwards. When we see all the things we can’t afford, rather than all the things we can.

Truth be told, most people don’t want to become a millionaire. They want to be one. And the difference is huge. Most people want to be a millionaire so they can spend a million dollars they didn’t earn. To become a millionaire, you have to save a million dollars more than you spend.