Good Debt Bad Debt No Debt – Best to Avoid Debt

Good debt bad debt, no debt! I hate debt. I don’t separate good debt from bad debt. The best debt is no debt. I detest ‘expert’ opinion that debt is certain. They say people must learn to manage good debt and avoid bad debt. That we can manage debt is among popular false assumptions. Nobody can manage debt. We manage our actions that lead to debt.

Experts say good debt yields more income than it costs, while bad debt merely costs. Further, they suggest monthly debt payments should not exceed 33-36% of gross income. This means the lower interest rates the higher allowable debt. What utter nonsense!

Let me examine debt under these headings:

  1. What the Bible teaches
  2. Good debt bad debt – which works for you
  3. Good debt bad debt – debt is costly
  4. Good debt bad debt – no debt

Good Debt Bad Debt – What the Bible Teaches

God Debt Bad Debt - Bible Says Repay Debt
God Debt Bad Debt – Bible Says Repay Debt

The Bible looks at debt negatively (Proverbs 22:7, Romans 13:6-8) and states clearly (Psalm 37:21) if you borrow you must repay. Still, many Christians borrow, don’t repay, and declare bankruptcy. Often I hear, “What do you expect me to do, I can’t repay.” My reply, “What do you expect the lender to do? In good faith, you agreed to repay.”

The difficulty or apparent impossibility to repay does not remove responsibility for the debt. Also, hiding behind the law and walking away from debts you agreed to, do not show the love of Jesus.

Some churches and Christian ministries borrow to build buildings, among other things. These entities burden their members with debt often because of an person’s dreams. They fund-raise, coerce, pressure as they try to service their debt. They forget the pattern in the Bible. God calls a person or group to do His work–that’s the key, His work–then He provides everything needed in His time, and His way.

Good Debt Bad Debt – Which Works For You

I read a recent article that states “…sometimes the decision to borrow doesn’t hinge on how much cash you have but on whether there are ways to make your money work harder for you. …” Financial leverage is implied here. You borrow to invest. This has at least two problems.

First, as followers of the Messiah, it’s not our money, and so we need to spend based on Bible principles. Apostle James tells us in James 4:13-16, we don’t know the future and should seek God’s will. Debt relies on later income, which is uncertain. Leverage means precise debt, but unknown investment results. No wonder many folks close to retirement lament investing their pension funds to make money. They bought a specified rosy future, instead of a more secure option.

Second, any decision driven mainly by money will fail in the long run because it has no root. Businesses run with good stewardship principles do not set out mainly to ‘make money.’ They provide products and services, get customers, generate sales, hold down costs, and create profits. If the goal is to make money, usually, they overlook customers and fail. Today, Apple Inc. has about $130 billion in cash and near-cash because it produces and markets excellent products that generate high returns.

Individuals who decide to borrow solely on financing costs, ignore the big picture and fall in a deep hole.

Good Debt Bad Debt – Debt is Costly

Earlier, I googled ‘cost of debt’ and got 274 million results. I looked through ten pages and did not see the emotional effects of debt–the significant cost. Whether business or personal, debt can create enormous stress on individuals and families. I see families where husband or wife, sometimes both, become stymied by their debt. Sadly, some folks took their lives trying to escape the debt burden.

Good Debt Bad Debt – No Debt

Good debt bad debt - avoid debt
Good debt bad debt – avoid debt

We are tempted to get  good debt,  and avoid bad debt. It does not matter whether it is good debt or bad debt.  Debt is debt. I think we can live and not fall in debt except to buy a home. However, like most things, this needs planning. It means doing what Jesus told His disciples about discipleship: “count the cost” before acting (Luke 14:28). It starts with believing this is feasible. Our attitudes lead to our behaviors.

Parents are responsible to show and teach their children good stewardship (Deuteronomy 6:4-9). Besides, Apostle Paul tells us in 2 Corinthians 12:14, “…children are not obligated to save up for their parents, but parents for their children.” If we believe we should fund post secondary education from savings, we will start saving when our children are born. In Canada, government provides significant funding to parents for children from birth to age 17. Yet, only half of Canadian parents save for their children’s education.

If parents do not save for their children’s education, they should tell their children early. But many don’t. Instead decide alone that children should take student loans to pay their education expenses. By doing this, parents do not fulfill Bible teachings in Deuteronomy and Corinthians mentioned earlier.

What about a house? A generic decision that it is good debt to borrow to buy a home is irresponsible. Buying a home is more involved. We need to count the cost by understanding home owning costs and preparing a budget. As well, there are things we need to learn about before we buy a home.

First, we should save to buy and replace the car, furniture, appliances, and other big ticket items. Second, we should save at least 20% down payment for the home, and hove no debts. Third, we should ignore generic debt servicing formulae, and ensure housing costs fits our budgets and do not prevent us from doing what God has called us to do.


Good debt bad debt, the best debt is no debt. Develop this mindset. Do not assume you can get debt just because projected income will be more than the cost of that debt. Ignore folks who tell you to let your money work for you. Money doesn’t work, money result from your decisions. As a follower of Messiah you are God’s steward and should apply Bible principles to all decisions.

Accepting popular views that we must borrow ignores affordability, focuses on financing terms alone, causes family strife, and major emotional problems.

For Christian financial advice, biblical stewardship advice, and advice on personal effectiveness improvement, and other leadership matters, visit: Managing God’s Money.

Copyright © 2013, Michel A. Bell

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Michel A. Bell

Michel A. Bell is a former senior business executive, author of five books, speaker, and adjunct professor of business administration at Briercrest College and Seminary. Michel graduated from Massachuetts Institute of Technology with a masters of science in management. He is founder and president of Managing God's Money, a private mission devoted to teaching biblical stewardship of time, talent, money and other resources. Visit Managing God's Money

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