So Is All Debt Evil?

Not necessarily. All debt carries with it a certain amount of financial risk, but no life is completely risk-free. The best guidelines on "acceptable" debt come from Elder Marvin J. Ashton in an address delivered on April 5, 1975 which was later republished in pamphlet form (One For the Money: A Guide to Family Finances) and continues to be available from the Distribution Center. Here is the gist of his counsel:

"With the exception of buying a home, paying for education, or making other vital investments, avoid debt and the resulting finance charges. Buy consumer durables and vacations with cash. Avoid installment credit, and be careful with your use of credit cards... Buy used items until you have saved sufficiently to purchase quality new items."

So these are the exceptions:
1. Buying a home;
2. Paying for an education;
3. Making other vital investments.

What are other vital investments? President N. Eldon Tanner, a former member of the First Presidency, stated that such “investment debt should be fully secured so as not to encumber a family’s security.”

Some simple questions may help us determine if it is appropriate to borrow to make a purchase (including purchases made using credit cards):

1. Will the item for which I am borrowing still be usable after I have finished making the payments?

2. Have I discussed this purchase with my spouse? Asking this question will eliminate most impulse purchases.

3. Does the purchase qualify as a “vital investment;” and could it be sold at any time to pay off the full amount of the indebtedness if our situation changes?

4. Who am I fooling? If this isn’t a house or an education then it is probably a “consumer durable” (such as a car, appliance, or furniture) and should be purchased with cash, not credit. Buy a used one or do without until you save enough to purchase a new one.

Elder Ashton adds this final thought:

"Please listen carefully to this—and if it makes some of you feel uncomfortable, it is on purpose: Latter-day Saints who ignore or avoid their creditors are entitled to feel the inner frustrations that such conduct merits, and they are not living as Latter-day Saints should! Bankruptcy should be avoided, except only under the most unique and irreversible circumstances, and then utilized only after prayerful thought and thorough legal and financial consultation."

Coming up next: how to pay off all your debts in ten easy steps. Really.