Overcoming Debt

Episode Transcript

Bob: Most couples, who are starting married life today, are bringing into their marriage financial debt—things like student loans. Russ Crosson says, “You need a plan to begin to address that.” 

Russ: The first principle is: “Alright; build a budget on one income. Save that second income and use that residual, after taxes, to begin to whittle away the debt.”  But what happens to young couples is: “Hey, we’re both making this. Man, it’s great. We can eat out. We can go on vacation. We can buy these fancy clothes. We can buy a car. Then, we get a tax refund—we spend that on going to the mountains.” 

And remember, that debt will only compound on you. So, it’s getting started on the right path. The right path is: “Live on one income, even if you are both working. Live frugally, even when you don’t have to.”

Bob: This is FamilyLife Today for Friday, May 19^th. Our host is the President of FamilyLife^®, Dennis Rainey, and I’m Bob Lepine. What do you do when your income doesn’t match your outflow in marriage?

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We’ll talk about that today. Stay with us.

And welcome to FamilyLife Today. Thanks for joining us on the Friday edition. So, we’re going to talk more about money; right? 

Dennis: We’re going to talk about debt.

Bob: Debt? Okay.

Dennis: Let’s cut to the chase.

Russ: That’s non-money. [Laughter] It’s non-money.

Bob: And that’s Russ Crosson, the President of Ronald Blue & Company. You know a little something about non-money.

Russ: Yes.

Bob: You’ve run into some folks who had non-money; haven’t you? 

Russ: Yes; a lot of non-money out here. [Laughter]

Dennis: His wife Julie joins us on FamilyLife Today. Welcome back to the broadcast.

Julie: Thank you.

Dennis: Here’s the question—you’ve written a book called 8 Important Money Decisions for Every Couple—

Bob: “Foreword by Dennis Rainey”—it says so right at the top.

Dennis: I don’t write many forewords.

Bob: No; you don’t.

Dennis: I don’t have time to do it—

Russ: And we appreciate you writing that one.

Dennis: —but I appreciate this one for really a couple of reasons. One is—it’s biblical in its worldview—you come out of the Scriptures / you’re basing it upon that.

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You give leadership to Ronald Blue & Company—they’ve always done that at that company.

Bob: What you said to me when the book came out—you said, “I like this, but my name should have been in bigger, bolder print at the top.”  [Laughter]  Don’t you remember saying that? 

Dennis: I did not say that!  [Laughter] And the other reason—before Bob interrupted—was really the integrity, Russ, that you and Julie bring to the ministry of money and helping people. You have a Kingdom mindset, and you want to see people send it on ahead.

I want to talk about debt today; but I also want to talk about giving, because I don’t think we’re talking enough about that.

Russ: Right.

Dennis: Let’s cut to the chase on debt. Do you have any debt? 

Russ: We do not.

Bob: None? 

Dennis: Zero? 

Russ: None, like in zero. And that doesn’t mean “except for my car and home mortgage.” We used to ask people that question, Dennis: “Do you have any debt?”  And they’d go, “No; except my home.” Now, they’ve added “…except my car.” They’ve—we kind of live in a country where there are just certain things that you don’t consider debt—and the mortgage is one of them.

Bob: “Well, my school debt,” that’s the third thing that’s going to get thrown in pretty quick.

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Dennis: Well, now, consumer debt is coming close behind—“…except for my $30,000 in consumer debt.” 

Bob: —“…in credit card debt.” 

Russ: But let me come back, Dennis. Obviously, I’ve lived for a few decades. But I think it’s important to understand that—when Julie and I bought our house in the mid-80s, and I was working in the financial services industry, and looking at the impact of debt on people’s lives, and marriages, and so forth—we just made a commitment, as a couple, that we were going to aggressively pay off the debt, including our house.

Bob: So, you didn’t pay cash for your house when you bought it in the mid-80s? 

Russ: No; no. I want to make sure people know that we had a mortgage; but instead of putting a whole bunch in retirement and going on fancy vacations, we said, “You know, if we get this house paid off by the time the kids are in their elementary school years or early junior high years, we’ll get a lot more options.”  We were looking for options and flexibility. That’s the thing about debt—debt restricts your options. We got the house paid off in the mid-90s—

Bob: Hang on—time out. The average mortgage for a house—30 years; right? 

Russ: Right; because that makes you extend it out there and be able to live, maybe, higher than you should because you have a lower payment.

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Bob: And if you do 30 years, you’re going to wind up paying three to four times the value of the house; right?—

Russ: Yes.

Bob: —over that 30-year period? 

Dennis: So, did you have a 15-year mortgage on your house? 

Bob: You paid it off quicker than that; did you? 

Russ: Yes; I paid it off quicker. Yes; I would encourage people to pay the price and sacrifice to do a 15-year mortgage—then, aggressively pay it—but it’s a mindset. It’s okay to be out of debt. It’s like we live in a country where it’s like, “No; you’ve got to have debt.”  I would say, “No; you might have to have debt to get started—started with the home or whatever—but then, the idea of paying it off is okay.” 

And there are a couple reasons. One is it’s not a bad investment. When you pay it off, you get rid of that interest—that’s a guaranteed return. Some people forget that. They’ll give us money to invest in bonds—they’ll say, “Hey, Russ; here, I want you to manage this money and put it in bonds.”  I’ll say, “Well, do you have a mortgage?” “Yes.”  “Well, what are you paying on that?” “Well, three or four percent…”  “Well, I can’t earn you three or four percent. Why don’t you pay that off and earn the three or four?”  Their head starts doing this.

There are two good reasons to pay off debt. One is—it’s not a bad investment alternative.

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Number two, the peace of mind and freedom that comes—and I would say this—number two reason is bigger than the first one. You just can’t understand the positive impact.

And I think, if we go back to ’08/’09, there were a lot of people that wished they had followed that advice when they could have. People could have paid their homes off—you know, the market is up / their cash balances are up—but they bought the lie that everything is going to continue linearly. They forgot that things cycle; and then, a lot of people—as you read about in the paper—are underwater on their homes.

Bob: Let me ask you a very practical question, because I had a friend who asked me this question—a young man, who had been married for two or three years. He and his wife had their first baby, and they were renting a house. He had about $10,000 in student loans still to pay off. It just so happened that a relative decided to give them a gift of $10,000. So, he calls me and he says: “Should I pay off the college loan, or should I make a down payment and get us into a house?” 

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And he said: “Now, the college loan—the rates are like super low. I don’t have to pay any—maybe, it’s better to go ahead and put the money into the house now and just pay that off. I’m paying one or the other off over time. Which is the best thing to do?” 

I know how I answered him. How would you have answered that question? 

Russ: Well, there are other questions I would have asked. Was the $10,000 going to be 20 percent down on the house?  Or are you going to have mortgage insurance and other things involved there?  Can your budget handle the increased cost of owning a house?— which people sometimes underestimate—you know, upkeep, repairs, taxes, insurance—all those kinds of things.

So, it’s not just a binary question: “Do I pay off the student loan, or do I put [$]10,000 on the house?”  The issue is: “Can I really afford a house?”  Then, if so, that means you have [$]10,000 less debt on your house; and you just need to begin to approach paying off the student loans. Bob, there is no simple question with a simple answer.

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I think the big idea here is—before you buy a house, which is one of the biggest decisions a young couple will make—the world would tell you: “Stretch. You’re always going to—income is always going to go up.”  “Don’t buy it on two incomes,”—that would be the first thing I would tell you. Try to make a decision to put 20 percent down. Build some disciplines to help you kind of get the amount of house you buy surrounded with some parameters. Then, realize that you want to—as you save money, some of that ought to be earmarked to pay off debt / student loan. Usually, then, you pay off the highest-interest debt first—you guys know the waterfall illustration.

But I think the biggest thing we would say to people is: “You’re probably going to have debt to start a house; just don’t buy too much house.” 

Bob: Right.

Russ: Then: “When you have savings, it is okay to begin to whittle away at the debt; and that means all the debt.” You know, Julie and I—early on, we didn’t have student loans—but we would have paid those off first. Then, we would have started attacking the mortgage. So, the idea is you can move toward being debt-free by—in your 40s—if you just build the discipline to get started.

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Bob: The average—and by the way, I said to him—without all the financial analysis that you did—I said: “All I can tell you is, if it were me, it would sure feel really good to have that student loan all paid off and be done with it. And if that means you’ve got to wait a couple of years to get into a house—you’re in a rental house now that’s serving you just fine.

Russ: Right.

Bob: “Why don’t you just stay with that and start saving the money you would have paid off on the debt toward that down payment on the house?” 

Russ: You maybe ought to get a job as a financial advisor there, Bob. That’s pretty good. [Laughter]

Dennis: Be careful—be careful here— 

Bob: Ten thousand dollars on student—

Dennis: —talk to Mary Ann first. [Laughter] 

Bob: —yes—but $10,000 on a student loan is nothing today. The average kid, coming out of college, has got somewhere between $25 and $30,000 in student loans. They are getting married and buying a house on two incomes. I mean, a lot of people are starting off life way behind the eight ball, financially.

Russ: Well, they really are. And let me just—that’s why you’ve got to come back and say, “What are some principles here?”

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They may get out with a student loan, and it is what it is. Then, you get married. Instead of both of you making [$]30,000—you’ve got [$]60,000—it’s like: “Okay; let’s go on a ski vacation. Let’s have a great time and live it up.” 

The first principle is: “Alright; build a budget on one income. Save that second income; and use that residual, after taxes, to begin to whittle away the debt. Hopefully, you may have a year or two before you have kids—you can get rid of that debt.

But what happens to young couples is: “Hey, we’re both making this. Man, it is great! We can eat out. We can go on vacation. We can buy these fancy clothes. We can buy a car. Then, we get a tax refund—we spend that on going to the mountains.”  So, Bob, you are exactly right. You’ve heard the principle: “The path—is getting started on the right path. And the right path is live on one income, even if you are both working, and live frugally—even when you don’t have to.”

Bob: Right.

Russ: And remember that debt will only compound on you.

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If you can get it turned around, sooner than later, you’re going to be better off, long term.

Bob: I have to ask your wife this question, because you grew up in an affluent home. You married a school teacher. He starting you on this path: “Live frugally / one income” kind of thing. Was that hard for you?  I mean, you were used to being able to go down to Nordstrom’s if you want to go to Nordstrom’s and buy something really nice; right? [Laughter]

Julie: Except for my parents were very frugal. So, the role model I had was—my mother was extremely frugal. Even though my dad made a good bit, she always felt that to spend as little as possible was the best thing to help him. So, I never saw that really as an option. I kind of went more that way myself; but what I saw modeled was that she was always making sure that whatever they spent—it was something that was needed—he agreed with it. So, I didn’t really have that coming into the marriage. That didn’t really seem to be a problem.

Dennis: You guys have been mentoring younger couples, now, for the past half a dozen years; right? 

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Russ: Yes.

Julie: Yes.

Dennis: What do you think is the biggest mistake or the biggest mistakes couples are making around this subject of debt?  Is it they just buy into the lie that the culture has—that debt is like gravity—you have to have to have it? 

Russ: I think, Dennis, that’s the underlying premise—is: “Hey, it just is. We’re going to have it.”  I think, for the most part, they’ve never even entertained the idea: “That’s really debt on my house, and that I, at some point, should build in a plan—not 30 years—but a plan to begin to get rid of that so I have some peace of mind and freedom, here, in the next 10 or 15 years.” I think that’s probably the biggest thing—is they just don’t consider—

And here is the other thing—there are no unattractive temptations; you know?  Their 401k is matching them. So, what we see—here is what we see a lot of—[$]100,000 in the 401k / [$]80,000 in credit card debt. So, the other problem we see with couples is—since they don’t have an overall plan, they’re really over-spending; but they’re funding retirement—

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—which you can’t buy kids’ clothes and do braces out of retirement funds. They’re accumulating debt. That’s really a bad direction. We see that a lot—no money in the bank, a lot of money in retirement—and that really puts stress on the marriage. So, I’m kind of—I know I’m a financial guy and understand compounding and all of that, but let me tell you—retirement has exacerbated the pace of life for couples. It’s really compounded the problem of getting a financial house in order.

Bob: So, a guy, who’s 26 years old, married for a couple of years, should he be putting $20 a month into some kind of a Roth, IRA, or something? 

Russ: Well, if he has got plenty of margin—he’s able to save for the house down payment—then, I’m not against putting money in retirement—but what’s happened is—most of them are putting into retirement, and aren’t saving for the down payment, and they are buying a house with no money down—

Dennis: And then, they are living—

Russ: —and then they are paying mortgage insurance and all that.

Dennis: —beyond their means with the credit card—

Russ: That’s right.

Dennis: —and running those numbers up.

Russ: I think, if I had to say it—is buying too much house is the biggest problem for young couples, and it’s the pressure of that retirement funding; because you read all the advertisements and it is like, “Hey, everybody does this.” 

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I would say, “Well, you need to think about that.” 

Bob: Yes.

Russ: And I’m not against retirement—Julie and I—there were years, early on, that we said: “Okay; I’m not funding retirement. I’m going to pay down the house.”  And I don’t have any regrets that we paid off the house early.

Bob: And the truth is—a part of your retirement is wrapped up in the value of your home; isn’t it? 

Russ: It is, and we enjoyed the trip. I had flexibility. You know, once that house was paid off, then, if my income went down one year, I didn’t get all stressed out. I think that’s the other thing about debt, Dennis—is that debt restricts your options. The reason you get out of debt is to have flexibility and to have options—whether it’s to coach your kid’s soccer team or do whatever. That’s why it’s so important to really relook at that.

Dennis: I mentioned I wanted to get to the giving question you’ve got in your book. I’ll set it up this way—

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—2013 was a milestone year for Barbara and me. We got out of all debt as well.

Russ: Well, congratulations.

Dennis: It took us a lot longer than it did you from what you just shared earlier, but we got out of all debt. As a result, in 2013, we were able to give more than we have ever given in our 41 years of marriage together. When we do get out of debt, that does increase our options; but if we don’t have a biblical view of giving, we’re going to go spend the money on ourselves and increase our own standard of living.

Russ: Right.

Dennis: And a believer / a follower of Christ, if he reads the Bible, needs to be thinking about sending it on ahead.

Bob: You’re saying with all the extra money you had, you didn’t lay it up on earth where moth and rust can destroy it.

Dennis: Well, there was the temptation to do that.

Bob: Yes.

Dennis: There really was. In fact, I kept kind of going through that verse and that passage: “Am I going to send it ahead, or am I going to spend it on us / on me?”  And you speak of all the retirement—

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Russ: Oh!

Dennis: —advertisements on TV. There are a lot of advertisements, as well, for “You can have it your way.” 

Russ: Right.

Dennis: “And you can enjoy it right now. Go out and—

Russ: Or “You deserve it.”  So worldly / so welcome—the credit card advertisements.

Bob: Yes.

Russ: And I want to affirm you, Dennis. That was great that you guys got out of debt and increased your giving. And giving is an integral part of any plan. We would encourage people that they build that into their plan to make sure they are spending less than they make.

Giving, paying their living expenses, paying off debt, and paying their taxes—those are the four uses of money. When you get out of debt and you have cash, you’ll always be more generous. When you don’t have the debt, and you actually have some cash and it’s not all in retirement, then, you can meet needs—you come across people who have needs. Giving is a very interesting discussion when it comes to couples.

I have to tell you a story. I didn’t grow up giving; you know?  I grew up and maybe see a dollar put in the plate as it when by on Sunday. Then, I met Julie. She’d grown up understanding giving and—like you said—understanding the fact we need to send it on ahead. I had not seen that.

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So, that was a source of a little conflict, early on, in our marriage. [Laughter] 

Bob: Yes.

Russ: Well, I said: “Okay; I don’t think we’re going to support this guy in Phoenix. I don’t even know the guy!”  So, that’s why it is one of the questions in the book, because something as good as giving can cause conflict in marriage. I mean, I’m sure you and Barbara were agreed on your giving—many couples—that’s a source of conflict.

Bob: I remember a story, where I was sitting down with a husband and wife. She was very frustrated, because they had [$]25,000 in consumer debt. Two weeks before, the missionaries had come to church and had shared their story. She had watched her husband put $100 in the offering plate for the missionaries. She is thinking to herself, “We’ve got $25,000 in debt.” He’s thinking to himself, “The missionaries are sleeping on dirt floors in Africa to tell people about Jesus.”  Who is right?  [Laughter]

Dennis: Don’t you love Bob? 

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Russ: Yes, okay; I’m going to—

Dennis: Binary choice— 

Russ: —let Julie—

Dennis: —a right and wrong choice.

Russ: —answer that question—[Laughter]—no! What you really illustrated there, Bob, was the very issue of why money is so volatile and why you have to go back to what we talked about earlier—and that’s be able to talk about it; because he’s thinking, “I see a need,” / she’s thinking: “My security—how dare you give that money when my security is being violated?”

Bob: —“threatened?”

Russ: —yes: “…threatened, over here with this debt?”  You understand how both of them are thinking; but the issue is: “How are they going to come together so she’s not frustrated about the $100 that he’s given?” She can maybe appreciate his heart—that’s a good thing and affirm that—but he needs to also affirm her need to have security and apologize and say, “We’ve got to attack this, because I know that’s a stress point for you.” 

Bob: So, the couple that’s putting together a spending plan—and they’ve got $20,000 in consumer debt—do they put giving in their spending plan before they pay off their consumer debt? 

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Russ: Well, I think you always need to give to acknowledge God’s ownership. How much that is—it’s interesting, in the New Testament, we don’t see a tithe—we see: “Give as you’ve been prospered.” I tell people that 10 percent is a good place to start, because it’s easy to just take it from there and not reduce my lifestyle.

Bob: Right.

Russ: This is where you need a third party to kind of look over your shoulder. Before you cut your giving back to fund that consumer debt, you need to really look at the lifestyle, because there are probably some places you can sacrifice—you know, eating out—whatever it is—to pay that down.

The issue is—you’ve got to put something in all the buckets. I need to give to acknowledge ownership. I need to pay my living expenses. I need to begin to whittle down the debt, and I need to pay taxes. But that’s why you have to look at it comprehensively. We see couples, all the time—that they may get a big tax refund. Well, that’s money that could have gone into the budget and other things. So, they really were saving—it’s they left the money with the government.

Bob: Yes.

Russ: Then, they get it in April; and they spend it. So, it’s a very complex thing—working all those together.

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But I would never encourage anybody to quit giving totally. I would discourage them from coming off the tithe until they’ve really had somebody look at their living expenses. I think, in 30 some years of counseling, I’ve only had one time where I told a couple, “Yes; you need to come off the tithe,” because I saw their budget was as tight as it could be. They had this debt. They could only afford to give, maybe, 5 percent because—let’s flip that around—some people are borrowing to give and don’t even know it.

Bob: Yes.

Dennis: Yes.

Russ: That’s why it’s all integrated.

Back to your illustration, let’s say the guy decides to give [$]20,000 to the missionary; but if he had to borrow the [$]20,000—you know, there has got to be a balance there.

Bob: That’s right.

Dennis: I want to come back to an earlier illustration that we kind of moved past very quickly. It’s to you, Julie—in the family that you grew up in—your mom and dad had a giving spirit. What would you say is the number one thing you learned from them—what they passed on to you about giving? 

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Julie: I’d have to say it’s the joy of giving; because what I saw was they wanted to give, at least, 50 percent of their income. So, that was their—

Dennis: Now, wait, wait; wait.

Bob: You said, “5-0”—50 percent? 

Dennis: 50?!

Julie: 50 percent.

Dennis: They wanted to do it, or they did do it?

Julie: No—well, yes; they did do it—that was their goal / that was their desire. Giving breaks the power of money. What I saw in their lives—as they wanted to give more and more to the Lord’s work—the joy that came between the two of them—just on the same page. They loved giving—they loved seeing what God was doing. I had a very positive role model, there, that giving was a wonderful thing. It was something I wanted to do.

Dennis: Giving is a great way to walk by faith. And I just want to say, “Thanks,” to you, Russ and Julie—both of you—for the great ministry you’re having through Ronald Blue & Company, down in Atlanta, and across the nation. Really—how you’ve directed a lot of folks to be better stewards of their finances and a lot of money toward Kingdom work.

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Bob: Well, and you’re helping a lot of couples, too, with this book. I really think this is one of those books that ought to be a part of premarital preparation or—at the very least, in the first year of marriage—couples ought to be sitting down and having these conversations. It’s better if you have the conversations before you get married; but after you’re married, you’re still going to have to figure some of these things out and make sure you’re on the same page when it comes to issues like we’ve talked about today—issues like debt, or about giving, or about savings, or about what standard of living you’re aiming for in your marriage. These are all important conversations.

You help couples have them when they get a copy of your book, 8 Important Money Decisions for Every Couple. You can order the book by going to our website, FamilyLifeToday.com; or you can call to order at 1-800-FL-TODAY.

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Again, our website is FamilyLifeToday.com; or call 1-800-358-6329 to order the book. Again, that’s 1-800-“F” as in family, “L” as in life, and then the word, “TODAY.”

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And with that, we’re wrapped up for this week. Hope you have a great weekend. Hope you and your family are able to worship together in your local church this weekend. And I hope you can join us back on Monday. We’re going to have a very interesting conversation about depression and bipolar disorder and the impact that can have on a family when somebody is experiencing either of those two conditions. We’ll talk with Dr. Charles Hodges about that Monday. I hope you can tune in for that.

I want to thank our engineer today, Keith Lynch, along with our entire broadcast production team. On behalf of our host, Dennis Rainey, I’m Bob Lepine. We will see you back next time for another edition of FamilyLife Today.

FamilyLife Today is a production of FamilyLife of Little Rock, Arkansas.

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