HOW can you answer a question like this? Let’s comment about debt. The Bible says that one should neither be a lender or a borrower. It does not seem to recommend the assumption of debt. Otherwise, it should say that there’s nothing wrong to be a borrower, but not a lender, or vice-versa. But the Bible is specific. It says do not be a borrower or a lender. Why not be a lender? Because you might end up losing your money. Why not a borrower?
Because debt service might end up destroying your enjoyment of life. Those of you with too much debt know very well how a heavy debt load can destroy the quality of your life. For those who don’t have debt, read on, so you won’t decide to plunge into a sea of debt.
So how much debt is too much? Well, if you and your spouse have a net combined income of $4,000, are about 40 to 45 years old, have a house mortgage to pay, maybe a second trust deed, one of those home improvement loans or HELOC, have on or two car payments and have children who are about to finish high school, you might examine your debt level now and realize that you are at a major crossroad in your life.
If you have about $30,000 of credit card debt, about 25 percent of your net income or close to $1,000 might be needed to make minimum payments on your credit cards, every month. What’s left of your net income is $3,000, which is allocated for the house, the cars, food electricity, insurances and other living expenses. After all these expenses, probably, your household has nothing left. The problem is your eldest child is graduating from high school and has good grades, did good on the SAT, and he or she wants to go to college. If you did not have the $30,000 of credit cards, you would be able to provide for his college expenses. But you’re saddled with too much debt as it is.
Indeed, you have too much debt because your children’s college education negatively impacts your debt level. Yes, you might have already sacrificed the future of your children in favor of the future of Visa and Mastercard. You might have to plead guilty to this, just the way, Michael Cohen, pled guilty to several felonies including violating federal election laws at the direction and with the cooperation of Individual-1. Like Mr. Cohen, you might have admitted that you have followed the darkness instead of the light.
Let’s use the same example, but let’s assume that you have no children and that you are a senior citizen going into retirement. Do you have too much debt? How is your debt level affecting your golden years? If you figure that you are setting aside 25 percent of your net household income to service your credit cards, then your debt level has destroyed your ability to set aside money for your retirement when you were younger many years ago.
If you had $30,000 of credit card debt when you were 45 and are now 65 and just starting to receive Medicare, how much money could you have saved up for retirement, instead of paying to keep the $30,000 of credit cards current for the last 20 years? You paid $1,000 a month for 20 years. In one year you paid $12,000. In 20 years, you paid $240,000. If you had invested the $240,000 in the stock market, it would have double every seven to eight years despite the sometimes very volatile market like it is now.
Let’s just say that you did so poorly in the market that the $240,000 doubled in 20 years. Then, you would have at least $480,000 now for your use as you go into retirement. $480,000 even at 5 percent growth is $24,000 a year. That means you would be able to use $24,000 of your portfolio of $480 to add to your pension income or social security, without reducing your principal of $480,000.
Because you did not get rid of your $30,000 of credit card debt 20 years ago, after paying $240,000 of interest for 20 years, you still owe the very same $30,000 of cards! So, you choose what you would rather have. Pay $240,000, and still owe $30,000 after 20 years, or save $480,000 and have $480,000 in your wealth portfolio as you retire.
Don’t think that 20 years is a long time. It’s not. It’s a very short time. For those seniors out there who are now 65, I am sure you remember that you were a young man or woman of 20 just last week. Where did all that time go? You feel the same but when you look at the mirror or pictures of yourself, you can see that you don’t look like you were 20 anymore.
Look at former Pres. Bush who died last week at 94. He was a great and honorable man. I remember him when he was president in 1990 as he led the American forces that kicked Saddam Hussein out of Kuwait in Operation Desert Storm. It’s now 2018. So 1990 was 28 years ago — 28 years ago, Pres. Bush was only 66.
And a month ago was the 50th anniversary of the battle of Mutter’s Ridge in Vietnam when Robert Mueller, then a young marine, now the special counsel investigating the Russian collusion matter, displayed honor and valor in saving his fellow Marines from a massacre, earning him the bronze medal of valor. That was 1968.
Time waits for no man, not even you. Get rid of your debt now if you are eligible. Or do you choose to be forever “slave to the lender”?
If you need debt relief, call my office for an appointment. I will analyze your case personally.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave, Mailstop 58, Building A-1 Suite 1125, Alhambra, CA 91803.
