I know that the members of the Church are counseled to be financially prepared to face “hard times,” the same way we are told to have a year’s supply of basic foods on hand. Does this counsel mean that all debt is categorically bad?

Robert F. Bohn, Instructor of Family Economics, Brigham Young University

Debt is intrinsically neither good nor bad; it is amoral (neutral) because, by definition, it is only a financial “tool.” How a Latter-day Saint uses the “tool” determines whether the effects on his life are “good” or “bad.”

One evening while an active Church member was having dinner with me, he asked me what I thought about credit cards. Before responding, I asked him about his own experience with charge cards. He answered quickly, explaining that he recently tore up and threw away all of his credit cards because he and his wife had repeatedly purchased impulsively too many items on credit due to its convenience. Accordingly, they found themselves continually burdened with monthly payments and paying a great deal in finance charges. When I was asked again for my opinion, I agreed that if having the cards was too much of a temptation to over-extend themselves, then perhaps they should not have the credit cards. However, does this mean that all Latter-day Saints should avoid the use of debt instruments like credit cards?

As was the case in the above illustration, a financial “tool” like debt can become a cruel taskmaster when used improperly. However, if a “tool” is used appropriately, it can also be beneficial to the user. For example, when traveling, many people minimize the amount of cash and travelers’ checks carried by having a widely accepted credit card. Likewise, in many situations a personal check (and sometimes even cash) is not acceptable; a common example of this is the rental of a car, where a credit card is typically most acceptable. A credit card can also be very helpful in accounting for and paying business expenses; then, when the monthly statement comes, the employee can easily receive reimbursement from the company without previously having to use his own money. Some people use credit cards for their personal bills and expenses to minimize the use of checks by writing only one check for the entire amount at the end of the month. If one understands how to use this “tool” effectively, he can enjoy the positive aspects and, in many cases, completely avoid the negative.

Other kinds of debt instruments also have their good and bad sides. On the one hand, obtaining excessive loans for unnecessary purchases often causes marital discord because of the resulting financial burden. On the other hand, the wise use of a loan enables thousands of Latter-day Saints to purchase homes and assists many students in obtaining an education. Speaking at Brigham Young University in 1962, Elder Ezra Taft Benson summarized what the Church has been teaching:

“Our inspired Church leaders have always urged Latter-day Saints to get out of debt, live within our means, and pay as we go. …

“Now I do not mean to say that all debt is bad. Of course not. Sound business debt and reasonable debt for education is one of the elements of growth. Sound mortgage credit is a real help to a family that must borrow for a home.” (Church News, March 17, 1962, p. 13.)

The creation of debt also provides income for many prudent Latter-day Saints. For example, every time we open a savings account to earn deposit interest, we create a debt (liability) for the savings institution. When we purchase bonds to earn interest income, we become creditors to the company from whom we purchased the bonds; the company is willing to go into debt to the bondholders in order to increase business and profits. Each time we save our money by purchasing government savings bonds we cause the government to increase its debt. Debt is a basic financial tool of our economy and needs to be understood so that we can enjoy its positive aspects while avoiding the misery associated with the negative.

Almost any practice or principle taken to an extreme can have “bad” effects. For example, saving is typically considered a good practice; but is also basically an amoral financial tool—neither good nor bad. The following is an example of how even saving, utilized to an extreme, can have bad effects:

If everybody in the country stopped spending and only saved their money, then goods and services would not be purchased. If goods and services are not purchased, then businesses stop producing. If companies stop producing, then workers are laid off. If workers are laid off, they have no money to spend or to save. This cycle would continue until a severe depression would destroy the economy. The cause? The extreme use of a seemingly “good” financial tool—savings!

In summary, debt can be likened to a saw in that the saw is neither good nor bad—it is a tool. If properly used, the tool can be used to construct beautiful homes; if foolishly played with, the tool can cut off arms and hurt lives. The challenge to us as Latter-day Saints is to learn the appropriate use of a wide variety of financial “tools” so that we are properly prepared when seeking the Lord’s counsel in confirming our financial decisions.