What does the Church of Jesus Christ of Latter-Day Saints teach its members about debt?
I started my debt-free conversion in January of 2010. I describe this moment as a type of spiritual awakening—an ah-ha moment if you will. I was looking for a solution to my financial incompetence and I found it. It was loud and clear and it felt right to me.
Oddly enough, I didn’t find it by listening to the leaders of the church of which I have been a member my entire life, even though LDS Church leaders have stressed the avoidance of debt to their members for years and the scriptures are full of verses warning against becoming enslaved to creditors.
Since debt-free living is now an obsession of mine, it comes up in a lot of my daily conversations. Often I will hear people (also Mormons) tell me that the Church isn’t entirely against debt and that it teaches mortgages, student loans, and other necessary debt is okay.
So what is the Mormon Church’s position on debt? Here is a simple explanation from the Church’s pamphlet on family finances titled All Is Safely Gathered In:
“Spending less money than you make is essential to your financial security. Avoid debt, with the exception of buying a modest home or paying for education or other vital needs. Save money to purchase what you need. If you are in debt, pay it off as quickly as possible.”
So the Church does say that some debt is tolerable— maybe a reasonable home mortgage, some student loans, and a small loan to cover other vital needs. But It does clarify to “pay it (debt) off as quickly as possible.” So why do so many members of the church (including myself) find themselves overwhelmed by large amounts of debt and in financial hardship? In a state (Utah) in which the predominant religion is LDS (somewhere between 60-70% depending on the source) why are more bankruptcies filed than in any other state in the US? Maybe it is that part about “other vital needs” that confuses us members.
Utah does rank highest in charitable giving, has the lowest rates of smoking and alcohol use, and the lowest out-of-wedlock birthrate in the nation. Apparently Utah Mormons are listening to some things on conference weekend. Tithing. Check. Law of chastity. Check. Word of wisdom. Check. Personal Finance. Ooops…!
What are those “vital needs?” And does that mean that we should fund them with credit cards, HELOC’s, cash advances, and such? I didn’t hear anything about car loans either.
Maybe we need to apply the same discipline we exercise by not consuming alcohol and maintaining our virginity before marriage to our personal finances and financial literacy. Even though personal finance isn’t necessarily a salvation issue, it is a very important principle and we should treat it equally as important as we do the word of wisdom and the law of chastity. Doing so will allow us to fulfill our goals and dreams and find greater peace in our lives.
“All of us are responsible to provide for ourselves and our families in both temporal and spiritual ways. To provide providently, we must practice the principles of provident living: joyfully living within our means, being content with what we have, avoiding excessive debt, and diligently saving and preparing for rainy-day emergencies. When we live providently, we can provide for ourselves and our families and also follow the Savior’s example to serve and bless others.”
-Robert D. Hales
The Church is very clear in encouraging its members to avoid debt and live below their means. And when we live below our means, we eliminate the need to acquire debt and turn to credit cards or HELOC’s, to supplement our lives. The Church does allow an exception for a reasonable home mortgage, some educational loans, and “other vital needs.” But just because the Church says it is OK, does not mean we HAVE to go into debt. We must use more discretion. I think that we use these statements to rationalize unnecessary purchases and to take on unreasonably sized mortgages and student loans.
We are also urged, when debt is incurred, to pay it off quickly. Quickly does not mean keeping student loans around for 20 years after graduation. Pay them off ASAP! Do it before you take on the responsibility of a home mortgage.
When buying a home, do some planning beforehand. Save up a sizable down-payment in order to get a more affordable monthly payment which will allow you to pay off your mortgage more promptly. Paying off a mortgage quickly does not mean taking out a 30 year mortgage every 5 years in order to buy a different home or to refinance and cash out the equity to fund a vacation, shopping spree, or debt consolidation. I recommend a 15 year mortgage or less with a good down-payment. Pay off your mortgage as soon as possible. If you decide to move, use the proceeds from the sale of your old home to buy a new home.
Imagine the peace your family would have if you had no debt except for the mortgage. Under these circumstances I think you could pay off your house in fewer than 30 years. Don’t you?
The church gives these recommendations as a guide and a source for direction. These are the minimum standards. Don’t strive to be average. Strive to be excellent. Excellent would be no debt, no mortgage, no student loans. Excellent would be a full rainy-day fund to cover emergencies and healthy savings to prevent you from having to borrow money to cover those “other vital needs.”
Money is powerful. Money is also very emotional and very spiritual. Having money will not lead you to happiness, but gaining control of your finances will clear the runway for you and your family to enjoy greater peace, launch your dreams, and grow closer to God.