The Bible and The Bard Agree on this Financial Principle
Last summer my wife and I took off for an overnight getaway - just the two of us - and ended up in Staunton, VA near Charlottesville. The draw to this particular place was the American Shakespeare Center’s Blackfriars Theater . Here’s a blurb from their website:
The American Shakespeare Center is an internationally acclaimed theatre company that performs Shakespeare’s works under their original staging conditions — on a simple stage, without elaborate sets, and with the audience sharing the same light as the actors. Home to the ASC’s resident troupe, the Blackfriars Playhouse has been established as one of America’s premier Shakespeare destinations.
I was just searching for something to do and came across the town and the theater and was intrigued by them. So we made some reservations and set off to Staunton to see Shakespeare’s Merchant of Venice . I was blown away! The theater experience was amazing and I had so much fun that evening! If you are ever in the area, I would definitely recommend checking it out.
At the end of the play, I turned to my wife and said, "You know what the takeaway from this evening is? Never cosign a loan!"
C’mon - what else would you expect from a guy who has a personal finance blog!
As a reminder, here’s a brief summary of The Merchant of Venice from sparknotes.com :
Bassanio is desperately in need of money to court Portia, a wealthy heiress who lives in the city of Belmont. Bassanio asks Antonio for a loan in order to travel in style to Portia’s estate. Antonio agrees, but is unable to make the loan himself because his own money is all invested in a number of trade ships that are still at sea. Antonio suggests that Bassanio secure the loan from one of the city’s moneylenders and name Antonio as the loan’s guarantor. Antonio and Bassanio approach Shylock, a Jewish moneylender, for a loan. Shylock nurses a long-standing grudge against Antonio, who has made a habit of berating Shylock and other Jews for their usury, the practice of loaning money at exorbitant rates of interest, and who undermines their business by offering interest-free loans. Although Antonio refuses to apologize for his behavior, Shylock acts agreeably and offers to lend Bassanio three thousand ducats with no interest. Shylock adds, however, that should the loan go unpaid, Shylock will be entitled to a pound of Antonio’s own flesh.
So not only has Antonio cosigned the loan for his friend Bassanio but he has also put his life on the line for it! Of course, in the end things do not work out as bad as it could have been for Antonio…but if you want to know the entire story and experience it in a supremely entertaining way - go check out the Blackfriars Theater! (though that particular play is not playing there any more, I’m sure any of them would provide a wonderful evening)
The Bible cautions against cosigning loans also
I was amazed to learn that God actually talks about co-signing a loan in the Bible.
My child, if you have put up security for a friend’s debt or agreed to guarantee the debt of a stranger. If you have trapped yourself by your agreement and are caught by what you said—
follow my advice and save yourself, for you have placed yourself at your friend’s mercy.
Now swallow your pride; go and beg to have your name erased. Don’t put it off; do it now! Don’t rest until you do. Save yourself like a gazelle escaping from a hunter, like a bird fleeing from a net. Proverbs 6:1-5 (New Living Translation)
Again, cosigning a loan for someone is not a good thing to do. The Bible informs that you should "swallow your pride" and "go and beg" to have yourself removed from the loan. And don’t even wait until tomorrow it urges - "do it now!" This is serious and urgent advice! It certainly does not appear to me that cosigning a loan is something you should do.
Why does someone need a cosigner?
Remember, the reason that your friend needs a cosigner on a loan is because the bank (or whoever) is fairly confident that your friend will pay back the loan. If they thought your friend was good for the money, they would not have required a cosigner. And if you friend does not pay back the loan….guess who will be. So, my advice is (obviously) do not cosign a loan for someone else. And if you do consider cosigning a loan, assume that you will be the one who has to pay back the loan. Make sure that your finances, your family relationships, and you relationship with your friend will survive the probable event that you will be paying for it. It might be hard to say "no" to someone asking you to cosign for them, but that still might be a lot easier than doing serious damage to your personal finances and serious damage to your relationship with your spouse and/or family!
Photo Credits: ryanrocketshipWhat if Everyone only got Paid once a Year?
I have no idea what I was thinking about the other day…but this thought popped into my mind:
"Would people take better care or worse care of their finances if everyone only got paid once per year?"
I like to come up with these strange questions to try to get myself and others thinking - I feel like it stretches my brain somehow (not literally) (I guess this is why I ended up having to answer most of my own questions in that Bible study we used to host in Arizona) (I should really stop talking to myself). I know it isn’t practical and it would never work and all of that - but practicality is not the point of this exercise.
Payday
So, on January 2nd (the 1st is still a holiday) (ok, the first weekday after January 1st - how’s that?), everyone got their single paycheck for the entire year. What happens next?
At first, I thought this would be a complete train-wreck. A number of people would have that money blown by Groundhog day. On the other hand, for fiscally responsible people, this would actually be somewhat of a boon. If you had all your entire year’s salary up-front instead of accumulating it little by little throughout the year, you’d be able to earn significantly more interest during the year.
Taking into account how much credit card debt the average American has, I think it is obvious that some people have a problem delaying immediate gratification to focus on the long term. Therefore, would people flush with cash at the beginning of the year run out and satisfy their every whim? I would say "probably." (you might say, "at least they’re not using a credit card," and this is true…but come the end of the year all expenses would end up on the CC)
But maybe, just maybe, if people knew that they only got this one paycheck and they were not getting any more, maybe they would be inspired to be more careful about their planning and living. Yeah, you’re right, that’s unlikely and it would probably end up being worse than now. Now that I think about it, that large lump sum would probably distract some normally fiscally responsible people and cause them to overspend early in the year as well.
So, I would answer the question like this: for some people it would work out a lot better. For some others, they would be inspired to get more serious about saving and planning. Unfortunately, I’d guess that some people would get distracted by the money, lose sight of the long-term, and end up being worse off. And, of course, I still believe that a number of people would have it all spent by MLK, Jr Day. The bottom line is it would be a lot better for some and a lot worse for others.
What do you think? Better? Worse? Why am I even wondering about this?
This Week in the Blogosphere
- This is just a great post discussing the different stages of how we view the purpose of money (@ The Happy Rock )
- Here’s a post discussing debt, debt myths, acceptable debt, and reasons to avoid debt . There are some really good reasons in his list of why to avoid debt. (@ Bible Money Matters )
- Frugality sometimes gets a bad rap - but I agree with Bob that there is a difference between being frugal and being cheap (@ ChristianPF )
- Tithing! Anyone still here? Here’s a story about someone going through the process of tithing for the first time (Guest post for Gather Little by Little written by Capital Couples Finance )
Have a great weekend and God bless…
Personal Finance Basics Part 2 – Enhancing Your Basic Plan
In this series, I’m discussing the main ingredients of a personal financial plan – this will be a high level introduction to the topics that most people should consider when they first get started thinking about personal finances. This is the second post in the series.
The previous post discussed the very basic necessities for a financial plan. Today I am discussing the next steps to consider. To review, here are the basics:
- Earn some money
- Give some of it away
- Spend less than you earn
- Protect yourself
- Create an Emergency Fund
After taking care of the first 5 steps, I would recommend the following:
Click here to continue reading…
Am I Stupid to Pay Off Our Student Loan?
First, I have to apologize - we are not allowed to use the word "stupid" in my house. It just slipped out - honest. 
Anyway, what I really meant to ask is "am I silly to pay off our remaining student loan?"
We have one student loan left
When we moved from the southwest back to the east coast, we had just completed paying off all of my student loans. That left us with (from highest to lowest balance) my wife’s student loans, a mortgage, and two car loans. As seen on my story page and the first checkpoint post , that was the point in time where I started to get really obsessed with paying off all of our loans and getting rid of everything except the mortgage. Click here to continue reading…
The Lesser of Two Evils: Determining Which Loan to Pay off First
The other day I was asked a good question: "We are looking to put some extra money towards prepaying one of two loans, so how would you go about determining which one to pay off?" Like most good questions, there is no easy answer. For most debt repayment questions, I would turn to Dave Ramsey’s debt snowball (pay off the loans in order from smallest balance to highest) or a similar technique (pay off the loans in order from highest interest rate to lowest). But this person was asking a slightly different question. Click here to continue reading…
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