JW’s Financial Coaching Podcast JW’s Financial Coaching Podcast-A show devoted to answering your personal financial questions and covering current events in personal finance. Giving people a new perspective on their money!

May 8, 2016  
00:0000:00
  • How are creditors and borrowers supposed to act
  • What a debt agreement actually is
  • Viewpoint from the borrower and the creditor
  • How to avoid the rat race all together
  • Quote of the lesson

Slide1

Do creditors have an obligation to lend money and treat borrowers with decency?

Do borrowers have a responsible to pay back their loans, even when it isn't convenient or beneficial to do so?

We tackle those tough questions on today's lesson. This lesson was inspired after listening to other shows and reading material such as David Graeber's book "Debt-The First 5,000 Years" that left a bad taste in my mouth.

To be honest doing research on this lesson really helped me form my opinion on this topic. Therfore my thought might be a little raw and hopefully they come across clearly.

But today we focus the morality of debt and we look at it from both a borrower and lender point of view.

What do we mean by debt? I'm focusing on the traditional borrowing of money from a bank or other lending institution. I'm not talking today about a debt to a friend or family member that is non-monetary.

But in my opinion from the borrowers point of view, we have a moral obligation to pay our debts if we have the money to do so. If debt becomes inconvenient, I don’t think you should just simply walk away. There is an obligation to pay when you signed the note. Not a promise to pay as long as you are able to, or a promise to pay as long as you have a job. It was to pay back no matter what. That’s why debt is often compared to slavery.
Now if you currently are behind to your creditors, you’ve walked away from your debt either voluntarily or involuntarily, or have filed bankruptcy in the past this lesson is not to judge you in any way. But I am fighting against the “It’s not your fault!” mentality when it comes to your debt.

On the flip side let’s look at the lender’s point of view. Obviously I’m not a big fan of debt, and because of that I could never be a lender because that would be hypocritical on my part. However I’m also not for making it illegal to lend out money either. But if you are going to loan money out, is it too hard to make sure you can loan money to people who have a realistic chance of paying it back?

It is too much to ask to take responsibility for your risky loans and not ask for protection from the government when those risky loans come in default? Subprime loans are risky, so if you take the risk, you should also take the loss. All I’m asking is for you to be fair.

Ultimately the best way to avoid the whole morality of debt to begin with is to not play the game all together. If you are in debt, make it a goal to payback all your creditors as soon as possible so that you can be done with them.
When the option of debt is removed from the table, you have to think differently and make different choices. Those choices might be painful at the start, but over the long run they will lead to growth.

Previous lessons mentioned on the show:

Today's quote of the lesson is brought to you by the JW's Financial Coaching Newsletter

"Better to go to bed hungry than to wake up in debt.”Unknown

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