The number one issue for fights inside of a marriage is money problems. Some studies show that 57% of the fights inside of a marriage are over money.
So if it’s that bad at home, what happens when a couple works together with the business finances? Well, here’s a very common question from one of our fans:
My husband and his father are running a small real estate management company. My husband hired me to start managing the finances/keeping the books for them beginning in September 2010. After working with their finances for several months now, I see that there is a substantial amount of credit card debt.
I have tried to explain to my husband that I need to apply the principle of the “debt-snowball” to this debt instead of continuing to make several minimum monthly payments that are several hundreds of dollars each. My husband argues with me about this stating that this will destroy the company’s credit rating, etc.
This is the same argument he made with me when I started FPU and told him we needed to start the debt-snowball on our personal credit card debt. In that case, he finally stopped arguing with me and let me go ahead. In terms of the small business, he is being a bit more difficult. I need to be able to show him the specific answer that the debt-snowball is applied in the same manner in a small company like theirs, as it is in personal finance. Please help!
The debt question is one that I get A LOT in EntreLeadership. So many leaders think that people can’t run a business without debt. So inevitably, during my event I will ask how many people are running their business debt free. It’s usually about 30% of the attendees. If people can’t run a business without debt, then how are so many doing it?
There are a few things to consider:
- What does God say? – The Bible is very clear on the issue of debt. DON’T DO IT! In fact, Proverbs says that if you have gone into debt, get out as quickly as you possibly can. Nowhere in the Bible will you find God blessing someone with debt. Nor do you see Him separating out personal and business. He doesn’t differentiate.
- It gives me options – Actually, I am a firm believer that debt robs you of your options. When your money is tied up paying off debt, you’re not able to take advantage of situations when they come up. On top of that, you are potentially holding God back from doing some of the things He want to do in His business. (It is His, right?) I have seen plenty of God situations that people weren’t able to capitalize on because they were bound by debt. Going into debt is saying that you know better than God on the speed of growth you should have.
- But my credit score! – There is only one thing that you need a credit score/rating for – to go into debt. That’s it. It’s there to help you get into more trouble. If you have cash, you don’t need a rating. Besides, you get MUCH better deals when you pay companies with cash. Especially in a time when so many companies are no getting their receivables collected for months on end. Go ahead and destroy the credit rating, it’s not helping you.
- Proverbs 31 – Who can find a virtuous wife? Her worth is far above rubies. Her husbands heart trusts safely in her; so he will have no lack of gain. Dude, listen to your wife! She’s onto something. Women have a sense of discernment that us guys just don’t have. And like fools, so many guys don’t listen to them when it comes to business. This is a mistake. God has wired them differently than us. Drop the pride and ask for her opinion. You’ll be surprised at how much money, time, and nose bleeds it will save you.
Question: What ways have you experienced this in your life?
Please be sure to share this in your circles.
Of course it works. After I “found” Dave Ramsey, my wife and I got on his plan at home, and I started implementing it at our business. We have paid off over 100k in debt in the past 10 months. Looking to be debt free in the business by the end of next year. What an awesome feeling. It already has allowed us to upgrade some equipment for cash. There is no better feeling in the world!
WOO HOO!!! Way to go Tom!!! That’s awesome!!!
Amen to Proverbs 31; gentleman please trust our ‘guts and instincts’, it’s for your own good and the good of the family, and you end up much happier:). Well said!
hahaha…Amen!
“I need to apply the principle of the “debt-snowball” to this debt instead of continuing to make several minimum monthly payments that are several hundreds of dollars each.”
Maybe I am reading this incorrectly, but it sounds like she wants to stop the minumum. As we know, the debt snowball says you continue to make the minimum payments and then throw everything you can at the smallest debt. It does not say to stop making the minimums. This eliminates the issue of destroying your credit rating with late payment hits.
With the debt snowball, we say to pay minimums on all debts but the smallest debt. That one you attack with everything you have. Once it’s gone, you roll that over onto the next debt. They are only paying minimums, and not paying anything off.
Does that make more sense?
Is it morally wrong to be employed by a company that is in debt?
Debt isn’t a Salvation issue. It is stupid, but I think it depends on your own morale values. For me, we are to be in the world, but not of the world.
It’s true that when we agree with our spouses that there seems to be a lot more peace in the home. In fact, when both spouses get on the same page it makes marriage much more enjoyable. Most arguments in a marriage are over money and when both spouses agree about their money it eliminates most arguments!
Amen brother!
Chris, Credit scores are also tied to insurance rates. How would you address this issue?
Hey Teresa, there are a TON of factors that go into how your premium is calculated. And while your credit score does play a factor in SOME insurance companies, it’s not the way you think. They aren’t checking the score, as much as they are checking the rating. What they are looking for are codes that tell them you have collection problems, too many people checking your score, or anything negative. Not the number. Therefore, if you have a low score like me, but no activity in forever, it doesn’t affect you. And if you’re with a great insurance company like Zander, they have so many companies that they shop, they can find one where it’s not an issue.
Now, that should clear up the crazy lie that you need to go into debt, and stay in debt to the tune of hundreds, or thousands of dollars to save a $100 hike in your premium. Make sense?
Thanks, dude! This always comes up in FPU and I’ve never had a “real” answer to give, other than it won’t effect your rates as much as you think it does. : )
Thanks for the blog – my husband always says “….debt is the noose and the devil is the hangman….” – and its true!