Reasons for Becoming Debt-Free
Do you think debt is dangerous? Here are some reasons why you should treat it with extreme caution.
Christians today are generally polarized into two opposite groups. One feels that the Word of God forbids any and all kinds of debt at all times (see Romans 13:8). Some of these even feel that debt is a sin. The other group assumes that debt is an acceptable and normal way of life that God often uses to meet the needs of His people. Neither of these viewpoints is totally accurate. Although debt is not a sin, it also is not a normal way of life, according to Scripture. Rather, debt is a dangerous tool that must be used, if at all, with extreme caution and much prayer due to its potential for enslaving people in financial bondage (see Proverbs 22:7).
Why debt is dangerous
The following are reasons why debt needs to be treated with extreme caution.
- Debt presumes on the future. When people commit themselves to payments over a period of time, they are presuming that there will be no pay reductions, no loss of job, and no unexpected expenses. That is an improbable assumption (see Proverbs 27:1).
- Debt lowers future standards of living. Money that is borrowed today must be repaid over time along with interest, which means that those things purchased with credit will cost more “tomorrow” than they did today. Therefore, the standard of living will have to be adjusted to compensate for the added expense.
- Debt focuses on façade decisions rather than real-life decisions. Debt encourages people to make decisions based on whether they can afford a monthly payment, rather than on whether they can afford the total cost (purchase price, operational expenses, and finance charges) of the item. Debt makes it too easy to say yes to low monthly payments while ignoring the real cost of items.
- Debt leaves people at the mercy of the power of compound interest. If consumers pay the minimum monthly payment on a $1,000 debt at 19.8 percent rate of interest and never charge anything else on that account, it will take eight (8) years to pay back the $1,000 and they will pay $2,023 for the privilege of charging $1,000. In some cases, items charged on nationally accepted bank credit cards can cost upwards to eight times the original purchase price of the item by the time the bill is paid off.
- Debt could delay God’s plan. God said that He would provide for His people’s needs. Debt allows needs to be met now, from a means other than through God’s provision. Debt provides instant gratification, at the expense of financial freedom, rather than waiting on God’s perfect plan and His perfect timing.
- Debt clouds the line that separates wants, desires, and needs. Needs are necessary purchases such as food, clothing, shelter, medical coverage, transportation, and others. Wants involve choices about quality of goods. Discount shopping versus specialty shopping, lobster versus chicken, or a new car versus a good used car, and so on. Desires are those things that can be purchased only after all other obligations are met and only if there are surplus funds available to purchase them. Debt allows desires to become wants and wants to become needs.
- Debt encourages impulse buying and overspending. The chief financial officer of a national credit card company said that consumers spend on the average of 25 to 30 percent more when they charge than if they purchase with a check or cash and that a great majority of those extra purchases are the result of impulse buying. Unrestricted debt assumption and credit cards have allowed people to buy immediately beyond the means to repay, without sacrificing needs and necessities.
- Debt stifles resourcefulness. In a society that lives by the premise of “I want, what I want, when I want it,” the need to be resourceful—mending clothing, resoling shoes, and changing oil—in order to save money is no longer relevant. It is more convenient to purchase new or to charge services simply by “putting it on plastic,” and then paying for it later, regardless of interest or finance charges.
- Debt eliminates family financial planning. Rather than planning for the future and allowing for a margin of errors, overruns, and changes to dictate future financial development, debt eliminates the necessity for future planning because the course for the financial future of the family will have already been set: pay the debt that has been accumulated.
- Debt teaches children that the world’s method of managing money is normal. Debt causes children to have a casual regard for using credit cards, obtaining loans and mortgages, and keeping vows to pay the bills. For this reason, we have children who have graduated from college by borrowing for education expenses and living to the limit of their credit cards. They have never considered paying cash for transportation or anything else and have begun adult life with so much debt that they have to work for years just to pay for the debt accumulated during their college years.
Debt-free living is still God’s plan for His people today. The blessings of becoming debt free go far beyond the financial area. They extend to the spiritual and material realms as well. No one who is financially bound can be spiritually free. The effects of financial bondage on a marriage relationship are devastating. Currently 50 percent of all first-time marriages fail, and the primary reason for the failure is financial incompatibility. Therefore, it is to all Christians’ advantage to strive to become debt free.
Six Steps to Freedom from Debt
1. Give to God first
As Christians, our first financial priority, just as in every other area of life, should be God and His work. The issue of managing all of our gifts including our finances is of great importance to God. Figuring out how much to give as a minimum is fairly easy, as the Bible instructs us to give a tithe, or one tenth or our income back to God. This is a great starting point for Christian giving and should be calculated on the gross salary (or on net income before taxes for those in businesses for themselves).
Now, you may be thinking: How can we possibly do that when we are already struggling to make ends meet? I thought you were going to tell us how to get out of financial trouble, not make it worse!
The truth is there will never be “enough” to give. If we wait until all of our needs and desires are met before we start to give, it will never happen. In fact, statistics show that in Canada, the more a person makes, the less they are likely to give, percentage-wise. The more we have, the more we think we need.
It is interesting, but people today talk very little about their actual salary or how much they are worth. Like all secrets, this gives far more power to money than it actually deserves. Similarly, and more properly, people who tithe do not go around boasting about it. But I would like to challenge you to ask people you trust whether or not they tithe. If they do tithe, ask them about their experience. In all my discussions with people about money I have never heard anyone say that their financial problems started or got worse once they started to tithe. On the contrary, people who tithe seem to be better off than those who don’t. It is one of the many mysteries of how God works.
2. Have a Written Plan
A written plan/budget is an absolute necessity to escape debt’s death grip. This plan’s success depends on your family doing two things: creating an itemised list of all your expenses, in their order of importance. And two, classifying our needs, wants and desires. Here are the differences between the three groupings:
- Needs. These are life’s basic necessities. Food, clothing, employment, home, medical coverage all fall into this category.
- Wants. Wants involve making choices about the quality of goods we consume: dress clothes versus work clothes, steak versus hamburger, a new car versus a used car.
- Desires. These are the goods and choices we make not essential to our survival, safety or well-being.
Good apps for budgeting: PocketMoney, Toshl Finance, Money Smart, Savings Goals, PageOnce
Debt Lessons (Powerpoint)
3. Determine Essentials for Living
Eliminate unnecessary living expenditures, and look for services around the home that can be done without outside cost. If you hire a cleaning lady, roll up your sleeves and scrub the kitchen yourself or learn handyman skills yourself. Tile and grout your floors, build a deck or paint the house to save costs. One more important thing to remember: We assume “expenses” are essential only because of the messages our society sends.
4. Think Before Buying
If your family is in debt, evaluate every purchase (Proverbs 24:3).
- Is it a necessity? Have I assessed whether it is a need, a want, or a desire?
- Does the purchase reflect my Christian ethics? (For example, certain magazines on the market do not reflect Christian ethics.) Can I continue to subscribe to magazines or belong to book, CD, or movie clubs while I owe others?
- Is this the best possible buy I can get, or am I purchasing only because I have this credit card?
- Is it a highly depreciative item? Am I buying something that will devalue quickly? (Swimming pools, boats, and sports cars fall into this category.)
- Does it require costly upkeep?
5. Cut up the credit cards
If you are in debt from the misuse of credit cards, stop – totally stop – using it. Cut up the cards and mail them back to their respective companies and ask them not to send you any more. Include in your letter the plan for paying that credit card debt back and commit yourself to buying solely on a cash basis. While handing out the green for your purchases engrain new attitudes in your daily spending. After all, you’ll have to sacrifice some of the wants and desires in life to break free from debt; otherwise, you will continue to borrow and only get deeper into bondage.
6. Practice Saving
Practice saving money on a regular basis. This includes those who are in debt. Even if it is only $5 a month, develop a discipline of saving. This does not mean you should store up a large amount of money while failing to pay your creditors, but one of the best habits a young couple can develop is to save a small amount on a regular basis. Families living above the poverty level have the capability to save money, but many fail to do so because of the misnomer that small amounts can’t make a difference. Others believe that God frowns on saving anything. Neither of these two reasons is scriptural. The prevailing thought presented in the Bible is to save on a regular basis, and it is important that Christians develop good habits to replace bad habits.
Controlling Impulsive and Compulsive Spending
How do you reduce debt?
The solution is simple: develop discipline in spending.
Advertisers play on the insecurities of consumers and tell them infinite ways their products will satisfy needs and dissatisfactions. Consumers in turn spend with a vengeance.
Although self-discipline is the best way to control spending, too many people are caught in a cycle of impulsive spending that seems to have a life of its own, beyond the limits of self-discipline.
Tahira K. Hira, a professor of family and consumer science at Iowa State University says, “Low self-esteem appears to be related to impulsive spending. Couple low-self esteem with lack of knowledge of current personal financial status, combined with other savings barriers such as procrastination, stress and insecurity, and the result is a greater focus on paying for needs today and forgetting those for tomorrow….The key is getting a grasp of cash-flow management. Those who don’t know extend their income with credit cards.”
Impulsive buyers buy on a whim, make unplanned purchases, usually lack self-control in buying situations, and lack clear priorities in spending, which results in overspending, unnecessary additional debt, unused articles, and family arguments.
Most impulsive spenders sabotage their own prosperity with the “I want it now syndrome,” which is characterized by spending beyond their incomes. This in turn leads to persistent fear, unremitting debt, and depression and feeds into a downward cycle of worry and low self-esteem…. the instant gratification of impulsive spending…deepening debts…more worry…more spending…
The best way to overcome short-term buying impulsiveness is to (1) leave the presence of the item; (2) price the item in three other places; (3) keep tight control on the use of credit cards; (4) buy only what is needed and practical; and (5) have spending priorities.
Discipline is the key to controlling impulse buying, long term. “By what a man is overcome, by this he is enslaved” (2 Peter 2:19).
Before buying on impulse, list the item on an Impulse List, talk about the item with your spouse, obtain comparison prices, and wait seven days before purchasing the item.
Most impulse purchases can be eliminated by this discipline.
When people do not feel confident in themselves and have very low self-esteem, they may look to factors outside themselves as sources of value.
Compulsive spending is a means by which people fill the vacuum in the heart that should be filled with a sense of personal acceptance.
Listed below are 10 signs and symptoms that characterize compulsive spending.
- Shopping or spending money as a result of being disappointed, angry, or depressed.
- Having emotional distress or chaos in personal and family lives because of shopping or spending money.
- Having arguments with others regarding shopping or spending habits.
- Feeling lost without credit cards.
- Buying items on credit that would not be bought with cash.
- Spending money feels like a reckless or forbidden act.
- Feeling guilty, ashamed, embarrassed, or confused after shopping or spending money.
- Lying to others, especially the spouse, about what was bought or how much money was spent.
- Juggling accounts and bills to accommodate spending.
- Feeling of powerlessness and helplessness to overcome the compulsion to spend.
Although genuine freedom from compulsive spending is a fruit of the Spirit in that God offers the power to have self-control through His Son, Jesus Christ (see Romans 6 and Colossians 3), there are some viable steps that can be taken to help correct the problem.
The first thing is to understand the nature of the problem: the emotional needs and personality traits that have given rise to compulsion.
Second, develop and implement practical applications that include balancing outgo with income (do not spend unless there is money to spend), budgeting, setting goals, and getting quality financial counseling.
Third, eliminate credit buying. Compulsive spending is many times an addiction to credit cards. It generally takes 30 days to break someone from any addiction such as drugs, alcohol, and so on. Credit cards can be included with this group.
Therefore, either destroy the credit cards, place them in a drawer out of sight, or give them to someone for safekeeping, and do not use them for 30 days. Within those 30 days it will become apparent that life goes on without the need for credit cards.
The U.S. Commerce Department says that U.S. personal-savings rate hit an all-time low of -0.2 percent in September of 2000 and as of January 2005, savings has not returned to a positive level.
That means that Americans are spending more than they earn, which leaves less than nothing for saving.
Since impulsive and compulsive spending patterns can often be justified or rationalized in our current society in which these unhealthy spending cycles are encouraged rather than discouraged, savings will most likely continue to decline and debt will continue to increase until self-discipline and self-control are established and the impulsive/compulsive spending precedent is brought under control.
Contentment is not something that’s found; it is an attitude.
One of the great mysteries of Christianity is contentment. At least one must presume it is a mystery, because so few people live it. Yet contentment is not something that’s found; it is an attitude.
There are many people who seemingly have little or no regard for material possessions. They accept poverty as a normal living condition, and their major concern is where they will sleep that night or eat that day. In contrast are the affluent, who have the best our society has to offer at their disposal. Their houses, summer cottages, winter chalets, and automobiles are the envy of the community. Does either scenario bring contentment? No!
If money can’t buy contentment and poverty doesn’t provide it, what is contentment and how is it attained? Contentment, contrary to popular opinion, does not mean being satisfied where you are. Rather, it is knowing God’s plan for your life, having a conviction to live it, and believing that God’s peace is greater than the world’s problems.
So often Christians get so involved in the day-to-day activities of earning a living and raising a family that they forget their real purpose in life: to serve God. They discover that their lives are out of balance and don’t know how to bring them back into balance. So, they buy more things or get rid of things in order to bring back the balance. However, nothing seems to work.
Christians get trapped into a discontented life by adopting worldly goals: more, bigger, and best. The Bible identifies these as indulgence, greed, and pride. For a while after accepting Christ as Savior, there is a peace and a real willingness and desire to commit everything to God. After a while there is a tendency to fall back into the same old routine of desiring and getting more, rationalizing that somehow it is “serving the Lord.” The evidence to the contrary is a lack of peace, a lack of spiritual growth, and a growing doubt about God’s ability to provide.
In today’s society it’s not normal to step down. Once a certain level of income, spending, and lifestyle is attained, most will go into debt in order to maintain that level. Stepping down to an affordable level is considered failure. Yet, contentment can’t be achieved without personal discipline and staying within the lifestyle parameters God has established, based on His provision (Luke 12:15; 16:13-14).
In poverty, the issue is usually black and white—you either have it or you don’t. In affluence, the deception is much more subtle, because anxieties and worries are not usually related to the lack of things but rather the loss of things. In essence, most affluent Christians fear they might lose the material things they have acquired. Unless they are so detached from the goods that they must be willing to lose them they won’t find real contentment. That does not necessarily mean that they have to surrender all of their material possessions. It means being willing to do so.
God’s plan for contentment
Although many Scriptures teach about the dangers of material riches, God’s Word does not teach that poverty is God’s alternative. God wants us to understand that money is a tool to use in accomplishing His plan through us. If we are to find true contentment we must establish some basic guidelines.
- Establish a reasonable standard of living. It is important to develop a lifestyle based on conviction, not circumstances. God will assign Christians at every economic level. On whatever level He has placed you, live within the economic parameters established and supplied by Him. Just having abundance is not a sign of God’s blessings. Satan can easily duplicate any worldly riches. God’s abundance is without sorrow and is for the purpose of bringing others to Christ.
- Establish a habit of giving. Along with the tithe, God desires that every Christian provide for the needs of others through the giving of offerings, gifts, and personal involvement.
- Establish priorities. Many Christians are discontented—not because they aren’t doing well but because others are doing better. Too often Christians look at what they don’t have and become dissatisfied and discontented, rather than thanking God for what they do have and being content with what He has supplied.
- Develop a thankful attitude. It is remarkable that in America we could ever think that God has failed us materially. That attitude is possible only when we allow Satan to convince us to compare ourselves to others. The primary defense against this attitude is praise to God. Satan uses lavishness and waste to create discontent and selfish ambition. Thankfulness is a state of mind, not an accumulation of assets. Until Christians can truly thank God for what they have and be willing to accept God’s provision, contentment will never be possible.
- Reject a fearful spirit. One of the most effective tools used by Satan against Christians is the question, “What if?” Dedicated Christians get trapped into hoarding because they fear the “What if?” of retirement, disability, unemployment, economic collapse, and so on. Although God wants us to be concerned about these things, when fears dictate to the point that giving to God is hindered, foolish risks are assumed, and worry seems to control every decision, contentment is impossible.
- Seek God’s will. “More than that, I count all things to be loss in view of the surpassing value of knowing Christ Jesus my Lord, for whom I have suffered the loss of all things, and count them but rubbish so that I may gain Christ” (Philippians 3:8).
- Stand up to fear. “I can do all things through Him who strengthens me” (Philippians 4:13).
- Trust God’s promise. “The peace of God, which surpasses all comprehension, will guard your hearts and your minds in Christ Jesus” (Philippians 4:7).
Contentment is so far removed from many Christians that it seems that they will never be able to find it or be at peace. However, contentment is not something that must be searched for and found. It is an attitude of the heart. Once the attitude has been modified and all has been transferred to God, contentment will be evident.
Tithing reflects a grateful heart that wants to give back to God a portion of what He has given us; in reality, what is already His. Tithing is our opportunity to show God that He is first in our lives. James 1:17 says that “every good and perfect gift is from above …,” so we have an opportunity to tangibly show God He is the “owner” of our finances by giving back to Him the first of what He gives us.
There are three reasons why we should tithe.
1. Tithing reflects our heart.
What is the most important thing to you? Jesus said in Matthew 6:21 that “where your treasure is, there your heart will be also.” We can see the reality of that in the world today and the exaltation of the financially successful, and more personally you can see that by looking at your own checkbook.
“Bring all the tithes into the storehouse, that there may be food in My house, and try Me now in this,” says the Lord of hosts, “If I will not open for you the windows of heaven and pour out for you such blessing that there will not be room enough to receive it.”
2. Tithing is biblical.
Long before tithing was a practice of the Israelite people, Cain and Abel, the second generation of the human race, brought an offering to the Lord. The Lord blessed Abel’s offering, but rejected Cain’s. Abel brought the “firstborn of his flock,” while Cain brought “some of the fruits of the soil” as an offering. God wants to be first. The following scriptures show how tithing is biblical.
Then Melchizedek king of Salem brought out bread and wine; he was the priest of God Most High. And he blessed him and said: “Blessed be Abram of God Most High, Possessor of heaven and earth; and blessed be God Most High, who has delivered your enemies into your hand.” And he gave him a tithe of all.
“And this stone which I have set as a pillar shall be God’s house, and of all that you give me I will surely give a tenth to you.”
And all the tithe of the land, whether of the seed of the land or of the fruit of the tree, is the Lord’s. It is holy to the Lord.
And it shall be, when you come into the land which the Lord your God is giving you as an inheritance, and you possess it and dwell in it, that you shall take some of the first of all the produce of the ground, which you shall bring from your land that the Lord your God is giving you, and put it in a basket and go to the place where the Lord your God chooses to make His name abide.
3. Tithing is a benefit.
God’s kingdom is built on multiplication, not division. God uses the tithe as an investment where everyone involved gets a return on the investment. Obviously, the church and the kingdom are blessed, and yet God’s nature is to also bless the giver. This principle is highlighted in the passage below.
2 Chronicles 31:4-10
Moreover he commanded the people who dwelt in Jerusalem to contribute support for the priests and the Levites, that they might devote themselves to the Law of the Lord.
As soon as the commandment was circulated, the children of Israel brought in abundance the first fruits of grain and wine, oil and honey, and of all the produce of the field; and they brought in abundantly the tithe of everything. And the children of Israel and Judah, who dwelt in the cities of Judah, brought the tithe of oxen and sheep; also the tithe of holy things which were consecrated to the Lord their God they laid in heaps.
In the third month they began laying them in heaps, and they finished in the seventh month. And when Hezekiah and the leaders came and saw the heaps, they blessed the Lord and His people Israel. Then Hezekiah questioned the priests and the Levites concerning the heaps. And Azariah the chief priest, from the house of Zadok, answered him and said, “Since the people began to bring the offerings into the house of the Lord, we have had enough to eat and have plenty left, for the Lord has blessed His people; and what is left is this great abundance.”