Handling Debt ... Before It Manhandles You!

You've heard me during my radio show, workshops, articles, speaking and coaching consider how God commands us to give generously, while telling us to be very wary when it comes to borrowing (i.e. debt) to finance our lifestyles. The only time God implores us explicitly to test Him is found in Malachi 3:10, when He tells the prophet, “Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this," says the LORD Almighty, "and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it“. We are created to be givers because of what it helps us become (like Christ), and avoid borrowing because of what it does to us: become self-centered, worrisome, and enslaved to the world (Proverbs 22:7). 

While I understand (and agree with) the reasoning to borrow wisely for certain major expenditures (a reasonable home), we Americans have taken it to an entirely monumental level.  In the past decade we have all seen historic borrowing levels, resulting in record personal bankruptcies year over year.  The only relief was in 2006 when we saw a dip due to the massive number of bankruptcy filings to beat the deadline prior to the law change the end of 2005; now they're again on the rise.  Simultaneously, foreclosures have skyrocketed at a time when it’s never been easier to buy a home. Simply put, we’ve made it so easy to finance any part of our lives that we’ve done exactly that … and most likely mortgaged our future while doing it unless we change now! So how do we begin to get a handle on our money?

Your first step must be taken with assertiveness and a sense of urgency: Stop Borrowing to Fund Your Lifestyle. I know that may sound ludicrous, especially at a time when you can’t go a day without seeing a low interest credit card or automobile financing offer. Or, you may choose to put off your payments while you “take advantage” of the unbelievable “no payments until the end of next year” offer. Perhaps you don’t realize that less than 25% of us actually pay off the purchase in time, and the rest get saddled with the entire accrued interest for something they may have wished they hadn’t even purchased.  Perhaps it simply doesn't register that you always get better deals when you buy with cash, as compared to purchasing with credit. And, that by making the minimum monthly payment, you extend the time to pay off the average credit card to almost 20 years. Bottom line: we all want to live an abundant life and it’s impossible to do that if you continue to borrow to fund it. 

Start with stopping your use of credit, today!  This means taking action today:

• Sell your auto(s) if you can't pay them off in 24 months or less.  Also, never lease another vehicle in your lifetime!  It's tatamount to renting a car.  Make sure your next vehicle purchase is for ... cash!
• Never finance another thing on a credit card.  That's right, no furniture, vacation, timeshare, school books, groceries, etc.
• Never use a "same as cash" deal again.
• Don't purchase a home if you can't put at least 20% down to avoid PMI (Private Mortgage Insurance) or a "piggyback" loan (the 2nd mortgage carries and higher interest rate).  If you don't have 20%, purchase a smaller home or ... save a little longer!
• Don't borrow to go to school.  Save longer.  Pay as you go (work you way through).  Find a cheaper school.  Land a scholarship.  The options are many, if you decide that debt isn't one of them.
• Don't use payday loans or advances.   You'll crank up a steamroller you won't be able to slow down.
• Don't get a Tax Refund Anticipation loan.   Nowadays, you can file electronically and receive your refund in two weeks or less.  Why pay someone a processing fee and high interest to get your money 10 days earlier?

The second step is to establish a basic Emergency Fund: $500 - 1000 maintained in a savings account so you can get away from those credit cards for good. “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has. (Proverbs 21:20).” We need a choice, other than a credit card or line of credit, to take care of life’s hiccups. This money is for emergencies, not that weekend getaway or Christmas.  Emergencies are things such as a major car repair, large medical expense or sudden job loss. How do you save $1000 when you’re barely making ends meet? Answer: it’s usually a combination of things. Reduce your expenses, get on a spending plan, learn how to tell the difference in Wants and Needs, and increase your income. Creative ways to raise some cash could be a yard sale, selling clothing you haven’t worn in a year or eating that food this month that’s been sitting untouched in your pantry or freezer (my wife and I regularly save over $300 each time by doing exactly that!). Make the minimum payments on your debts until you have the $1000 in the bank.

You can do this my friends!  The question is will you?  I'm pulling for you.