Finances By The Book - Discipleship Course
Chapter 2
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Key Scripture:
Keep your lives free from the love of money and be content with what you have, because God has said, ‘Never will I leave you; never will I forsake you'- Hebrews 13:5

Besides the warnings against presuming upon the future and denying God an opportunity to work, there are many other biblical principles relative to debt and borrowing.

You should calculate the long-term cost. "Suppose one of you wants to build a tower. Will he not first sit down and estimate the cost to see if he has enough money to complete it?" (Luke 14:28).

Owing money to someone often hinders your ability to love that person. "Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law" (Rom. 13:8).

You become a slave to your lender. "The rich rule over the poor, and the borrower is servant to the lender" (Prov. 22:7).

By taking on debt, you run the risk of not providing for your own. "If anyone does not provide for his relatives, and especially for his immediate family, he has denied the faith and is worse than an unbeliever" (1 Tim. 5:8).

Beware and be on guard against any form of greed. "Watch out! Be on your guard against all kinds of greed; a man’s life does not consist in the abundance of his possessions" (Luke 12:15).

Debt can be defined in many ways, but simply stated, it is money owed to anyone for anything. However, debt is not a sin. Although its use is discouraged by Scripture, it is not prohibited. Debt is often the symptom of a much deeper spiritual problem; therefore, the root problem must be dealt with first.

Four common causes of problem debt are:
1.A lack of discipline.
"He who ignores discipline comes to poverty and shame, but whoever heeds correction is honored" (Prov. 13:18).
2. A lack of contentment. "Keep your lives free from the love of money and be content with what you have" (Heb. 13:5).
3. A search for security. "His heart is secure, he will have no fear" (Ps. 112:8).
4. A search for significance. "He who pursues righteousness and love finds life, prosperity and honor" (Prov. 21:21).

Warnings Against Borrowing

Getting into debt is a lot easier than getting out. Easy credit, low payments, and advertising illusions all promote foolish financial decisions. The current marketplace wisdom says, "Raise your standard of living by buying what you want, and pay for it while you enjoy it." But compounding always works against you. The resulting debt mortgages your future and sentences you to a lower standard of living. It may even deprive your family of the necessities of life.

Debt robs you of freedom of choice because it becomes the first priority in your life. From the banker’s point of view, payments come before tithing, taxes, a college education for your children, even food on your table. In addition, debt is always paid back after tax dollars.

The five kinds of debt are (1) mortgage, (2) consumer [or installment], (3) credit card, (4) business, and (5) investment. Before going into debt in any of these areas, you should use four criteria for making your decision. It is especially important to utilize them when considering a home mortgage.

Economic. Is the after-tax return greater than the after-tax cost? For example, will the appreciation on your home be greater than the cost? And do you have a guaranteed way to repay?

Psychological. Do you have peace of mind? A home mortgage, for instance, may be a source of great stress, especially to a woman. How much stress can you handle?

Unity. You and your spouse should be in agreement concerning this important decision. The value of unity in the home is always greater than that of any loan.

Spiritual. Do you have freedom before God to take on this debt? What personal goals and values are you meeting with this debt that can’t be met in any other way?

Credit Cards

Credit is extended to you because you are supposedly credit worthy. But when you use that credit, you are in reality borrowing money. When you charge (or borrow) so much money that you cannot repay it, you are in debt. Credit cards make it possible to go deeply into debt without even realizing it. People typically get into trouble with credit card debt because they fall victim to one or more popular misconceptions about credit cards.

Misconceptions about credit cards:

You can’t live without them. Credit cards are often used for temporal and depreciating items such as entertainment. One way to avoid using a credit card unwisely is to never make an impulse purchase. Instead, wait twenty-four hours to make sure you really need the item.

Having a credit card means you are credit worthy. Credit card companies are more interested in their high interest rates and fees than in your credit worthiness. They can afford to take on some significant losses if you should not prove to be credit worthy.

You establish a credit rating by using a credit card. Credit bureaus often serve as clearing houses for personal credit histories. However, a potential lender uses several sources to check your credit rating. The best way to establish a good credit history is to pay all your bills on time and to maintain checking and savings accounts at your local bank.

All interest is equal. If you borrow $1000 at 12 percent interest with the full amount due at the end of the year, you would pay a total of $1,120. You have used the money for a whole year for only $120. However, if you pay back the loan at a monthly rate of $93.33, you will still pay back $1,120. But you will essentially be paying 12 percent on $500 for six months of the year because you have not had the use of the $1000 for a whole year. Each month your principle has been reduced, but you are still paying on the full amount of $1000. Interest charges and interest rates are often two entirely different things.

Using credit cards—which always have a high interest rate—to buy items that depreciate never makes sense. Credit cards can be used without going into debt only if you begin with a spending plan. Consider using a debit card rather than a charge card and always pay the full balance at the end of the month. Even then, it has been found that a credit card encourages the purchase of more goods and services—up to 34 percent more. To prove that you can save by using cash only, put your credit cards away for at least six months. If you already have living expense standpoint, you can develop a strategy for repaying your obligations. Once you have decided how much you can pay back each month, go directly to your creditors and show them how you plan to repay them. Be sure to pay something on each debt every month so that each creditor knows you are serious.

To buy a car, furniture, or other depreciating items using installment debt is never a wise decision, because even a low interest loan has a cost hidden somewhere. If you can't afford to save for it, you can't afford to borrow for it. If the money is available to make payments the money is also available to be saved. All you have to do is delay buying the item.

As far as a business debt is concerned, a couple in unity can prevent needless risks. Men, who are usually greater risk-takers, often overlook possible financial dangers. On the other hand, women who usually possess an uncanny intuition, can sense a hidden risk. If a deal sounds too good to be true, it probably is. Truly successful people still become well-off the old-fashioned way--they earn it. The key to financial success is to spend less than you earn and to do it for a long time. There are no shortcuts. Remember, financial (and spiritual) maturity is giving up today's desires for the future's benefits.

How to Get Out of Debt

If you are in debt, the first question to ask is, "Why am I in this situation?" Determining the reason can facilitate your getting out. The major requirement for getting out of debt is discipline. You get out debt the same way you got in -- a little at a time. The most formidable aspect is that it almost always requires a change in lifestyle and the reordering of priorities. Unfortunately, there is no easy or painless way to get out of debt. But with your family's cooperation, you can pay the price now to enjoy freedom from financial bondage later.

If you should choose not to pay off debts gradually, you do have the alternative of selling assets(a house, boat, or car) or somehow generating more income. Additional money might be raised through your spouse working (this alternative may be more expensive in the long run), by obtaining a second job, or by asking your teenagers to work. Whichever option you choose, you will experience a definite change in lifestyle, for you must give up either your time or your possessions.

The following four sites will help you get out of debt:

Step 1. Determine where you are.
Using Worksheet 2-B "Debt Schedule," determine the total amount of money you owe. List all credit card balances, installment loan balances, mortgage balances, and term note balances, along with the terms of repayment for each loan. Do not list regularly monthly expenses for utilities, school tuition, food, or clothing.

After completing the worksheet, you now have two spiritual requirements. If anything comes to mind regarding our debt for which you need to be forgiven, confess it and ask God to forgive you. "If we confess our sins, he is faithful and just and will forgive us our sins and purify us from all unrighteousness" (1 John 1:9). Be sure to thank God for forgiving you, and as an exercise of faith, give thanks to him for working on your behalf. "Be joyful always; pray continually; give thanks in all circumstances, for this is God's will for you in Christ Jesus" (1 Thess. 5: 16-18).

Step 2. Stop going into debt.
You must decide to borrow no longer for any purpose. If the temptation is too great, stay out of shopping malls and close your credit card accounts. Learn to say "No" to sales pitches, especially those on the telephone. Many companies offer free items or demonstrations (some in your own home), "with no strings attached." But look out for the hook hidden somewhere. If you don't watch such demonstration, you will never realize how much you really "need" the product.

Step 3. Develop a repayment plan.
In Chapter 1 you completed the "Living Expenses" summary and "Your Cash Flow Analysis Summary" worksheets. Now that you know your situation from a debt, cash flow, and living expenses standpoint, you can develop a strategy for repaying your obligations. Once you have decided how much you can pay back each month, go directly to your creditors and show them how you plan to repay them. Be sure to pay something on each debt every month so that each creditor knows you are serious.

Do’s of debt repayment (consider a combination for your situation)

• Do sell assets of either small or large items.

• Do use your savings accounts; do not use your emergency funds.

• Do make double payments to reduce the principal quickly.

• Do keep your payments constant. Pay off smaller debts first and keep paying the same amount on remaining debts.

• Do reduce your living expenses; 30-40 percent of every family budget can be used to repay debt.

• Do reduce your tax withholdings by determining your tax liability for the year. Decrease your withholdings to no more than that amount and use the extra take-home pay to decrease your debt.

Don’ts of debt repayment

• Don’t decrease your giving. "Honor the Lord with your wealth, with the firstfruits of all your crops; then your barns will be filled to overflowing, and your vats will brim over with new wine" (Prov. 3:9- 10).

• Don’t use tax money. "Give to Caesar what is Caesar’s, and to God what is God’s" (Matt. 22:21).

• Don’t use a debt consolidation loan unless suggested by a financial counselor.

• Don’t seek a second full-time income; extra income tends to raise the level of discontent. Most debt problems are spending, not income, problems.

• Don’t go it alone; consider counseling for both you and your spouse.

• Don’t wait for your "ship to come in" or depend on lottery tickets or bingo prizes to relieve your indebtedness. Gambling of any kind can become addictive. Rather than bailing you out, it will drag you down to total poverty. The odds are always against you, and the Lord is not honored by the lifestyle promoted by gambling.

Step 4. Establish accountability.
The principle of accountability is seen throughout Scripture. Choose a person or a couple to whom you are accountable for your financial decisions—those who are trustworthy and will confront you, if necessary. Of course, the individuals to whom you are accountable must have proven themselves capable stewards of their own finances. "For lack of guidance a nation falls, but many advisers make victory sure" (Prov. 11:14).

You are now ready to take an action step toward getting out of debt. Using the suggestions made in this lesson, fill out Worksheet 2-C, "Action Plan for Getting Out of Debt."

Much of the material in this chapter has been adapted from The Debt Squeeze by Ron Blue (Focus on the Family Publishing, Pomona, CA 1989). This volume includes many other examples and charts as well as a more complete discussion of the debt problem. In it Ron offers the expert advice of a financial counselor in lay terms in an easy-to-read format.

Further Study: Review the scriptures under "Debt, A.4. Debts in the New Testament world; B. Debts used as a symbol," NIVTSB, p. 41; also read "Debt," NIDB, p. 265.

Life Application: See the "Vulnerability of Stress Scale." Count the number of units you have accumulated this past year. How many of the factors are related to your finances? Can you see how money management touches almost every area of your life? Determine to change those things that are in your power. As far as the other things are concerned, "do not be anxious about anything, but in everything, by prayer and petition, with thanksgiving, present your requests to God" (Phil. 4:6).


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