A focus in my home for 2016 is that of getting out of debt. Now we are not drowning in the throes of piles of unpayable debts; however, things such as car payments, credit card payments, and other bills of that nature are becoming continuous “ankle-biters” we have determined need to be addressed. The reasons are numerous. First, we are tired of making “payments” into perpetuity which of course is one of the allures of credit, namely the ability to stretch out payments far into the future to accommodate a purchase in the present. Second, dealing with these bills obviously will free up funds for other things such as paying off our mortgage much earlier, saving for retirement, saving for college tuition for our daughter, or the many other wise financial preparations necessary these days.
Moving in this direction takes a conscious and concerted effort. Each purchase encounters a bit more extra scrutiny along the lines of “Do we really need that at this time and can it wait.” Impulse purchase become few and far between. Now mind you, I earn a good living and I have a very steady job so getting out of debt is not based on financial inabilities or the fear of losing income. It really is based on what I believe to be the need for holiness when it comes to matters in the financial realm. Let me explain why I made that last statement.
The statistics for credit card debt alone for the average family is truly staggering. A July 2014 article I ran across recently states the following:
– $7,087: Average household credit card debt.
– $15,191: Average balance for households that have any credit card debt.
Now remember that is the average which means there are many who are below those amounts and many who are above those amounts. Furthermore, this merely reflects average credit card debts and does not reflect car payments, student loans, mortgage loans, or any number of other commonly held consumer debt.
When it comes to car loan debt, statistics show that the average American household has a car loan debt of right around $17K. Add to that an average mortgage debt of $155K and you come up with a grand total average debt of just these three typical loans of $179K of indebtedness again for the average American household. Those with student loan debts can add another $33K to that amount and you have quickly surpassed being $200K in debt. Essentially the average American has knowingly been sold into the slavery of debt for the “pleasure” of a new car, fleeting possessions, and that American of all dreams – the joy of home ownership.
Now I am certainly not opposed to having things and I do not affirm the poverty gospel. On the other hand, I most certainly do not affirm the prosperity gospel. I affirm THE gospel which is sharing the good news of redemption, salvation, relationship which is also rooted in the need for holiness in all aspects of our life to include how we approach and use the funds God blesses us with.
In my home, we have come to a realization that indebtedness not only hampers sound financial decisions, it also hampers our ability to spread the gospel and to love God and love others. When the focus of the entirety of your money is directed at paying on debts for things that rust and destroy and where thieves could easily break in and steal, then the question has to be asked if you are really laying up treasure for more eternal matters. The answer for many, at least according to the financial numbers is a resounding NO! I am going to go out on a short limb and state I believe God is not pleased with our approach to finances, especially in a country such as the United States where people are blessed beyond measure with money, at least compared to the rest of the world.
I would like to share with you a few methods to begin digging yourself out of the miry pit of debt, at least methods that have shown to be fruitful in my home.
1. Develop a comprehensive budget and stick with it. What I mean by a comprehensive budget is something far more than chicken scratch on a paper napkin. A budget of this nature involves sitting down, identifying your income each month, your recurring bills/expenses, and then listing separately your debts. I would highly recommend developing a budget for at least the period of a year out in advance. This will allow you to visually see your income, your bills, and where you can apply extra funds towards paying off debt. There is software, often free, available to create a budget; however, sometimes creating a MS Excel spreadsheet does the trick.
2. Pay off debt. The best approach to paying off debt seems to be the “debt snowball” methodology promoted by Dave Ramsey. The way this works is you take your smallest debt, focus any extra funds on paying that debt off first while paying the minimum payment on all other debt. Once that smallest debt is paid off, you then move on to the next smallest debt, applying the funds you were paying for the previous debt along with the savings from having paid off that previous debt to this new debt. You continue to follow that procedure until all debts are paid. One thing I have learned is applying money across the board to all debts above and beyond the minimum payment takes too long and of course paying just the minimum payment will result in decades of bills and interest charges.
3. Create an immediate reserve fund. I have seen varying amounts suggested for the creation of a reserve fund. The point is to set aside some amount of money in a savings account for emergencies. This allows you to access that account for those emergencies instead of whipping out the credit card or incurring additional debt.
4. Have an honest family discussion concerning expenses. This would involve deciding what bills can be reduced and what things can be cut out as recurring expenses. For example, can you live without cable or satellite television or can you at least reduce the package you are paying for? My wife and I made the decision to cut out the cable/satellite bill completely. We went down to Wal-Mart, purchased an indoor antenna and are enjoying all the major network television channels along with some other channels that quite honestly provide a better variety of wholesome programming. Can you decrease what is covered in your cell phone plan? Can you take advantage of using coupons and eating more at home? These are just a few examples of where cost savings can be found.
5. Get out of debt not to accumulate worldly wealth, but to be able to help others. Paying off debt will inevitably result in more disposable income in your budget. You certainly should look at ways to increase contributions to your retirement plan, save for your children’s college fund, and other very wise financial approaches. However, never forget the ultimate focus is not building worldly wealth. Look for every opportunity to bless those in need, whether that is in your local church, your local community, your major metropolitan area, state, country, or places around the world. Never forget that pure and undefiled religion is noted in James 1:27 as “to visit orphans and widows in their distress, and to keep oneself unstained by the world.” Keeping yourself unstained from the world in part involves not falling into the debt trap that has stained far too many of us over the years.
I leave you with this challenge. Get out of debt! Make it a goal this year to move smartly and purposefully in that direction. If you do not live by a budget, not is the time to start. If you have no idea where your money is going, now is the time to wrap your head around such things. We are called by God to be wise stewards of that which He has provided to us. Being frivolous with your money and continuing to live under the burden of what really is a ridiculous amount of debt is not God honoring and thus does not fall under the umbrella of holy and righteous living. The time for change in this area is today so I urge you to honor God with your finances.