Navigating Your Way Out of Debt

(A Series on Finances – Part III)

We have taken the time to address the topic of debt in the last two issues. In this article I would like to give you a broad view of how you can be debt free. You should read this article after reading the previous two articles. If you haven’t read those, please do so.

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. Impulsive buyers buy on a whim, making unplanned purchases, and usually lack self-control in buying situations. They 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 resources. This in turn leads to persistent fear and unremitting debt, and it feeds into a downward cycle of instant gratification and deepening debt. “By what a man is overcome, by this he is enslaved.” (2 Peter 2:19b).

Compulsive spending is a means by which people fill the vacuum in the heart that should be filled with a sense of personal acceptance of who they are in the Lord. 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, Colossians 3.) So a first step is to understand the nature of the problem: the emotional needs and personality traits that have given rise to compulsion.Compulsive spending is many times an addiction to credit cards. 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- debt will continue to increase until self-discipline and self-control are established and the impulsive/compulsive spending precedent is brought under control.

You should approach the issue of debt the same way you approach anything in your life. You learn, understand and practice. Learn the technique, understand those principles that make those techniques work effectively, and then practice to become proficient in the technique. When you spend the time to think and plan you place yourself in a position to be blessed. Thinking and planning are not easy, but they are essential to Godly stewardship (management). Thinking and planning are not examples of working for your salvation. They are examples of what Paul calls working out your salvation (Philippians 2:12).

Debt is daunting. Debt takes more than an economic toll; the emotional toll as one struggles with mounting debt is devastating. As stress mounts, people begin to get desperate. And desperate people do dumb things. Money elicits emotion, and when we are emotional we tend to make terrible choices. That is why I am passionate about empowering people with Godly knowledge, choices, and financial confidence. But the process needed to bring about the desired financial change is not easy. (Before you see a rainbow, you must persevere through the storm!) It is going to require you to be on your knees praying, determined, focused, motivated to reach that place of living a debt free Christian life. 

The Plan:

First, you must begin to hate debt. There is no such thing as “good debt”. If you owe someone, you are a slave to that debt. List all of your debt, small to large, and put a plan together to pay each debt on that list. Many will find that no additional revenue is available to pay towards the debt load. You will have to be open to doing the following: cut up all of your credit cards, store cards, gasoline cards, reward cards, online cards; sell collections; go from two cars to one; have a garage sale; get a second job. Short of selling your children and spouse, do whatever it takes in the short term to eliminate debt. Usually with a plan, on average, people eliminate all of their debts, except mortgage, in less than 48 months.

     Now you may ask, “What about all my rewards?” You are in no position to use your rewards! In most cases when you feel compelled to use those rewards, it sets you back further in additional debt. Also, effective debt reduction requires multiple areas of concentration,depending upon your level of debt and your desire to reduce that debt. The strategy for debt reduction will also vary depending upon the type of debt you carry, such as credit card debt vs. a home loan. A plan that is clear, strategic, measurable and realistic helps you navigate your way out of debt.

The Budget:

Budgeting effectively is the key component to getting out of debt, and a true long-term, debt-reduction solution cannot take place without solid financial management through use of a budget. There are many key areas of budgeting. An honest assessment of the current financial situation needs to be completed, a cash flow analysis done, and personal as well as family goals and budgets set up. Whether you are single or married, a plan helps you reach and accomplish goals. If you have no plan it means you are not serious about reaching your goal. The budget is the strategy that helps you reach your goals. The reason people do not want an honest evaluation of their financial situation is because they do not want to deal with or face the truth about how loose, casual, disinterested, negligent, or just uncaring they have been about their finances. The reason people do not want to sit and do a budget is because it exposes the “dirty laundry” of their financial life and they can no longer live in their fantasy land.

     Once you assess your current financial situation, if you find that you either have not made it a priority or have simply ignored it because you do not understand, you will respond in one of two ways. You will either get so infuriated with the way you have conducted yourself, get convicted, and commit to changing your behavior, or you will simply turn your back and say, I will never understand or win this battle. I pray that you fit the   former perspective. You can do this first by praying, and then finding a cash flow and/or budget spreadsheet that tracks your budgeted amount to actual expenditures on the same sheet for the month. Different spreadsheets can be found online by searching for “budget templates". You want to have a template that is comprehensive; in other words it tracks every dollar you earn and spend. There is no “miscellaneous” on this budget sheet; every expense is accounted for. You will utilize this to track any expenses you have each day no matter how small. In order to gain an accurate picture of spending patterns, the expenditures should be tracked for at least one month- assuming all bills are monthly or more frequent. The quarterly, semi-annual, and annual expenses are to be divided over 12 months and included. You do not just budget for all the big things, you budget for all expenses: past, present and future.

     When you begin to do a budget, begin with the current requirements. With zero dollar budgeting (income minus expenses = zero), you will notice either you have excess or you are short. Once you go over the itemized budget and have determined that everything is included, begin to allocate your excess to the debt and/or goals you have prioritized. If you are short, you have to determine if you can cut back on things in the budget or put in action a strategy to increase your revenues – whether it is by asking for a raise or seeking part-time employment.  

The Execution:

Change of behavior simply means every purchase pay only with cash or check. Stop using your credit cards. Try this for one month. You will find you think and plan more, much more. Plus, at the end of the month you will find you will have spent far less than normal for the “normal” things of life. (Credit card companies have statistics to show that you will “normally” spend 34% more if you use credit as compared to cash.) If you really want some excitement in your life, go on a cash only basis and carry a small note pad to write down everything you spend down to one penny. This simple exercise will help you identify and correct some of your poor spending habits.

We at Koinonia Fellowship are committed to teaching the sound counsel of the Word of God concerning finances and are available to help you “navigate” your way out of debt practically. If you are serious about your spiritual and financial well-being – because every financial problem has its root in the spiritual realm – we are here to help you. Look for more next month on how to put a plan into action!