The borrower is servant to the lender.
Back in Bible times when the Levitical laws were in place and enforced, debt was handled differently. The Year of Jubilee, which came every seventh year, ensured that if an Israelite owed a fellow Israelite money then that debt would be expunged. Loans and payments were based around this concept, and thus, every seven years, all Israelites became debt free.
Such is not the case now. Not even for Christians who seek to incorporate biblical teachings into all aspects of life. As prominent speakers and organizations such as Dave Ramsey and Christian Personal Finance have pointed out, Christians have more debt today than ever before. This debt that saddles so many not only restricts their ability to live fully but their ability to live freely in the way God intended as well.
The Bible itself does not prohibit taking on debt, but it does warn of the risks. Poverty and slavery, though perhaps not literal slavery these days, generally are among the more common consequences. Budgeting actually gets a far stronger promotion in the Bible as Jesus when speaking to His disciples warns them that those who start to build a tower but do not count the cost to see whether they can finish it look foolish when they fail. Luke 14:28-30.
Debt constricts your abilities to live the life God wants you to have. Think about the mission trip coming up in the summer. You and your whole family want to go help build the orphanage or the rehabilitation shelter, but you do not have enough funds because all of your extra money is going into paying off the debt. If you did not have that debt, you could potentially pay for your family’s whole trip.
That’s the problem with debt. When you sit down at the table and try to spend your money in a godly manner, debt sits with you and demands more than its fair share. It may even try to stronghold you into not tithing or giving. But you have to control the debt. Don’t let it control you. Even in debt, Christians must continue to serve only one master, God, rather than money. Matthew 6:24.
Life happens, and sometimes, you cannot help but gather some debt. Most people cannot afford an education without some financial aid, and unless you are one of the fortunate ones who was able to scratch together enough scholarship money to pay for your room, board, and tuition, chances are you will have some student loans. Similarly, a house is not something that most people can just pay cash for upfront. But that new wardrobe, cooking ware, and entertainment system….those are examples of debt you should avoid.
The primary distinction should be whether the purchase is an investment. Not just an investment that will help keep you from spending more money on your entertainment but an investment that will pay for itself, either by increasing your actual earning potential or by reselling it later to recoup the costs.
This means that you must analyze each item before you agree to take on debt. For student loans, consider whether this is the career you should be entering into and whether the amount of debt you incur will be such that you can pay it off with the salary you make. The news is flooded these days with tales of young people who have six figure debts to obtain degrees in leadership, social services, and preschool education. While these degrees do have their benefits, a high salary is rarely one of those, and the crushing student loans can soon send you spiraling into deeper debt.
Paying off your debts early leaves you extra money. Unless you were unfortunate enough to sign onto a contract that accelerates all interest payments upon early completion, you will save a significant portion from what you did not spend on interest.
The other advantage is that once you are debt free you can better respond to the little surprises life throws your way. Mission trips, community outreach, youth sponsorships along with the feared emergency room and car crash bills suddenly become much more feasible in your financial plans. No longer do you have to be enslaved to your creditor. After paying off your debt, you can focus on reaching other goals, whether those are spiritual, financial, relational, or something else.
In this day and age, many different resources exist to help families, both Christian and non, to get out of debt while living frugally and happily. Though the basic destination, debt free, is a goal which almost everyone can share, the way that we get there varies. Here are some of the possible ways for you to start getting out of debt right away. Use one or a combination or something else entirely, but start moving toward the debt free godly life you long for.
Ramsey famously promotes the Snowball Payment. In this system, you look at all of the debt payments you have coming in each month, pick the smallest amount, and then pay it off as soon as you can while paying the minimum on all other payments. All of your extra money goes into that payment. Once that bill is paid off in full, you add what you were paying on that small bill to paying off the next smallest bill, so you are paying both the minimum on that next smallest bill and the previous amount.
As you pay off more and more debt, you start paying more and more on each particular one, helping you to reach the goal of being debt free faster.
Television and internet all display ads for debt consolidation, but this is not a choice that you should walk into without researching the long term effects.
Consolidation of loans may lead to lower payments over the course of the bill’s life, but if you are not careful, you may end up owing more in interest than you did before. Consolidation tends to work better for saving you money when you can lock in an interest rate rather than having a variable one.
This method is certainly convenient, but use it with caution.
Prioritize and Pay Off
Other financial experts such as Catherine Alford recommend a different approach which takes into account the types of debt you have.
Prioritize the various forms of debt so that you start paying off the debt with the highest interest first. Often this means credit card debt needs to be made a priority. With interest rates ranging from 3% – 28%, you can end up paying many times over the value of something.
Consider combining this with the Snowball Method to see increased results.
Cut the Costs Where You Can
This technique may sound like a no-brainer, but stop to think about what you are actually spending. Can you slim anything else down to leave more room for your debt payments? For instance, what if you were to stop purchasing as much meat and use beans for your protein source. Though perhaps a more meager meal, cutting your family’s meat consumption in half could save you anywhere from $20 – $50 a week.
Similarly, look at your entertainment bill. Are you able to consolidate your entertainment into just the Internet? Can you cut down on your phone services? What about the cable or membership fees to places you never go? Remember that there are many free activities you can participate in around your community and in your church. Then seriously consider what you can cut away to free up more of your resources for becoming debt free.
Add An Extra $25
Sometimes our current financial situation just straps us down too tightly for us to be able to do much more than wish for it to leave. But if you can afford to just pay an extra $25 or more a month, you will start to make a difference. Check out your various creditors’ policies. Some allow that extra amount to be added toward the next payment so that if you should hit hard times, you are already ahead on your payments.
In Bankrate’s article “Save Money By Paying Off Mortgage Early,” the experts recommend making extra payments throughout the month rather than all at once. So if you save $50 on your groceries one week, you go ahead and make that payment, being sure to tag it for the principal, rather than waiting until the end of the month.