ALEXANDRIA, La. (BP)–Many American households are drowning in debt and see no way out of the pit that continues to grow deeper by the month. For example, 71 percent of all credit card accounts have only the minimum monthly payments being made by consumers. Typically, this means that 90 percent of the payment is interest and only 10 percent is applied to principle reduction. The problem is so profound that 75 percent of Americans are a mere three paychecks away from bankruptcy.
In 2003, American households racked up $412 billion in credit card charges, up 185 percent from the previous five years, according to Standard & Poor’s. The average balance on open credit cards in December 2005 was $4,616.90. If a household has more than one credit card, the average amount of consumer debt is in excess of $8,000.
An ever-mounting consumer debt can wreck one’s judgment, job performance and relationships. There are people, even Christians, who are so far behind they sense the enemy has cast them into a demonic bondage and there is no hope except for bankruptcy, a lottery win, a consolidation loan or cashing out the equity of a home. All of those scenarios carry problems within themselves and tend to exacerbate the debt rather than bring about genuine, life-long solutions.
For most Christian households wrestling with consumer debt, lasting solutions are very possible. After all, dissolving consumer debt is not rocket science. Follow these basic principles to exorcise the red ink:
1. Start with the right mindset. The Bible is very clear about a believer’s money and possessions. Part of discovering the splendor of God’s grace is finding that “I surrender all” means I surrender all of me and what I call mine to the Lordship of Christ. Transference of the ownership of stuff and resources has a way of revolutionizing a person’s mindset. Instead of living with an allegiance to the cultural god of the almighty dollar, life’s meaning is found in bringing pleasure to the Lord Jesus with work, relationships, purchases and money.
2. Find out what is causing the debt. Most people who are drowning in debt do not have a clear picture of what is trashing their personal finances. All they know is their outgo is exceeding their income and the causes for this dilemma is a mystery. To get a handle on what is actually happening, make an inventory of expenditures for the last 90 days. Was it purchased with cash or debt? When debt is used, future income is obligated. Consequently, there is less money for today’s purchases. Are you spending more than you are taking in on things that could be considered non-essential?
3. How much debt is there? Too often people who struggle with debt do not know how much they owe. Make a list of the balances and the interest rates for each. Rearrange them so that the smallest debt is on the top of the list. Now, ask the Lord for strength to do everything you can to dissolve the debts, starting with the smallest debt.
4. Get a plan and work the plan. There are four specific things most Christians can do to dissolve debt:
— Tithe. From a biblical perspective, the child of God begins with giving instead of receiving. Tithing to your local church is an act of faith and must be a non-negotiable. Whatever the income is from all sources and before taxes, tithe it to the local church. Obedience is the pathway to finding biblical solutions for life’s challenges.
— Cut spending. This is perhaps the most painful part because it means we have to deny ourselves and curb our natural proclivity toward gratification. But, if we are serious about conquering debt, it must be done. Christian financial advisors suggest the following: shred the credit cards, pay cash, avoid impulse purchases, mow your own lawn, discontinue memberships or subscriptions, cook at home and bring your lunch to work, avoid unnecessary travel, buy groceries right after you have eaten and not before, don’t buy junk food, only buy clothing at a consignment store or an outlet, shop your auto insurance with different carriers, and car pool.
— Increase your income. Finding ways to increase your income will do more to speed up the process of debt reduction than anything else. Is there a temporary second job you could do? If you take a second job, make sure it is true income. If a job is costing you money, it is not making you any money. Is there something you currently own that can be liquidated and applied to the debt? Can you cash out of your current vehicle and buy a less expensive one? How about a smaller home?
— Create a spending plan. Put the plan on paper. What must you spend on essentials including tithing, groceries and debt reduction amounts? What about nonessentials like cable TV/Internet service or a stereo for the car? Place everything in priority order with the most important (essential) items at the top of the page. To harness the debt, you may have to forgo the lower priority, nonessential items.
5. Record the progress. Simple, accurate records will help you see the progress you are making with spending, income and debt reduction.
6. Pray without ceasing. Make it a matter of sincere prayer for you and your family. Debt is usually what we do to ourselves with the choices we make. However, we must always remember that God loves sinners and loves to demonstrate His grace through the lives of repentant sinners.
Statisticians often find no major difference in the personal finances of American Christians and the general population. However, the failure of American Christians to trust God with prudent financial decisions does not mean that Christians don’t have an available solution. Obedience to God in the area of biblical financial stewardship can tame the demon of consumer debt and set the Christian free to be a conduit of kingdom resources for the glory of God.
John L. Yeats is director of the communications team for the Louisiana Baptist Convention and is the recording secretary for the Southern Baptist Convention.