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Steps to debt freedom

GAINESVILLE, Ga. (BP)–The current world economy is squeezing American families with mounting financial pressures. The subprime disaster, declining home values, escalating foreclosures and inflationary costs of consumer goods — especially gasoline and groceries — place great strains on families.

The importance of being debt-free seems to have been grabbing everyone’s attention. It’s a wake-up call causing many Christians who may have been ignoring God’s financial principles to want to get back on track with Him. So, let’s look at some steps to help you do just that.

1. First, have a written plan — it’s an absolute necessity for anyone in debt — because a written plan (sometimes called a budget) places expenditures in their order of importance. That’s crucial because you must establish a point of reference between needs, wants and desires.

— Needs are purchases necessary to provide basics, such as food, clothing, a job, home, medical coverage, and so on. “If we have food and clothing, we will be content with these” (1 Timothy 6:8).

— Wants are decisions involving the quality of goods: designer clothes or lesser, steak vs. hamburger, a new car vs. a used car. A biblical reference point to help determine wants in a Christian’s life is: “Your beauty should not consist of outward things [like] elaborate hairstyles and the wearing of gold ornaments or fine clothes; instead, [it should consist of] the hidden person of the heart with the imperishable quality of a gentle and quiet spirit, which is very valuable in God’s eyes.” (1 Peter 3:3-4).

— Desires are choices that can be made from surplus funds left only after other obligations have been met. “Do not love the world or the things that belong to the world. If anyone loves the world, love for the Father is not in him. Because everything that belongs to the world — the lust of the flesh, — the lust of the eyes, and the pride in one’s lifestyle — is not from the Father, but is from the world” (1 John 2:15-16).

2. Determine what’s essential for living. Christians in debt must stop all expenditures not essential for living (see Proverbs 21:17). Cultivate an attitude of conservatism and eliminate expenditures that are not essential. Christians in debt-bondage must stop paying for frivolities.

A few years ago almost all home labor was done by family members — not professionals who charge for it. By developing and utilizing some home skills you can cut down on non-essential expenditures. And, whether in debt or not, it actually might be fun and certainly will help stabilize the family life.

3. Think before you buy. A Christian, whether in debt or not, should think before every purchase (see Proverbs 24:3). Is it a need, a want or a desire? For example, you can’t continue to subscribe to magazines or belong to book, CD, or movie clubs while you owe others. Don’t buy something that devaluates quickly or requires costly upkeep, such as swimming pools, boats, sports cars and so forth. Also, be sure the purchase reflects your Christian values and ethics.

4. Discontinue all credit purchases. Christians in debt should begin to buy on a cash-only basis. Credit cards are convenient, but they can also provide one of the biggest debt traps. Some people actually sell their homes in order to use the equity to pay off credit card debt. That may be a possible solution. However, unless they have worked out a plan to discontinue the use of those troublemaking cards, they’ll probably fall right back into the same trap of credit card debt again — and this time without a home.

5. Avoid all forms of leverage when in debt. Leverage is the ability to control a large asset with a relatively small amount of invested capital. Current housing foreclosures are an obvious signal that engaging in leveraging can become a catastrophic practice.

Borrowing money to invest can be disastrous, because if no profit is made and you can’t make the payments, the investment is lost and you’ll still owe the lender.

The current economic climate illustrates that — for an individual or a multi-billion dollar financial institution — leveraging is a form of gambling that has left a lot of folks holding an empty bag.

6. Finally, practice saving money on a regular basis, even if you’re in debt. You may only be able to put away $5 a month, but develop a discipline of saving.

This does not mean you should store up a large amount of money while failing to pay your creditors. But, one of the best habits you can develop is to save something — even a small amount — on a regular basis.

Everyone is capable of saving some money, but many fail to do so because they think that the small amounts they can save are meaningless. Others believe that God frowns on a Christian saving anything.

Neither of these reasons is scriptural, because: “Precious treasure and oil are in the dwelling of the wise, but a foolish man consumes them” (Proverbs 21:20).

To get out of debt, start putting these steps into practice and you’ll be in for a pleasant surprise, because you’ll be following God’s principles for becoming debt free.
Howard Dayton is co-founder of Crown Financial Ministries and the current host of Crown’s radio program, “Money Matters.” Dayton and the late Larry Burkett joined forces in 2000 when Crown Ministries, led by Dayton, merged with Christian Financial Concepts, led by Burkett. The new organization became Crown Financial Ministries, on the web at www.crown.org.

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  • Howard Dayton