Article
How to Conquer Debt Forever
Debt. Almost everybody has it, but nobody likes it. It is the cause for the breakup of many marriages and endless stress and
squabbles in families. Most people
are naïve about how much they actually owe, much less understanding the impact
that their obligations will have on future earnings.
The facts:
The average American carries a credit card balance of $5,800 on which he
or she pays 18.3% interest, making for a cash outlay of $929.70 per year in
interest charges alone – and that doesn’t include paying down the actual
debt. Instead of seeing this as a
wake-up call, many take a perverse comfort in the fact that they are not alone.
Four steps to a debt-free
life:
- Figure out what you owe.
List your obligations, recording any money
you owe to anyone for anything. List the amount, the balance due, and the
interest rate you must pay. The only debt you should exclude is your mortgage
payment, since that obligation counts as a living expense in your monthly
budget.
-
Determine what caused the
debt.
The Bible doesn’t forbid borrowing, instead it repeatedly warns about the
dangers of indebtedness – that debt
creates bondage (Prov. 22:7). There are times when you may have to
borrow money, such as when you take out a loan to buy a home, launch a
business, or fund a college education. In each case, the benefits you
receive will outweigh the costs involved and you will have a realistic plan
for repaying the loan on time.
Impulse debt – which results
when you buy things you have neither the budget nor the plan to pay for –
is the real trap. Often the purchase is made so that you feel good in a bad
situation. For example, if your marriage is in trouble, couples might try to
fix the problem by spending money on a swimming pool. Not only hasn’t the
marriage problem been solved, but is now complicated by the stress of extra
debt. Look at your list of debts and think about why you spent the money in
the first place. Resolve to stop using credit to pay for things you don’t
need or can’t afford.
-
Establish
a realistic repayment plan.
In order to repay a loan you can either increase
your income or reduce your expenses. Saving money by brown-bagging it,
wearing clothing until it wears out, doing your own home repairs, can reduce
your expenditures by a minimum
of $2.74 per day, saving $1,000 a year to pay off a loan. Pay off your
smallest obligation. By experiencing early success, you can motivate
yourself to tackle successive hurdles. Focus on paying debts with the
highest interest rates. Give yourself time. It took
you time to get into debt, it will take time to get out.
-
Be accountable to someone.
Accountability builds focus and discipline. Hold yourself accountable to
someone whose judgment and integrity you trust. Don’t turn to your spouse,
since it could get difficult if you don’t hold to your end of the deal.
Consider contacting the Consumer Credit Counseling Service (1-800-722-1976).
For a small monthly fee, the CCCS will help you develop a debt repayment
plan and negotiate with your creditors to obtain lower monthly payments and
reduced interest rates.
Ron Blue is founder and
president of Ronald Blue and Co.,
and the author of nine books, including Generous Living, Master Your Money, and
Taming the Money Monster. www.crosswalk.com
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