Summary: When you run in debt, you give to another power over your liberty. But God can help you climb out of debt.
How to CLIMB Out of Debt
Building Blocks of Financial Freedom – Part 2
We continue our series on Financial Freedom today. Last week, we talked about the importance of giving to God. We talked about how giving first to Him, and giving it regularly will bring financial freedom in your lives. Giving your money to Him is the only place where God says to test Him. He will give back more than what you can give.
Today, I want to talk about the flip-side of giving. I want to talk to you about how to get out of debt. You know, many people think about debt today. I should say they worry about debt. It is a big concern among people. This is especially true in a materialistic society like the one we live in.
I was reading in the German magazine “Stern” about a report concerning the German government and its budget. They keep talking about a huge hole that is in the budget. They show all of kinds of details about where the money is coming from and where it is going. One simple statement stuck in my mind. People like to blame the government for the way it spends its money. But have you thought why it is happening? I suggest to you that one of the reasons that the government is in debt is because its citizens are in debt. So goes the people, so goes the nation, as the saying says. The government budget and its related debt is a reflection of the people and their budgets and debt.
Many people want to blame the government for their own woes. When it comes to finances, it is important that the individual person take responsibility. That means that if you are in debt, you don’t look to the government to get you out. But what can you do about the situation you are in? We can listen to many stories about how a person got into debt, but the important question is: How do I climb out of debt?
Before I answer that question, I need to clarify what I mean by debt. A debt is not an investment. Debts are things you bought that you are no longer using for which you still do not own. Debt is owing to anyone that which you cannot righteously repay without undue hardship to yourself. In other words, you shouldn’t be paying on something you’re not using productively. If you bought a house, or a computer, or a car, and you are using it while you are repaying it, then it is an investment. When you have paid it, it becomes an asset which has value. As long as it is usable, it is an asset. But when you have it, and you don’t use it, and you have to repay it, then it is good debt. If you have bought something – something you don’t need, and you are still repaying it, then it is bad debt. If you buy something that you can’t pay back for whatever reason, that is also bad debt. Debt can be that huge television you bought on credit for €2000, when a small €200 TV would do. Webster’s dictionary defines debt as:
DEBT, n. det. [L. debitum, contracted.]
1. That which is due from one person to another, whether money, goods, or services; that which one person is bound to pay or perform to another; as the debts of a bankrupt
When you run in debt, you give to another power over your liberty.
But more than that, debt can be a lifestyle for most people. Some people go from one credit card to the other. Some people buy and buy and buy until they are overloaded with bills and repayments that they cannot reasonable repay. Some people live today with all kinds of debt. Debt is a human problem, not a divine misstep. God did not put you in debt. You put yourself in debt. Just like any other sin, you didn’t follow God’s plan and so there are difficult consequences.
Categories of Debt
There are two different categories of debt you can accumulate:
Personal debt, often called "bad debt", results from the purchase of an asset that will likely depreciate in value over time. This includes borrowing for such items as a new car, clothes, or furniture. Going into debt to finance a vacation or go out to eat are other examples of personal debt. Bad debt offers short-term pleasure in place of long-term anguish. It really is as simple as that.
Note: With personal debt, it’s important to note why you have it in the first place and to what degree it’s necessary. Financing a car because it gets you to work or school may be an acceptable form of personal debt. Purchasing a new car on a moment’s notice is not. Each situation should be weighed differently.