How to keep your head above debt

Late one night, my telephone rang. On the other end of the line a friend said, “I hate to bother you at this time of night, but I've just been counseling with a couple, and they're desperate. They are at the point of bankruptcy and just do not know what to do.”

He went on to say that this couple had Visa cards from three different banks, and each card was “maxed out.” They owed Visa a huge sum and were being charged 19 percent interest, which was compounding on them. The monthly payments on their credit cards amounted to more than their home mortgage payment!

Debt's Impact

Unfortunately, this incident wasn't particularly unusual. Where I live more and more families declare bankruptcy each week! The impact of these insolvencies spread in ever-widening circles. Not only the husband and wife, but the entire family is affected adversely for a long time. And then there are the creditors and their dependents, who get only partial payment or even must write off what is owed them.

Right now, men and women give high importance on lifestyle, earning power, and possessions. Those people who don’t have the money to live as they fantasize like borrow to acquire what they think they must have. Many people who look like they are very wealthy in reality have large debt loads that endanger to engulf them.

These unwise, unhealthy attitudes toward material goods are bringing a very subtle slavery to many people. And debt enslaves without regard to ethnic background, age, gender, marital status, or income level.

But for many families today, debt is just part of life. Often, when a couple marries, one or both are already in debt. They may have taken out large student loans that require regular payments. These student loans are not even dischargeable in bankruptcy, so they must be a part of a couple's budget for years to come. And many young people also bring to their marriage debts on cars, furniture, stereos, credit cards, and more.

By midlife, most couples have added the burdens of a home mortgage, educational expenses for their children, loans for boats or other recreational equipment, deeper credit-card debt – the list could go on and on. In the worst cases - and they are all too common - couples reach retirement age still bearing the burden of debt.

Since many families live at the maximum limit of their credit, even a minor change in their income can cause major financial problems. If both husband and wife are working and one (or worse, both) loses his or her income because of illness or loss of job, then the family financial situation deteriorates rapidly. You know the drill that follows. The family begins all kinds of desperate measures. They try bill-consolidation loans, with their high-interest rates. They borrow from relatives. They max out their credit cards. They take out second mortgages, etc.

These heavy financial burdens bring great stress on the family itself. Many simply do not survive - divorced couples often testify that money-management problems were a major factor in the dissolution of their marriages.

What About Bankruptcy?

People who are in debt can get creditors off their backs through declaring bankruptcy. This escape comes in two forms. Those declaring bankruptcy can have their debts discharged in court – not because the debtors dispute the validity of the debts, but because they declare their complete insolvency or inability to pay. Or the debtors can pay back all or a portion of the debts owed over a specified period following a schedule approved by the court.

Bankruptcies, however, have lengthy consequences - particularly when it comes to obtaining credit. For example, though one can file for bankruptcy once every seven years, many lending institutions have in their loan applications a question that asks, “Have you ever filed for bankruptcy protection?” A Yes answer to this question - regardless of how long ago you suffered the bankruptcy - will reduce your chances of having credit extended to you.

And then there's the question of whether bankruptcy is an alternative people can use. I don't think it is. We are duty-bound to pay debts we incur. You can imagine how you world feel if someone who owed you money declared bankruptcy and left you holding the bag financially.

Some with serious debt have little choice as to whether or not they will claim protection under the bankruptcy code. Their creditors' demands force' them into what the law calls involuntary bankruptcy. I believe people in this situation should try to get a reorganization-type of bankruptcy so they can repay those who trusted them with credit.

Of course, it's better never to reach the point of having to consider declaring bankruptcy. The wise man said, “The rich rule over the poor, and the borrower is servant to the lender”. In some translations, the point comes across even more strongly; they read “slave” instead of “servant.” “Let no debt remain outstanding, except the continuing debt to love one another”.

We know that debt is bad – just as most smokers know that smoking is harmful. What we need is help! Is there anything a person can do to keep his or her family from experiencing the embarrassment and stress of unmanageable debt?

There is good news: The answer is YES!

The following plan will help you to eliminate debt and bring financial freedom to your family.

Four Steps to Financial Freedom

The plan is simple. It has just four steps.

Step one

If you aren't already doing so, begin paying a faithful tithe. To benefit by God's wisdom and receive His blessing, one must be faithful in returning His holy tithe.

No person should expect God's grace while stealing things of what is really for Him. On the opposite side, God is will bless those who praise Him.

Step two

State a moratorium on superfluous debt. Stop Unessential credit spending! If you do not borrow funds, you cannot be in debt. If you do not borrow more extra funds, you cannot go into greater debt.

Step three

Make a covenant (promise or agreement) with God that from this time on, as He blesses, you will pay off your debts as quickly as possible. Set a goal when you want to be debt free. When you receive additional income, use the money to minimize debt and not to buy unimportant things.

This step is probably the most critical because when most folks receive unexpected money, they simply spend it.

If you've made a covenant with God, you will know what to do with any extra money you receive. You will apply it to your debt-reduction plan. And as the Bible makes clear, God does not want us in debt. So once you've made the covenant, you're likely to find - as many families have - that God will bless you in unexpected ways and your debt will be reduced faster than you had anticipated.

Step four

Enumerate all your debts in a list from the largest to the smallest. For many families, the home mortgage is the first one on the list and a personal debt or credit card is the last item. Pay at least the minimum monthly payment due on every single one of your debts. And pay two times or increase by any amount you can afford on your due payments on the smallest debt of the list. You will be shocked at how fast you can eradicate that debt on the bottom of the list. When you have paid off your smallest debts, append the funds you were paying on it to the basic payment on the next smallest debt on the list. As you solve your smaller, high-interest debts, you will save a large sum of money to pay off the next higher debts.

And when you reach the top of your debt list, you can begin to make additional payments on the principal of your home mortgage - thereby saving considerable interest that you would have had to pay and also reducing the length of the loan.

By following these four simple steps, many families have become debt free. You can too! If you put God first, you will receive His wisdom and blessing for managing what He has entrusted to you. And when you eliminate your debts, you will be freer to advance the cause of God on earth and to help others - thereby storing up treasures in heaven.

More Tips on Debt Reduction

Try these suggestions if you require additional advice with solving debt problems:

1. Organize a budget. Most families who have a above average income declare they do not know where it the funds are spent. You can discover by paying for all your expenses thru check for a span of three months. Then analyze your checkbook register for that time range. A lot of families are shocked when they discovered how much funds are consumed on useless items.

2. Set an objective for your family. Millions of families go thru life from paycheck to paycheck. They are not really having a joyful life; they are just getting by and just existing. Why not establish objectives for your family? Have the kids start saving every day for their upcoming expenses in college. Set aside funds for your next SUV. Set a date to pay off some debt. Establishing objectives and accomplishing them brings fulfillment.

3. Throw away your credit cards. For many, Credit cards are one of the major reasons of family indebtedness. They are not difficult to use and so difficult to settle the due payments. If you think that you are not paying off the total sum of the cards every month or that you are utilizing the cards to buy things that you normally wouldn’t have bought otherwise, then you should get rid of your cards before they devastate you and your family.

4. Buy devaluing items using cash. In most cases, families who utilize cash to buy items tend to spend less. Because when a family save up for an item, they usually make sure they get the best deal around. On other cases, you are probably going to buy items that will soon be eaten or used up when you can prolong paying for them than when you have to spend the cold, hard cash.

5. Start economy measures. Sometimes we do not notice how much we could minimize our monthly expenditures just by observing some of the small expenses. A good example is utilities. Just by adjusting your thermostat a little lower during the cold months and a little higher in summer and then switching off the lights in rooms where there are no people in it can save a large sum every single year. You can also minimize expenses by not always eating out, by having shorter and fewer long distance calls, and by shopping on sale days.

6. Have a garage sale. Most families have basements, garages, and closets with many items stored that they will never utilize again, items like tools and leftover building materials; magazine and record albums; children's clothes and toys; old books, and many more items. Why not gather all these things and start a yard sale, and send the earnings on your debt?

Society | Self-Help

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