I know we are not the only family in the world who has carried the weight of debt. The Bible calls debt slavery and that is exactly what it is. Proverbs 22:7 says "The borrower becomes the lender's slave." Think about it. When you are in debt to a credit card company, you WILL work to pay that money back with interest. There is no getting out of it (other than the even more undesirable options of bankruptcy, default, etc). You are the company's slave. (NOTE: The use of slave here is not to diminish the horror of human trafficking...but the Bible is clear that the punishment for finding yourself in debt is severe). No one wants to be a slave. So, given our relatively successful battle against debt, I wanted to share how you can find your debt shrinking and your freedom expanding.
1. If you're not in debt, don't start now!
2. If you are in debt, read what the Bible has to say about debt and money. Whether you are a Christian or not, I assure you that you will find great wisdom in the Scripture on both topics. How does your perspective on money compare with that of the Bible?
3. Pray that God can a) help you to dilligently carry out a plan to eliminate your debt and b) can change your attitude towards money. Most of us look at money and possessions as "ours," things we have earned. The Bible corrects that mentality, helping us to see that everything belongs to God. When we start to understand we are dealing with God's money, it is much easier to be careful with it.
4. Create two spreadsheets. The first sheet is your monthly bills and savings. Ours is a seven column spreadsheet----company/bill, due date, total, interest %, balance, paid?, and expected payoff date. We have found this sheet helpful for several reasons. First, we aren't paying bills late because they are in order by date. We look at the sheet often and we know what must be paid and when. This has saved us a lot in unnecessary late fees! Second, we are able to see the interest we are paying and this is helps us know how to spend our excess money (more on this later). Third, the payoff dates give us hope. We can see how the debt will disappear if we stick to our plan and God continues to provide.
The second spreadsheet is our budget spreadsheet. This sheet is set up in such a way that we see how much we start with in each category, and has blanks to the right so we can deduct from those totals with each purchase. The budget is much more difficult to get right at first. We had to play with different amounts for a few months until we settled in on what were appropriate limits for each category. FYI, our categories are groceries, clothing, gas, dog, miscellaneous, entertainment, dinners out, health and beauty and allowance. We have actually taken this a step further in recent months, taking our budget totals and putting cash in envelopes for each category. Once the cash is gone, the spending for that category is over for the month. This eliminates the tendency to go through money on a debit card as if it is monopoly money.
5. Add up all your income for the month and add up all your expenses (bills + budget). Subtract your expenses from your income. Hopefully, you have a positive number! If your expenses exceed your income, you have two options. Using a credit card is not one of them. First, you can eliminate expenses. A data plan, cable television, excess groceries, excess gas (eliminating trips and riding your bike or walking can help), eating out, entertainment money and any other unneccessary expense can be cut to help you get into the green. Second, you may need to get a second job or a new job in order to have your income exceed expenses. I am not suggesting this part will be easy or fun. But remember---you're trading slavery now for freedom later.
6. Once you have excess income, you can start to really pay debt. If you ever read your credit card or mortgage statement, you know that paying minimum payments results in paying a lot of money for a long time. Paying minimum payments is no way to get out of debt. Go back to your bills spreadsheet. Which bill has the highest interest rate? Add your excess income to your highest interest bill. You will be shocked at how fast that bill disappears.
7. After you have paid off one debt, take your excess income PLUS the minimum payment you were paying on that bill, and add it to the payment for the highest interest bill remaining. You can see the pattern and where to take it from there. Eventually, your excess income will be high enough that you will be making $1000+ payments on smaller debts!
8. Somewhere along the line, and this will be different for each person, I would recommend putting a small percentage of money in savings. If possible, avoid every purchase made on credit besides a mortgage (and more power to you if you can pay for a house in cash!) If you have sufficient savings, you can pay for a car in cash. You avoid the interest and you will most assuredly get a better deal on a car you are paying for in cash.
9. Most importantly, honor God with your money. I don't just mean tithing, although I do think you should give a percentage of your money each month to a church, charity, someone in need, etc. Read what the Bible says about that if you need direction. However, I'm talking more about doing what is right with your money. Don't spend on things that are wrong. As you gain more, don't become greedy and selfish. Always reevaluate your attitude towards your finances. Money is not the root of all evil----the LOVE of money is the root of all evil. If you're asking God to help you get out of debt, honor Him through the process.
Hopefully, this information is helpful to someone reading out there. Alyssa and I have been extraordinarily blessed throughout this process and we want to bless others with our story and we've learned. Feel free to contact me if you want some additional resources, need advice or just want to share your story!
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