In 2017, American consumers hit an all-time high of more than $1 trillion in credit card debt! That’s scary! Total debt, including mortgages, auto loans and student loans is also at an all-time high. Debt, while seeming to satisfy an apparent and immediate need, later denies us future financial freedom. Learn more in this week’s blog.
Thousands of years ago, a wise man wrote, “The borrower is slave to the lender.” (Proverbs 22:7) That truth seems more relevant today than ever.
The problem is that it has become so easy to get credit and go into debt—especially using credit cards. You can hardly walk into a store these days without being offered an immediate discount on your purchase if you apply for their credit card. That’s tempting, almost appearing wise. Paying by credit card has become a way of life. And credit card payments have become a fixed entry in our budgets.
You’ve no doubt heard the saying, “Necessity is the mother of invention.” Let’s apply that saying to the matter of debt. Couldn’t we also argue that need or lack is the mother of creativity?
We can often find a way to avoid debt if we’re willing to solve our need in a unique and creative way. For example, many successful bloggers and podcasters started their business on a shoestring. Instead of going out and buying the latest equipment and software, they used what they had to get started and only purchased more expensive “professional” tools when the money was there.
But we look at their success and often assume that we have to own the tools they now use in order to be as successful as they are. So we go into debt. But you can’t borrow your way to success.
The same principal applies to our personal lives. We often think that we “need” certain items. While some of these “needs” are actually “wants”, some of these items really are legitimate needs. But often the solution that we look at to meet those needs is not practical given the current situation. It is like going out and buying the expensive “professional” tools when we should be operating on a shoestring.
Just like the bloggers, we need to fit our solutions to where we are at now, not where we want to be.
Instead of just reaching for the credit card, here are some questions we need to ask before going into debt:
How crucial is this purchase—really? If we’re honest with ourselves, is this item more of a want than a need? Or, what would be the consequences if I postponed this purchase until I could save up for it?
Can I find a creative alternative instead of making this purchase? How else can I meet this need?
To what extent will incurring this debt hurt my future ability to grow? We’re tempted to think about debt only in terms of whether we can afford the monthly payments. We forget that over the length of the payoff we may be paying for that item many times more than it’s worth.
Is my spouse in full agreement with me about this purchase? If we’re married, one of the great things about a marriage is that our spouse is often wired very differently than we are. In this way, we can offer each other a more balanced view when it comes to decision-making. In large purchase decisions, agree that you need to be in harmony about the purchase. This will not only save you money, but perhaps your marriage as well.
If you’ve gotten yourself into debt—especially credit card debt, decide to free yourself from slavery to your debt as quickly as possible. One of the best ways to eliminate debt rapidly is by using a technique I call a “Debt Payoff Plan”.
With this approach, you identify funds you can apply to your debt with a budget, and then use that money to pay off your debt as fast as possible one at a time. Then you take the amount of money you were using to pay off that debt and add it to the payment on your next debt. This will accelerate that debt payoff.
The Debt Payoff Plan is an extremely effective way to pay off debt quickly. While you’re aggressively paying off debt, it’s vital that you refrain from incurring any new debt. Take the credit cards out of your wallet or purse. Then, once you’re debt-free again, either cut up your credit cards or commit to paying them off each month.
You’ll be amazed how free you feel without debt! And just imagine the things you could do if you had no debt!
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God Bless your week!