Tackling Your Debt

You’ve conquered your fears, overcome the fears and procrastination that have been holding you back and now you’re finally ready to get out of debt. Unfortunately, a change of heart doesn’t erase all the consequences or your previous behavior. Many of you will need to deal with the issues surrounding the debt you’ve accumulated. The following steps will help you systematically develop a plan for tackling the debt you already have and prevent the need for any more in the future.

Understand the reason why you have each debt.The logical first step is to figure out what got us into debt in the first place. Was it a result of sinful desires like greed, impatience or materialism? Perhaps it was involuntary, such as a medical emergency or debt left to you by a former spouse. Understanding how we got it is important because it does us very little good to get out of debt if we haven’t first dealt with the root cause. Ignoring the source is one of the shortfalls I see in many debt-elimination programs. When we fail to address the heart, one of two things will commonly happen when a person gets debt free. They will either find themselves in debt again or they’ll continue a sinful lifestyle only paying cash instead of using debt. Neither is an acceptable outcome. We’re working toward permanent life-changing solutions here and that starts with an honest assessment.
Repent of sinful behavior. As Christians, we know we’re sinful beings with rebellious tendencies. Step 1 should reveal to us if we have sinful struggles in the area of debt that we need to battle. If so, we need to repent of those sins and do whatever it takes to claim victory over them. I can’t stress enough how important an accountability relationship is in this process. Since sin likes to live in the dark, the best thing we can do is place it under a light to help make it go away. Having a partnership with someone that will keep us in check is always a good starting point.
Commit to no new debt. No matter how slow your progress may seem, if you avoid taking on new debt, even minimum payments will eventually get you debt free. This is why it’s so important to commit to avoiding future debt whenever possible. This could be very difficult in the beginning because you likely have a budget that’s strained and little cash to cover unexpected expenses when they arise, which can make debt the only path forward. Know that even if that happens, it will get easier with time and sticking to your commitment to avoid debt whenever possible is still the right decision. Trials will come, especially in the early phase. How you handle them will dictate your success.
Save for emergencies. It’s crucial for us to have some available cash if we’re going to succeed at not taking on future debt. There will always be expenses we didn’t anticipate, which means we need to have another way to cover those expenses. This is where the emergency fund comes in. Start saving any amount on a regular basis and don’t use it for anything short of an emergency. This is why it’s a good practice to separate it from your normal spending money. We will address the idea of building an emergency fund in our next lesson.
Save for future planned expenses. Once you’ve set aside enough to cover a typical emergency, take a look at the expenses you see coming in the next year or two. This is an often-overlooked step as people get laser focused on paying off their debts, but one that is extremely important at this stage. If we’re committed to taking on no new debt, but neglect to plan for bigger future expenses, what do we expect will happen when that day comes? How can we expect to avoid future debt if we lead ourselves down a path that gives us no other option? From my experience, it’s more important to follow a plan designed to fix the problem permanently than one designed to only provide temporary relief.
Pay your debts. We may not like the debts we have or the lenders associated with them, but that doesn’t remove our responsibility to pay them back. Psalm 37:21 tells us that “The wicked borrows but does not pay back”.

The idea of paying your debts often brings up the issue of bankruptcy. From my experience, a lot of people jump to the bankruptcy conclusion way too early in their fight with debt. I’ve had many people tell me they’re ready to file bankruptcy and wipe the slate clean, but when we get into the situation and look at the details, it’s really not that bad. It usually boils down to a perceived financial apocalypse due to a large amount of voluntary spending in their budget. There is absolutely no reason to consider bankruptcy if you’re still living a lifestyle that contains optional spending. The only thing bankrupt in these situations is the will of the person to fight.

While I think bankruptcy is an often-abused process in our society, some situations do actually warrant it. Those cases typically involve abusive lenders or extreme mental and emotional stress brought on by the financial strain. At some point, you may have to protect the person from the situation that’s gotten out of control.

In the Old Testament (See Deuteronomy 15), we read about the Year of Jubilee where all debts were cancelled. Bankruptcy is a similar process in our legal system that has provided relief for those who get in too deep in order to prevent a lifetime of servitude. Some people, sensing the moral obligation of their commitment to the lender, will still seek to repay their debts even after bankruptcy although this can sometimes be tricky to do from a legality standpoint.

If you find yourself in trouble paying back your debts, I strongly suggest that you communicate with your creditors right away. Most of them will be much more willing to help a person that starts the conversation early in the process than they will once you’ve fallen behind.

Conclusion

Getting out of debt isn’t going to be a simple or quick process. Just as it probably took you many years to accumulate the debt, it’s going to take a while to dig yourself back out. It all starts with that first step of figuring out what got you into debt in the first place.

The initial debt is always the hardest one to tackle because your budget is stretched the tightest at that point and you have the least amount of free cash to put toward it. However, once you get it paid off, you can start to apply that payment to the next debt and so-forth. That doesn’t even consider that while you’re working on the first loan, the others are still receiving minimum payments that move them closer to being paid off. By the time you get around to the later loans, it may only take a few months to knock them out.

I highly recommend updating a Personal Financial Statement each quarter in the early phases to lift your spirits. At times it may feel like you’re not making much ground, but it’s amazing to see how quickly your balances go down when you simply stop adding new debt to them.