The True Costs Of Debt
It is important to look at how responsible we are with managing the finances we use when giving
. There are times when we give to others (or to ourselves) to an extent that it puts us in extreme debt.
It's one of the biggest concerns for many Americans. We believe in buying now and paying later, but it's not in our best interest.
What does debt cost?
Debt costs more than most of us realize. It damages relationships. In about 83% of divorces today, problems with debt and finances are partly to blame.
We also lose control of our lives. More than 1 million people file bankruptcy each year. However, the Bible disapproves of bankruptcies. Psalm 37:21 says, "The wicked borrows and does not pay back, but the righteous is gracious and gives." (NIV)
It's possible that managing debt can help cut down on both divorces and bankruptcies, as well as reduce stress for everyone.
Let's look at some numbers. If a borrower has a credit card with a balance of $5,560 and an 18% interest rate, it costs $1,000 a year just to maintain that card. Over 40 years, that adds up to $40,000. If the borrower had invested that $40,000 in the stock market and averaged 12% growth each year, that money would have grown to $767,000.
Even more surprising, the lender made over $4 million from the borrower's interest in those 40 years. There are lots of things that we think we want when we see them, but after looking at it from this perspective, is it really worth it?
Debt defined in Scripture
The Bible encourages us to be debt free. Romans 13:8 says, "Let no debt remain outstanding." (NIV) It looks at debt as a form of slavery. Proverbs 22:7 reads, "Just as the rich rule the poor, so the borrower is servant to the lender." (NIV)
When we're in debt, we no longert have the freedom to decide how we spend our money. We work to pay someone else, and the money is gone before we bring it home. The Bible encourages us in 1 Corinthians 7:23, "You were bought at a price; do not become slaves of men." (NIV)
Debt denies opportunities
Since most of our money is going to pay bills, we lose out on being able to afford things we need at the moment. As emergencies arise, we get deeper and deeper in debt because we have no cash available to cover those emergencies.
Debt denies opportunities for God. He blesses us with jobs so that we can take care of ourselves and God's Kingdom. But if we live from check to check, how can we do anything to help anyone who may be in need?
Getting started
Paying debts is not something to put off. We need to act responsibly. Proverbs 3:28 reminds us, "Do not say to your neighbor, 'Come back later I'll give it tomorrow' - when you now have it with you." (NIV)
The best way to work in paying off debts is to first establish a budget. Once you know what you have coming in and what needs to go out, you can then create a repayment plan. Make a list of all of your debts. Put them in order according to balances due, listing the smallest balances first.
Decide how much you can afford to pay on each debt, and pay that same amount every month. When the first debt on the list is paid off, that money does not become free cash. Move the money you were paying on that bill to the next bill on the list. The amount you pay towards debts each month should not change until they are all paid off.
Let's take the first step toward becoming debt-free. Create a budget and a debt payoff plan. Determine how much you can comfortably afford to allocate toward paying off all debts and stay consistent all the way to the end.
by: Ozeme J Bonnette
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