Breaking Out of the Debt Trap
We live in a society of instant gratification. Buy now, and pay later. This causes enormous problems, not only in our culture but also in our individual families and lives. For the first time in history, personal and consumer debt totals over 100% of Canadian incomes. An article in the Globe and Mail’s Report on Business earlier this year said, “Canadians can't spend fast enough. Our debts are at record levels and show no signs of slowing. How did things get so wild?”
Welcome to the culture of ever-expanding consumer debt, where low-interest credit-card applications arrive weekly, pre-approved lines of credit are offered unbidden, and a barrage of advertisements tell us what we just can't do without and why bother waiting anyway when you can have it now. Did you know the number of credit cards in circulation has doubled in twenty years? Credit card companies now allow limits that are two and a half times what a person can conceivably repay. Half of Canadians carry a credit card balance from month to month. That’s why today I want us to look at how to break out of the debt trap.
Why is debt a trap? It’s a trap because debt enslaves you. When you go into debt, you lose your freedom. Proverbs 22:7 says, “The borrower is servant to the lender.” Any time you take a loan or some credit, you in a sense become a servant to those people. You become mentally enslaved to them. You may wake up at night worrying about how you are going to keep up with your bill payments. You become physically enslaved to them. You end up working longer and longer hours to meet your obligations. And you become legally enslaved to them, ultimately responsible in the eyes of the law to make your payments. It becomes a trap that many people never get out of.
Every week, it seems like we’re bombarded with credit applications. At Eatons, you can get a credit card at the cash register in twelve seconds or less. You open your mail, and there’s an application for preferred, pre-approved credit. If you believe what they write in those letters, you think, “Wow! I’m preferred! I’m prestigious! I’m in the select few!” They mention everything in those letters except for one word – debt. Because what they’re offering you isn’t financial freedom or customized spending services. What they’re really offering you is a word that they’ll never use. They’re offering you debt.
Not all debt is wrong, but for many people debt has become a trap. Today I want to give you some warning signs that you’re either in debt already, or you’re headed for trouble. More importantly, I want to give you some biblical steps that you can take to get out of debt if you are. What are some signs that you’re headed for the debt trap?
1. YOU’RE LIVING ON CREDIT
The first danger sign that you’re headed for the debt trap is if you’re living on credit. How do you know if you’re doing this? Easy: if your credit card bills are going up. People who live on credit start to use their credit cards for cash advances. They use their savings to maintain their lifestyle. They find that they are living on the overdraft on their accounts, or that they bounce checks from time to time. They only make minimum payments on their credit. They often don’t keep and record their credit card slips, and they’re frequently surprised when the credit card bill comes. They use their Visa to pay their MasterCard. They’re using credit cards to maintain their lifestyle.
The Bible says in Romans 13:8, “Pay all your debts.” God doesn’t want you to live on credit. God has promised to provide for all your needs. When you start to live on credit, you’re making two mistakes. You’re saying that you’re not content with what you have. The other mistake you’re making is that you think you can pay it off later. Proverbs 27:1 says, “Don’t brag about tomorrow, since you don’t know what the day will bring.” You are headed for the debt trap if you find yourself living on credit.
Some people are living off credit because they’re waiting for that big break. They think that they’re going to win the lottery, or that Ed McMahon is going to show up at their door. Proverbs 13:11 says, “Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows.”
One major problem with living on credit: the interest will kill you. If you have $5,000 on a credit card and only make the minimum payments, it will take you 28 years and over $12,000 to pay down that credit card. Of course the banks want you to live on credit. You can’t afford to get in that kind of a trap.
2. YOU MAKE IMPULSE PURCHASES
McDonald’s has made millions of dollars with six simple words: “Would you like fries with that?” Stores are designed to get you to make impulse purchases. If you find yourself caving in and buying things on impulse, you’re likely headed for the debt trap.
Proverbs 21:17 says, “Those who love pleasure become poor; wine and luxury are not the way to riches.” Substitute your weakness there for “wine and luxury.” For me it’s books and gadgets. I once worked for a bookstore, but I hardly ever took my pay home with me. I spent it all on books. To me, Proverbs would say, “Darryl, books and gadgets are not the way to riches.” Whatever your weakness is, if you give in and make impulse purchases, you are on your way to the debt trap.
Jesus said in Luke 12:15, “Beware! Don’t be greedy for what you don’t have. Real life is not measured by how much we own.” The real problem when we make impulse purchases isn’t the purchase itself. The real problem is that we expect to get happiness from what we purchase. Most impulse purchasing is based on emotion and results in the purchase of poor-quality, over-priced merchandise. Impulse purchasing is based on greed rather than need. That’s the real problem with impulse purchases.
By the way: studies show that people spend 23% in stores when they buy using a credit card. When you don’t have to pay the money up front, you’re likely to buy 23% more than if you had paid cash. When you make impulse purchases, you are headed for the debt trap.
One more sign that you’re headed for the debt trap:
3. YOU CAN’T AFFORD TO GIVE TO GOD OR TO SAVE
If you’re not giving God the first and best part of your income, and if you’re not saving, then you’re spending too much. You’re robbing God. In Malachi 3, God says:
Should people cheat God? Yet you have cheated me! But you ask, “What do you mean? When did we ever cheat you?” You have cheated me of the tithes and offerings due to me. (Malachi 3:8)
If you’re not giving to God, you’re using God’s money to pay your bills. And God takes that very seriously. How can we expect God to take care of our finances when we’re stealing from him?
One of the richest people of the 1900s was John D. Rockefeller. He was fabulously, incredibly wealthy. His personal wealth peaked at a billion dollars when a dollar meant way more than it does now. Someone asked him one time, “How did you amass such wealth?” He said, “Simple. Save ten percent. Give ten percent. Live on the rest.” That’s called living on a margin. If you can’t save ten percent and you can’t give ten percent, you’re spending too much money. You need to reduce your lifestyle. You’re living above your means, because you can’t do what God tells you to do. You’re headed for the debt trap if you’re not saving and if you’re not giving to God.
Now, you may have realized today that you’re in the debt trap. You may have seen some of the warning signs that tell you that you’re headed for the debt trap. But I didn’t come to just give you the bad news today. The Bible has a lot to say about how to break out of the debt trap. Next week we’re going to look at how God provides to meet all of your needs. God is bigger than any of your financial problems. He can help you if you follow his principles. What steps can I take to break out of the debt trap?
1. START THE PROCESS TODAY
Not next week, not next month. Start the process today. It always starts with a commitment. Psalm 37:21 says, “The wicked borrow and never repay.” God says that if you borrow and don’t repay – you’re being wicked. It’s not an option. So you’ve got to start the process of getting out of debt today.
It’s not going to be easy. It’s always easier to get into debt than it is to get out of debt, just like it’s easier to gain weight than to lose weight. It takes discipline and perseverance. But it starts today. Don’t bother waiting until tomorrow. Start the process today.
You may be thinking, “What’s wrong with declaring bankruptcy? That will give me a clean start!” Bankruptcy is not an option for the believer. Bankruptcy is a bandage solution to a much deeper problem. Once again, the Bible says, “The wicked borrow and never repay.” Romans 13:8 says, “Pay all your debts.” It’s wrong to make other people pay for your own mistakes. So personal bankruptcy isn’t a good option for a follower of Jesus.
The first step that you can take is to sit down and say, “Beginning today, I will add no new debt to what I already owe.” That’s going to be a huge step right there. You may decide that you have to stop using credit cards. Some people have found that they’ve had to put all their credit cards on a cookie sheet and bake them in the oven. Others are a little less dramatic and simply cut them in half. I’ve heard of someone putting them in a Tupperware bowl of water and sticking them in the freezer. That way you can at least get them back. Is that too much? Jesus said, “And if your hand—even if it is your stronger hand—causes you to sin, cut it off and throw it away” (Matthew 5:30). Jesus wasn’t talking about mutilation. Jesus was talking about taking drastic action to deal with a drastic situation. Sometimes you have to go cold turkey.
Some of you may need to cut back, but you don’t need to go cold turkey. You’re making your monthly payments, and financial planners define the debt that you have as good debt. In other words, In that case, your cost to borrow is less than the economic benefit received, and you have a guaranteed way of repayment. You may need to put limits on your debt. You may need to set your own credit limit. I know of one couple that phones their bank and says, “How dare you raise my credit limit! Lower it back down. I don’t want that much available credit.” You need to set your own credit limit. Whatever step you need to take, start taking that step today.
What’s the flip side of starting today? When you stop adding new debt, you can make the decision that starting today, you will enjoy all that God has given you. A Jewish tradition says, “At the judgment seat, God will ask you to account for all the allowable pleasures that you did not indulge in.” The Bible says, “True religion with contentment is great wealth…if we have enough food and clothing, let us be content” (1 Timothy 6:6-8). Start enjoying what God has already given you. When you enjoy what you already have, you can start the process of getting out of debt.
2. SET ASIDE MONEY FOR GOD AND YOURSELF FIRST
Getting out of debt doesn’t start with repaying all your debts first. Getting out of debt begins with setting your financial priorities in order. And number one has to be putting God in his rightful place in your financial priorities.
Many people say, “I can’t afford to give God first place in my finances.” What you’re really saying is that you don’t trust God to provide if you put him first. Deuteronomy 14:23 says, “The purpose of tithing is to teach you always to put God first in your lives” (Living Bible). Next week we’re going to look at God’s promises to meet your needs. But those promises are based on a premise. And that premise is that you are putting God first in your finances.
What about saving? Is that reasonable when you’re in debt? The amount that you are going to be able to save may vary, depending on your financial situation, but Proverbs 13:11 says, “He who gathers money little by little makes it grow” (NIV). It’s okay to start with a little. If you spend less than you make, over an extended period of time, that money will grow and become a significant amount. Set money aside for your savings.
I mentioned the 10-10-80 principle earlier. Give God 10%; save 10%; live off the other 80%. If you start this at age 40, and you make $30,000 a year, then by the time you retire you will have given $75,000 to God’s work, and you will have saved a quarter of a million dollars. If you started when you were 20, then you would have given $135,000 to God’s work, and ended up saving well over a million dollars. This really does work. Start putting money aside for God beginning today. Put him first in your finances. Then start putting money away for your savings. Begin today.
3. SHARE A REPAYMENT PLAN WITH YOUR CREDITORS
The third step is often the hardest one to take – and yet it’s often the most rewarding. Share a repayment plan with your creditors. Proverbs 21:5 says, “Good planning and hard work lead to prosperity.” Sharing a plan tells your creditors that you intend to repay them. Creditors are usually very interested in working with you if they sense that you want to develop a plan.
What should your plan include? It should probably include some steps that you are taking to sell some of what you have to repay them. In 2 Kings 4:7, Elisha told a poor woman, “Now sell the olive oil and pay your debts.” Sometimes you can sell off assets to help pay down your debts.
You can also share your situation with them and ask them for some leeway. Many creditors are willing to waive all or part of the interest if you work out a repayment plan with them. Matthew 18:23-27 gives an example of someone who owed money and appealed to his creditor:
For this reason, the Kingdom of Heaven can be compared to a king who decided to bring his accounts up to date with servants who had borrowed money from him. In the process, one of his debtors was brought in who owed him millions of dollars. He couldn’t pay, so the king ordered that he, his wife, his children, and everything he had be sold to pay the debt. But the man fell down before the king and begged him, ‘Oh, sir, be patient with me, and I will pay it all.’ Then the king was filled with pity for him, and he released him and forgave his debt.
Just be honest. Tell them you’re a follower of Jesus Christ, and you’re committed to repaying everything you owe. Tell them what you can afford. If it’s only $5 a month, then tell them that. Ask them to give you a break on the interest, because if they don’t you’ll never be able to repay them. But tell them you’re committed to meeting your obligations, and ask them to work with you toward that goal. Proverbs 16:7 says, “When the ways of people please the LORD, he makes even their enemies live at peace with them.”
One place in Toronto that help you do this is the Credit Counseling Service of Toronto. It’s a not-for-profit, charitable organization that offers a free consultation. They help plan and administer a repayment schedule, and in some cases they arrange for your creditors to reduce the monthly payments and the interest to help you repay faster. Is this the smart thing to do? Jesus said in Matthew 5:25-26, “Come to terms quickly with your enemy before it is too late and you are dragged into court, handed over to an officer, and thrown in jail. I assure you that you won’t be free again until you have paid the last penny.”
One of the smartest moves you can make is to get help from a financial counselor. It can be the Credit Counseling Service. It can be somebody who does this for a living. But you need to take this step. You need to set up a repayment plan with your creditors. Psalm 37:21 says, “The wicked borrow and never repay.” Romans 13:8 says, “Pay all your debts.” Share a repayment plan with your creditors.
One more step to breaking free from the debt trap:
4. STICK WITH IT!
The hardest part about being in debt is feeling that it’s hopeless. You feel that your little efforts to get out of debt are wasted. It seems like it takes forever to get out of debt. Don’t feel that way! If you start slowly, and stick with it, time will be on your side in getting out of debt.
When the Temple in Jerusalem was destroyed, a new one was built in its place. The trouble is that the new Temple was nowhere as nice as the old Temple. But God said to the people in Zechariah 4:10, “Do not despise these small beginnings.” You need to hear that. Don’t despise small beginnings. A small start can make all the difference in the world.
Galatians 6:9 says, “So don’t get tired of doing what is good. Don’t get discouraged and give up, for we will reap a harvest of blessing at the appropriate time.” Don’t give up. Make a start today, and commit yourself to sticking with it, and you will get out of the debt trap.
How does it start? It starts with committing to God’s principles for your finances. Don’t buy into the lie that finances aren’t a spiritual topic. God has given you everything that you have, and if you commit to living out God’s principles in your financial life, you will be living a financial life that pleases God. You need to make God the Chief Financial Officer of your life.
One more note: there is one debt that you will never be able to repay. What is this debt? It’s the debt of sin. The Bible says that your sins – all the things that you’ve done wrong – have created a debt that you literally cannot repay. The Bible compares this to a debt that we could not repay. But somebody has offered to repay it on your behalf. 2 Corinthians 8:9 says, “You are familiar with the generosity of our Master, Jesus Christ. Rich as he was, he gave it all away for us—in one stroke he became poor and we became rich” (The Message).
How did he do this? The Bible says that there is a penalty for sin – death. Jesus Christ assumed that debt, and he paid it in full 2,000 years ago. Jesus Christ came to earth, stretched out His arms on the cross and paid for your debt that you will never, ever be able to pay. So you get to go Scott free!
What a deal! Colossians 2:14 says, “He canceled the record that contained the charges against us. He took it and destroyed it by nailing it to Christ’s cross.” The debts caused by your sins can be totally obliterated by the cross of Jesus Christ.
You need to get your finances in order. But before you do that, you’ve got to resolve this spiritual debt issue. If you’ve never accepted God’s forgiveness and grace and turned your life over to Christ, you need to do it before you leave this room this morning.
Prayer:
Would you pray this: “Jesus Christ, I accept your free gift of forgiveness to pay for my sins. It’s almost too good to be true that you would love me that much, that you would die on the cross for me and wipe out a debt that I had no hope of repaying. I accept that gift today, and pledge to follow you as long as I live. Thank you, Lord!”
Now why don’t you talk to God about your finances? Why don’t you pray this prayer: “Dear God, I’m discouraged about my finances. But I do believe that what is impossible with men is possible with God. Today, I want to give you my financial mess. I want to do it your way. I am willing to do, Father, whatever you your Word tell me to do to get out of this debt trap. I ask for your help, in Jesus’ name. Amen.”