In America, the use of debt has become a standard practice for many. Borrowing money to purchase a home or finance a business are legitimate uses of debt. However, debt can limit options especially when there is little value to show for it, as when used to purchase consumer goods.

"...the borrower is servant to the lender." (Proverbs 22:7) Debt reduces flexiblity when seeking to respond to God’s call on your life. Therefore, getting out of debt, especially credit card and other consumer debt, is a priority for those pursuing God’s call.

Commitment

Commitment is probably the most important step in the process of getting out of debt. Without a solid commitment it will be extremely difficult to change current spending habits and complete a plan to get out of debt. We are more likely to follow through with commitments that are written down on paper. Writing your intentions on paper, even posting them on the refrigerator, creates a lasting impression that will not be easily forgotten.

Acquire Accountability

Be accountable! Ask someone you can trust to assist you in holding yourself to your commitment. Probably, this person should not be your spouse! Find a mentor or a small group — someone who is not emotionally connected to your situation — who will be able to ask you the difficult questions when necessary. Allow iron to sharpen iron. (Proverbs 27:17) Your church could be a great place to start looking for this person for quality encouragement and support.

If you do not know someone personally that can help you, the National Foundation for Consumer Credit (NFCC) has local offices throughout the country where a professional credit counselor could help you through the process. Typically there is little to no charge to use these non-profit services. You can search NFCC’s website www.nfcc.org for a location near you.

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Spending Habits

Are you hooked on plastic? Take this test View a 2001 Survey on Credit Card Debt.

Create new spending habits. When struggling with debt, you can start by purchasing with cash only. That means getting rid of the credit card. Yes, cut them up and through it away! It is virtually impossible to get out of debt while continuing to add to your credit card balance.

Get a Handle

Where does all that money go? Most people with debt problems have no idea where they are spending the money. First, start a new habit of writing all purchases down on a note pad. Not only will you be able to track where your money is going, you will also think twice before purchasing that cup of coffee and newspaper at the convenience store. You should practice this for at least 60 days. You might want to continue the exercise beyond that time simply because it has become a good accountability tool for you.

Evaluate

After you have been tracking your expenditures for several weeks, you can begin to evaluate areas that you might need to reform. When reviewing your spending pattern, it would be helpful to think about the things you really need. With a little self-discipline, you might find that many of the items can easily be eliminated with virtually no sacrifice on your part. You might discover that these items are relatively inexpensive and that you bought them on a quick urge or impulse. However, after a month these small items can add up to a significant amount of money. Also, identify items that could be substituted with something less expensive. Food is a great example. Eating out regularly can be replaced with meals at home. Even when grocery shopping, you should be careful of what you buy and the price you pay.

Control Impulses

Emotions drive many of our buying decisions. By creating a habit of delay in buying patterns, we reduce the emotional impulses that drive us to buy. On any individual purchase over $100 agree to talk it over with someone. Use your spouse, if married. Get three prices and wait 14 or even 30 days. Only then, if the item is still important to you, buy the best value. Developing this habit will enable you to make good buying decisions and limit your emotional impulse purchases.

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Eliminating Debt

Good Secular Advice For a generation hooked on plastic Should I dip into my 401(k)?

So far, we have not addressed the issue of eliminating debt. Without developing healthier spending habits and having someone hold us to our commitment, it will be extremely difficult to get out of debt. Even if we find a way to get out of debt without developing new habits, we will more than likely continue to struggle financially until we do. Many rich people have died destitute because they never learned to make healthy buying decisions. Once you have control over your spending, you are ready to accelerate your debt reduction. A great book to reference is "Rapid Debt Reduction Strategies" by John Avanzini. Several strategies discussed in his book are outlined below.

Debt Rreduction Strategies

Following is an outline of several accelerated debt reduction strategies:

1. Do I really want to keep it?
2. Will I enjoy having the item more than I will enjoy using sale proceeds to pay off the debt?
3. Will the item grow in value to me in the near future?

1. Look to consolidate debt into a loan with a lower interest rate.
2. This strategy comes with a number of cautions.
3. Not very useful as a stand alone strategy — should be used with one of the other strategies.
4. Can relieve current financial stress. Be committed to get out of debt before consolidation.

1. Think about all debt as one bill
2. Apply any additional income or savings from reduced spending to loan with shortest maturity or highest interest rate.
3. When loan is paid off apply new money from this payment to the next loan of greatest priority
4. Continue this procedure until all debts are paid in full

Example:

Note:
After the 1st Payoff Period, the $250 payment on Loan 1 is added to Loan 2, while the payments on Loan 3 and Loan 4 remain the same.

In the same way, after the 2nd Payoff Period, the $750 payment on Loan 2 is added to Loan 3, and after the 3rd Payoff Period, the $850 payment on Loan 3 is added to Loan 4.

• Pay one-half of monthly payment every other week.
• Paying every 14 days will add one extra payment to a loan each year.
• This simple strategy will reduce a 30 year mortgage to 22.5 years.

• Use amortization schedule to pay next month’s principal payment with current month’s payment.
• This will eliminate the next month’s entire payment completely.
• Using this strategy for the entire life of the loan would cut the loan period in half.

• Contribute additional money to regular payments.
• Will have varying effect on overall reduction of loan period depending on amount and regularity of addition payment.
• Example: Add a $100 to each payment every month.

Resources:

Websites:
www.nfcc.org (Nat'l Foundation for Consumer Credit)
www.crown.org (Crown Ministries)

Books:
The Family Financial Workbook Larry Burkett
Debt Free Living Larry Burkett
Rapid Debt Reduction Strategies John Avanzini

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