Decreasing Debt

Dissatisfaction leads to unnecessary purchases and increasing debt. Discover God’s principles for decreasing debt and living in financial freedom.
May 19, 2024

Solomon on Debt

  • Prov. 11:15 – If someone puts up security for a stranger, he will suffer for it, but the one who hates such agreements is protected.
  • Prov. 17:18 – One without sense enters an agreement and puts up security for his friend.
  • Prov. 22:7 – The rich rule over the poor, and the borrower is a slave to the lender.
  • Prov. 22:26-27 – Don’t be one of those who enter agreements, who put up security for loans. If you have nothing with which to pay, even your bed will be taken from under you.
  • Prov. 27:13 – Take his garment, for he has put up security for a stranger; get collateral if it is for foreigners.
  • Prov. 28:25 – A greedy person stirs up conflict, but whoever trusts in the Lord will prosper.

Problems with Debt

  • Elevated Cost – Debt seeks to secure our happiness now by committing to pay more for it later.
  • Symptomatic Problem – Increasing debt indicates that there is potentially something dangerously discontent within you.
  • Interest Rates – Incurring high interest rates now means you have less money to spend in the future.
  • Minimum Payments – If a company can lock you into paying the minimum requirement, they benefit the maximum amount.
  • Depreciating Value – Most purchases depreciate, which can lead to owing more than what something is worth.
  • Relational Burden – Debt can create tension within a family and increase one’s probability of being a burden on others.

Considerations for Debt

  • Home Mortgage – It is financially unwise to have a mortgage payment of more than 25% of your take-home pay.
  • Car Loan – Since a car significantly depreciates in value, it is best to avoid a car loan if possible.
  • Student Loan – Only incur a student loan if the degree and school are necessary for an unwavering career path.
  • Credit Cards – Reconsider if you really need something that you don’t have the money for right now.

Decreasing Your Debt

  • Create an intentional and persistent plant to eliminate all debt.
  • Avoid going into further debt by fighting for contentment and creating a budget.
  • Utilize the debt snowball approach to reduce your existing debt.

Example

  • $500 medical bill – $50 payment
  • $2,500 credit card debt – $63 payment
  • $7,000 car loan – $135 payment
  • $10,000 student loan – $96 payment

 

  • If you paid the minimum, you would maintain these debts for 10 years and 10 months.
  • If you had an extra $500 each month, you could pay off all of your debt in 27 months.
  • Pay off the medical bill in 1st month.
  • Pay off credit card debt at $613 a month in 4 months.
  • Pay off the car loan at $748 a month in 10 months.
  • Pay off student loans at $844 in 12 months.
  • You would pay off $20,000 of debt in only 27 months.
  • Then, you have $844 unrestricted money every month.

Order

  • List all of your debts out.
  • Order them by amount (smallest to largest).
  • Pay the minimum on all.
  • Pay any possible extra on the smallest.
  • Once one debt is paid, apply the entire payment to the next debt in line.
  • Repeat until all debts are paid.
  • Refrain from incurring any unnecessary debt.