Adapted from Information from Crown Financial Ministries resources
By Glen Elliott - Pantano Christian Church
Here are some basic steps to becoming debt free.
1. Surrender to God. The first step is to transfer full ownership of your whole life to God. This is the beginning. You can’t jump over this. Because of our selfish, sinful ways, we have hijacked or stolen our lives from God. Until we surrender we are in fact saying that my money is MINE! In debt we’ve said, in effect, to God; “God, this is my money and I’ll spend it how I want and that means you won’t get the best and most generous part of me!” None of us dare to outright say that to God. But in fact when we overspend and go into debt, we are saying that God really isn’t the owner of my whole life, at least not my finances.
We believe in the STEP acronym as a picture of how to follow Jesus well. You’ll find it on pages 4 and 5 of the brand new Pathway Handbook. The E of STEP states that we recognize that God owns all of us and has Entrusted us with time, talents and treasures that we are to use for God’s purposes.
2. Put God first. That means giving the first 10% of your income to him, even while in debt. This is basic to everything. We put God first, no matter what. If you can’t get to 10% today, start working toward it. And keep growing. Jolene and I are giving 16% of our income and we intend to keep growing. Some of us are giving more than 20% of our income. The more we give, the more we see how God provides.
3. Stop all future debt. Cut up credit cards if you need to and don’t borrow. Converting consumer debt to a 2nd mortgage or home equity loan may give you a lower your interest rate and be a good decision, but it is still debt (it is not your mortgage - it just uses your house as collateral). Many use a 2nd mortgage or home equity loan and then keep adding credit card debt or other consumer debt to that! While a 1st mortgage is “good” debt (it increases in value), all other debt (vehicles, home equity loans, department stores and credit cards) is debt that does not honor God and puts us in slavery.
4. Commit to not spending more than you earn. Develop a realistic budget. Here’s a simple budget outline, but you can find more help at the Crown Financial Ministries web site - www.crown.org
First we pay our tithe (10%) and taxes which leaves your net income. Here’s a “normal” budget. However, depending on your income and life circumstances (age of kids, amount of debt, etc), the percentages may vary.
EXPENSE % OF NET INCOME
Housing 36%
Food 12%
Auto 12%
Insurance 5%
Debt retirement 5%
Entertainment & Recreation 6%
School & Child Care 5%
Savings 5%
Medical/Dental 4%
Miscellaneous 5%
Investments 5%
See the Crown Financial Ministries article called “Family Budgeting” for more information and worksheets.
5. Eliminate your debt. Develop a pay back plan with creditors. Shelley, one of our staff members was in debt $27,000. She made a commitment to pay back $604 a month for 62 months (5 years, 2 months). She’s a single mom on a very limited income! She did it and is free today.
There are several good plans so seek advice on what’s right for you. You can pay off the smallest first, and then apply that amount plus the interest expense you don’t have to pay on that credit card to pay off the next credit card. This is called the snowball effect. Or, you can total all your debt, consolidate it and pay it off each month with one payment like Shelley did. Get help!
6. Start saving. Save to avoid future debt to replace cars, appliances, pay for school, etc. If you don’t save, you will have to go into debt with items need to be replaced or unexpected expenses occur. Ideally, you should work toward having the equivalent of three months salary in savings.
7. Develop an accountability system. Share your commitment with your family, life group or whoever you can use best to help you stay the course. Tell them your plan to get out of debt and plan to limit your spending. Ask others to ask how you are doing and tell others how you are doing. To verbalize your plan to others is a powerful way to insure your success.
Oh, there is an 8th step - Celebrate! Have a wonderful celebration when you become free and clear of debt and let us know so that we can celebrate with you!
