How to Get Out of Debt

Here's the debt payment program, or as I call it, gaining financial freedom.

First, I should define debt.  When I talk about debt, I'm not talking about being behind in your payments!

A debt is money you owe, regardless of any agreed payment plan.  If you owe the money to an individual, you usually won't have an account or get a statement like you would from a business.  Any account you have that has an outstanding balance is a debt.  That includes your car loan, your mortgage, and your credit cards, unless you pay them off in full every month.  Your utilities, however, are not debts because you pay those bills in full each month, and because you're paying this month for the utilities you used last month - sort of a pay-as-you-go plan - unless you don't pay on time.  Then it's a debt.

Doing what you need to do to get out of debt isn't hard at all!  But, for most people, both getting the necessary, burning desire to get out of debt and changing their minds about their finances is very difficult!

I should tell you that you can get out of debt without trusting God.  But why put yourself through the hassle when He's so willing to help?  If you choose to love Him and trust Him for your finances, He'll increase your income and decrease your wasted money (auto repairs, medical bills, etc.).  So what have you got to lose? - except your debt.

Also, in order to really prosper, you have to sell out to one god or the other.  Why not sell out to the one, true God and get all the other benefits He has for you as well?

As I may have told you, I was sleeping-in-my-car poor.  I owed lots of money to lots of people and companies.  Now I'm completely debt free including my mortgage, living in abundance, and blessed with several months' expenses in the bank and a growing retirement plan.  How did that happen?

God inspired me to put myself on a program where I:

1.  Kept track of every penny I spent, no matter how insignificant it seemed at the time.  I had a little, 2" by 3" notebook and wrote down the amount I spent and what it was for, on the spot, right at the time I spent it.  If you do this, no fair going out to the car to write it down or, worse yet, writing it down after you get home!  Don't even move to another counter!  Write it down right there, on the spot, right where you spend the money, before you get the receipt!  It may seem like a royal pain at first, but trust me, you'll grow to genuinely hate it!  :)

2.  Stopped buying all the things I didn't actually need and all the things that wouldn't fit in my budget.  And at the time, my budget was pretty small, so that was a lot of things.

3.  Borrowed no more money from anybody for any reason whatsoever.

4.  Told myself over and over and over and over again, many, many, many times each day that God is my sufficiency (2 Corinthians 3:5, 9:8) and He will take care of me (1 Peter 5:7) and cause me to prosper (3 John 2).  (See How to Address a Problem.)

5.  Developed a spreadsheet of all my debts, the interest rates, the minimum payments, how much I should put toward each one each month to pay the least in the long run, and when I would be completely out of debt.  I will make that available to you if you wish.

6.  Called up all my creditors and negotiated lower interest rates and lower payments with them.

7.  Made a lot of mistakes that I would hope to help you avoid!

You see, I realized that everything I thought I knew about finances was a bunch of crap!  And much of the advice I got was unworkable.  But God worked with me and showed me how to handle my finances.  Many years later, I saw a program for sale that taught exactly what I did except for learning to trust God.  So I guess it not only worked for me; it works for lots of people.

If you want to put yourself on this program, you'll have to decide you know nothing about finances and look forward to changing your thinking about them.  Then write down everything about your finances (including debts you don't care to remember or didn't tell your spouse about) so you can put together a specific plan.  You can put it into the spreadsheet I mentioned earlier or you can write it on paper, but you MUST be completely honest in this, if you want to succeed.  And you need to tell yourself many, many, many, many, many times each day that God is your sufficiency and that He will cause you to prosper!

What you need to write about your finances is your actual, take-home, spendable income; your monthly bills (utilities, rent, food, etc.); and your debts.  For each debt you need to write:

1.  Who you owe - name, address, phone number.

2.  How much you owe - the outstanding balance.

3.  The interest rate and the minimum finance charge, if there is one.

4.  How the minimum payment is calculated.  For example, credit cards often require 3% of the outstanding balance or $20, whichever is greater, plus any amount over your credit limit, plus late fees and other charges.

5.  The payment due date.

Once you have that information in front of you, develop a plan where you:

1.  Pay all your bills on time.  Take responsibility!  Never allow yourself to incur a late fee!  If you do, it's your own fault!  You either overspent, didn't plan well, or didn't carry out your plan.  (Hint:  Learn to live on less than you earn!)

2.  Determine in advance the total amount you're going to pay toward your debts each month and then never pay less than that until your debts are all paid!

3.  Pay the minimum payment on every debt except one.  See #4.

4.  Pay the rest of your total debt payment (that you determined in #2) on the debt that has the highest interest rate.  If you can pay that one off, do so!  Then pay the rest of your total debt payment on the debt with the next highest interest rate.

5.  Set aside a little bit each month until you have two months' expenses saved.  You can add to that (and even start a retirement fund) after you're out of debt.

The spreadsheet I developed will tell you how much to pay on each debt each month.  And it will tell you when you'll be completely debt free.

That's the basics of how to get out of debt.  If you have questions, feel free to ask.

And remember, God is your sufficiency!  He will cause you to prosper!  Tell yourself that many, many, many, many, many times each day!

God bless you!

Read How to Address a Problem.

Have questions?  E-mail the author.

By Jeffrey Moore, Southern California