2 TIPS FOR GETTING OUT OF DEBT
Years ago, Dawna and I got caught up in borrowing money. Not only did we listen to voices that encouraged us to borrow for investment and tax reasons, but we made choices that accumulated large amounts of debt.
One morning in prayer, the Lord asked us, “How much bondage are you willing to live with?” I asked Him, “Lord, what do you mean?”
He pointed out to us in Scripture how borrowing money wasn’t a sin, but it was a form of bondage (see Proverbs 22:7).
Dawna’s and my answer to His question was “zero.” We didn’t want any obstacles, financial or otherwise, to hinder our growth. We set ourselves to paying off our mountain of debt. It took longer than we anticipated, but we did emerge victorious.
Today we are pleased to be debt-free, and to own our vehicles and house. It’s a wonderful feeling to not owe anything to anyone. This victory can be yours as well; it just takes time.
If your debts are swelling and you’re not sure how to overcome them, here are 2 useful tips:
Tip #1: Build an emergency fund.
Debt reduction is important, but building an emergency fund is just as critical. Without one, your home is vulnerable to sudden financial upsets. Debt will threaten to repeat itself over and over unless you have cash set aside for emergencies.
Typically, I ask my clients to save 20% of their monthly income. If your savings start out smaller, that’s okay. Just be faithful to build and protect your nest egg.
Tip #2: Pay off your smaller debts first to build momentum.
Dawna and I tried this when we were navigating our liabilities, and it worked out very well. We call this the Momentum Effect:
Make a list of all your debts. They don’t have to be in any particular order. Just record each one as they come to mind.
Arrange your debts from smallest to largest. (For example: put the $358 doctor’s bill first, followed by the $1556 credit card bill, then the $12,867 car loan.)
Focus all your debt-paying energy on item #1 (your smallest expense).
Pay off item #1 and then move on to your 2nd debt. Add in the monthly payment you were making on item #1. (Eliminated debts free up minimum payments each month, so apply this “extra” money to your larger bills.) Continue this process until all debts are paid.
Realize this is a long-term strategy. Allow yourself to be okay with the process. In most cases, debt takes years to pay off. It took Dawna and I about 10 highly disciplined years to become debt-free. Don’t feel discouraged if your journey is taking time. You can and will conquer this mountain.
Here’s a prophetic exercise you can work through this week:
Take a piece of paper. Crumple it into a ball. Then wrap another piece of paper around it. Crumple it up as well. Do this until you have a ball made up of the same number of papers as the debts you owe. Throw away the ball as an act of faith. Declare, “I am throwing away my debt, and I am trusting You, Lord, to help me build my wealth. Thank You, Jesus, that debt doesn’t scare You. Thanks for working in my life to set me free.”