Biblically Based Money Management Planning
Exodus from Debt Valley, Step 2
Spend less than you Earn: Seek Godly Wisdom in Financial Areas.
Proverbs 17:16 “Of what use is money in the hand of a fool since he has no desire to get Wisdom?”
The Law of Dominion
God created us to reign and rule over our possessions and desires. Most American Christians (and Christian Americans) are ruled by their possessions and desires. According to Genesis 1:26-29 believers are instructed to subdue and exercise dominion over the things of the earth: our desires, appetites, spending patterns, debt, health habits, lifestyle-all things that present a temptation or lust beyond God’s plan and purpose.
“This I say therefore, and testify in the Lord, that ye henceforth walk not as other Gentiles walk, in the vanity of their mind, having the understanding darkened, being alienated from the life of God through the ignorance that is in them, because of the blindness of their heart: Who being past feeling have given themselves over unto lasciviousness.” (Behaviors without restraint) — (Ephesians 4:17-19)
We should live a fasted life, disciplined by the Holy Spirit in every area. Instead of “How much can I spend and be satisfied?” consider “How little can I spend and be satisfied?” The apostle Paul taught us to be content in whatever state we find ourselves. It should not matter that the debtors are calling for our last dime if we are doing all in our power to satisfy our debts and live within our means. Within does not translate on the edge. Most people have the income to support and eliminate their debts; they simply lack Godly wisdom and counsel as to what to pay first. Also, most people who come for counseling have never tracked their spending patterns. A wise steward not only tracks his income, he tracks every category in which that income empties: “Every Dollar on Purpose”.
Very simply, these strategies help turn the ship into the right direction:
- Do not carry much cash; Liquid Money
- Keep detailed expense records: locate every dollar. Be selective.
- Develop a Spending Plan: Spend less from your checking account than your paycheck!
- Work with annual and monthly figures
- Set up regular and occasional accounts (one envelope for each bill)
- Evaluate progress regularly and adjust accordingly
- Track debt separately from expenses (Use Debt Triangle and Self-Consolidation)
Taking Dominion over debt will transfer to other areas of over-indulgence in our lives. Soon we recognize obsessive patterns in shopping, eating, smoking, drinking, even medicating. Obsessive-compulsive behaviors need not be limited to money matters. That spirit can take on any desire we open ourselves to as slaves.
Substitute the blanks with whatever behavior you wish to change. How little can I ______________and still be content? (spend-eat-smoke-drink-medicate—)
Minimum Requirement Trap
Our society has produced generations of Minimum Requirement mentalities. We have grown up asking, What’s the least I have to do to pass this course? What’s the least I have to know to qualify for this job? How many hours do I have to work and not be part time? What’s the least I have to do to keep my health? How little time can I spend with my mate and not get divorced? How little attention or affection can I spend with my children and still be a parent? How sinful can I be and still go to Heaven? If not checked, that attitude consumes every aspect of our lives.
Consequently, we have become a nation of consumers instead of producers. We take from others instead of producing for others, developing strong dependencies within our social structure. The tragedy of that mentality is that too soon, we begin treating ourselves with the same discourtesy. We take our income and spend more than what is really there, placing a tremendous burden on ourselves to sweat the difference. The suggestion to “Spend less from your checking account than your paycheck,” allows you to live on the very least amount available, and pay extra on one of your creditors. Also, this exercise teaches you to be selective with how you spend the remaining money. While still in debt, any excess moneys should go to eliminating finance charges. You should not try to put extra amounts in savings at this time. The creditors are taking a higher percentage of your payments in interest than you could ever make in a savings account. Keep an emergency cushion in savings, but PAY THE DEBTS!
Remember that the widow did not go around asking each creditor what their minimum payment would be.
III. Use the Excess to Eliminate Debt: Re-Set Your Affections
Proverbs 22:7 “The rich rule over the poor, and the borrower is servant to the lender.”
Proverbs 27:12 “The prudent see danger and take refuge, but the simple keep going and suffer for it.”
Law of Fidelity: Being Faithful to Your Goals
Luke 16: 10-13 exhorts us to be faithful in all things with which we have been entrusted. “He who is faithful in a very little thing is faithful also in much, and he who is dishonest and unjust in a very little thing is dishonest and unjust also in much. Therefore, if you have not been faithful in the case of deceitful riches, money, possessions, who will entrust you to the true riches? And if you have not proved faithful in that which belongs to another, who will give you your own true riches? NO servant is able to serve two masters; for either he will hate the one and love the other, or he will stand by and be devoted to the one and despise the other. You cannot serve God and riches, or anything in which you trust and on which you rely.”
As we discover excess money in our spending plan, the test comes to recognize God’s provision (miraculous flow of oil) and quickly use it to pay the debtor first. Several techniques have been proven to work.
Before deciding where to send the money first, an analysis of your debt should be done. There are actually Good and Bad categories of debt. If we take a “Snapshot” of your balance sheet or spending plan, we discover that you have Asset and Liability debts. Again, we must view things from a Christian American perspective and honestly identify trends to which we may have yielded.
|Better/ Luxury Car||Asset||Liability|
|Credit Card (Unsecured Debt)||Bad Debt||Bad Debt|
|Automobile Lease/Loan||Bad Debt||Bad Debt|
|Home Equity Loan||Good Debt||Bad Debt|
|Home Mortgage||Good Debt||Good/Bad Debt|
|Income Producing Asset||Asset||Asset|
|Mortgage on Income Producer||Good Debt||Good Debt ( if not over-leveraged)|
Debt Elimination Strategy
First, take inventory of all debt to be eliminated in Credit Cards, Department stores, Discount stores, etc; Sears, JC Penney, Wal-Mart. Target all cards separately using the highest balance as the center of the Target, and move out according to amount of debt. As one pays off, DO NOT DECREASE THE MONTHLY PAYMENT. Simply roll the eliminated card payment onto the next Target realm. Continue this process over the months until all the payment is concentrated on the largest remaining balance. One theory is to pay all the smaller balances first to give a sense of accomplishment since they will pay off more quickly. I preferred to pay the most to the card with the highest finance charge so that the creditor made as little from me as necessary.
Now that all “Sin” has been eliminated from your finances, we concentrate the previous monthly allotment for credit card debt toward Loans, Auto Loans, and Mortgage (ideally in that order). When beginning Phase II you may decide to split your excess and begin an investment parallel plan. To do this, list your investment amount as if it were a debt, but instead of paying off a debt, you are making the purchase (or accumulating funds to make a future purchase) of an income producing asset. For example, make a monthly payment to your savings for a future automobile purchase! The following charts will demonstrate a clearer picture of strategic approaches toward debt elimination. Remember, God will honor Proactive behaviors which correct destructive life-styles more than irresponsible evasion which escalates into poor witness examples.
1. Ladder Technique:
List debts from lowest balance to the highest. Apply extra funds to each regular payment until each has been eliminated.
2. Target Technique:
Eliminate all debt from the outer circle to the core without decreasing the monthly payment. The total payments eventually serve as a fire hose toward the last debt!
Celebration Strategy: As each debt pays off, the extra for that month could be used for a long-deserved reward.
Critical Condition! Unfortunately for many consumers, Credit Card Debt has a greater balance than Auto or even Mortgage balances! Due to the higher finance charges, the wisest choice is to eliminate Credit Card debt first!