Consumer debt is like a cancer. Consumer debt is like termites. They are working their pain beyond the notice of the outside world. While they eat away at the infrastructure of our bodies and homes, we often go about life unaware.
I sat with friends recently who received the news they have cancer. They were devastated. Crushed.
“How could I be dying? I feel fine. ”
They wrestled with the emotions of anger, grief, loss, and hopelessness. They wondered why none of their annual checkups had caught the problem until it was in stage 4. We prayed together. We grieved together.
I have two friends who had to go bankrupt in the past three years. Both of them were very close friends who seemed successful, healthy, and smart on the surface…and they were, but under the surface of their lives was a cancer. It had been growing for some time. The cancer of consumer debt.
Productive Debt is the type of debt used to invest in something “productive” (something that produces income) like a small business, a machine to make your work more productive, etc. This type of debt is risky, but has the potential to pay for itself and more… Consumer debt is all about Consumption. It’s that car that is worth less every year. It’s the Christmas gifts you bought last year (that you are still paying for). It’s the bills for going out to eat last month that you are still paying on. That is consumer debt. Like a cancer, it grows. If you don’t have an intentional plan to pay far, far, far more than the minimum payment, the principle will grow. The interest rate will grow. Then paying the “minimum” balance will grow. When you merely pay off the interest, but not the principle, you are in trouble. Until you attack the cancer at the core, the principle, you will not stop the spread. Therefore, if you wait until your consumer debt is in “Stage 4,” you may be spending more and more monthly to simply service the debt. That’s financial speaking for merely paying off the interest payments.
You may feel overwhelmed. It may feel more like an elephant on your chest than a cancer in your checkbook. How do you eat an elephant? One bite at a time. Begin by freeing up income. Sell stuff in the attic, the basement, etc. Have a garage sale. Take out a part time job. Get more income. Then aim the income at the credit card with the lowest balance. Make a plan to pay it off in less than a year. Take all extra income and attack with full force. Each month as you see the balance go down, celebrate and use that emotion to stay the course. Sell more unused stuff. Keep the part time job. Once that card is paid off, take all the money that was “servicing the first card” and aim it at the second. (After you cut up the first card and never use it again.) Here are some Scriptures to meditate on as you crawl toward freedom.
What Does The Bible Say About Debt?
The borrower is slave to the lender. When you are in debt to another, you enter into a slave/master relationship with your creditor. (Proverbs 22:7) You can get out, so work your way to freedom.
God wants us to lend to others. Obviously, this is difficult if you don’t have anything to lend (Deuteronomy 15:6, 28:12, Matthew 5:42). The goal is to get to the place you can give and lend to others to bless them. Your hard work now can result in blessing many in the next chapter.
We are required to pay back what we borrowed. It is easy to take this lightly, but if we borrowed it, we should pay it back (Psalm 37:21, Ecclesiastes 5:4). It may not always be possible, but as much as it depends on you, keep your commitments. Make your yes be yes, and your no be no.
One final thought on Macro economics. Just to show you how distant common sense is from common thinking. Imagine your credit card company calling you up and saying, “You are borrowing a lot of money. I don’t think you can make the payments. I’m not sure you will ever pay this off. I am thinking about charging you more monthly fees and a higher interest rate, unless…” What might this silver bullet of “unless” be? He continues, “We will work with you as long as you promise to keep borrowing more and more money with no limit, no cap, and no ceiling.” You may shake your head in disbelief. I can be a “safer” risk if I borrow indefinitely? Hmmmm? You will feel better about me as a consumer if I consume more? You will trust my judgment on overspending as long as I promise to overspend until the end of time?
You might think you are being punked. You may look around for the Candid Camera. You will be wrong. When you discover the truth, you realize that you are living in Washington D.C. Our government has overspent by trillions and trillions and trillions of dollars. The payments to simply “service our debt” are growing so exponentially that paying Social Security and other promises of the past will be impossible in a few short years according to David Walker, former comptroller of the US government. He warns that we must radically eat the elephant. Democrats and Republicans are thinking about nibbling at the debt elephants’ toe nails, but it’s not enough, not even close. The services to the vulnerable in our country are at stake because of our debt’s growing payments. So, where does that lead us? We could make some painful cuts in spending now, or we could feel some devastating cuts later. We could raise some taxes now (fairing on everyone including the 50% of Americans who pay no taxes currently) or we will see all taxes go up later. Or, we could listen to the Imaginary Fairy God-Mother who promises a painless “solution.”
Moody’s (the country’s credit card company for the sake of this analogy) suggested this week that America can be a good credit risk indefinitely if we remove our debt ceiling and promise to never stop going into debt. This is the “solution” from the credit card company huh? Common sense has truly died. Ideas have consequences. Actions have consequences. If we don’t act now in our personal credit and national credit, there is pain on the horizon.
For a free first session of Godonomics… http://www.godonomics.com/watch-session-1