The Ten Commandments of Financial Wisdom: #1 – Avoid Debt Like the Plague

Would you voluntarily choose to be a slave? Seriously, think about it. Would you surrender to someone and allow them to imprison you? The concept seems absurd and may even be bordering on offensive, however this is what many of us are effectively doing every day.

In Proverbs 22:7 (ESV) it says:

‘The rich rules over the poor, and the borrower is the slave of the lender.’

Slavery is a demoralising, dehumanising and quite simply evil concept, not just when the Bible was written but all throughout history and where it still exists today. Therefore, the use of the term ‘slave’ in this context is used to emphasise how serious it is to avoid debt at all costs. As a society, we have sleepwalked into the idea that being in the debt is the norm and not really a big deal. Friend, I have come to wake you up and say it is a big deal.

According to the organisation Money Charity, the average total debt per UK household in October 2020 was £60,580. One of the major causes of this debt is credit cards. The problem with credit cards is that you are effectively taking money from your future self to meet your want for immediate gratification. The potential spiralling cost of a credit card is illustrated below:

Let’s assume that you have a balance on your credit card of £5,000 at an interest rate of 24% APR. You only make the minimum payment, which is the greater of 2.5% or £25. How long would this take to clear? Five years? Ten Years? The correct answer is 26 years and 2 months! That sounds like a prison sentence. This is why people are perpetually in debt. But wait there’s more. How much would you have paid in interest in this period? £12,070! So more than double the original amount borrowed has been paid in interest alone! Wake up, wake up out of your sleep!!!

We’ve just looked at the cold, hard numbers of debt, but debt has an impact on us emotionally, mentally, and even physically. Money issues are also responsible for 22% of all divorces, making it the third leading cause, according to the Institute for Divorce Financial Analysis. There are countless studies on how debt can lead to depression, anxiety, and sleepless nights. Debt steals joy. You could be doing something you enjoy and then a voice in your head reminds you that ‘You still owe!’ quickly bringing down your mood.

Is it ever OK to get into debt?

The rare occasions that it may be OK to take on some debt is when you are investing in an asset that is going to appreciate. Even in these limited cases, it needs to be approached with wisdom and a cool head. These instances include:

• A mortgage for a house
• A student loan

In the examples above you are investing in assets that will grow in value and help you build wealth in the future.

How to Avoid Getting into Debt

It really isn’t rocket science but the main ways to avoid getting into debt can be summarised below:

• Establish a budget
• Spend less than you earn
• Avoid impulse purchases
• Avoid paying for larger purchases on credit

If you are looking to make a big purchase, it’s better to save up and pay for it in cash later. If you are thinking of making a purchase on credit, you probably cannot afford it right now.

What to do if you are already in debt

If you are already in debt, do not despair as God in His grace has given us a way out. I believe that there is a spiritual and a practical element to this, which are both needed to break free of debt.

Spiritual

I believe the first step is to pray. If it was through our own mistakes or financial mismanagement that we are in debt, we should ask for forgiveness and simply just pray for God to help us. In 2 Chronicles 7:14 (ESV) it says:

‘If My people who are called by My name humble themselves and pray and seek My face and turn from their wicked ways, then I will hear from heaven and will forgive their sin and heal their land.’

We see that God has promised if we come humbly before Him and change our ways, He will come to our rescue. Further, in Galatians 5:1 it says:

‘For freedom Christ has set us free; stand firm therefore, and do not submit again to a yoke of slavery.’

If we are in Christ, then we are already free and can confidently shake off the shackles of debt. Once you understand that you are no longer spiritually bound to debt, we can move onto what we must do in the practical dimension.

Practical

A really effective way of paying off debt is the ‘Debt Snowball’ method devised by Dave Ramsey. This method focuses on paying down your smallest debt balance before moving onto larger ones. The debt snowball method is all about building momentum as you pay off debt.

It looks something like this:

Step 1: List your debts from smallest to largest regardless of interest rate.

Step 2: Make minimum payments on all your debts except the smallest.

Step 3: Pay as much as possible on your smallest debt.

Step 4: Repeat until each debt is paid in full.

There are other methods of repaying debt which focus on repaying high interest debt first, but personally I believe that the psychological ‘win’ from clearing a debt balance makes this my preference.

If you are really struggling and cannot see a way out by yourself, there are organisations that are able to provide help. Christians Against Poverty, StepChange and Citizens Advice are just a few organisations who have specialists to help you deal with your debt worries.

I hope this has been useful and that you will stay with me through the rest of this series. Just remember that you are not alone in this. God is on your side and you will overcome!

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God bless

Ten Talents