Fight the Tide: Debt

I’m indebted to Dave Ramsey for many ideas in this post. Please click here to obtain some of his great resources on personal finance.

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The second area we need to fight against the tide of our culture in is debt. Considering the average American spends $1.25 for every $1 they make, we must fight against how others around us are using their money.

While the Bible doesn’t necessarily say it’s a sin to have debt, it seems to point to it as something that will come with some consequences: Proverbs 22:7 says, “the borrower is servant to the lender.” Being a servant to a lender may come with less peace and an increased stress level, amongst other things.

So, what should we do? I’d like to offer three ideas towards financial peace – two words which Dave Ramsey says don’t go together very well (but are possible to obtain!):

1. Make a budget and use cash. You need to know where your money is going. Write down every dollar you spend each month and compare it to what’s coming in. What’s going out must be equal to or less than what’s coming in. If it’s not, you’ll have to decide what you can live without, simply put. When you pay with cash your brain actually registers that a transaction is happening. With plastic, this doesn’t happen – you don’t feel like you’re spending money and thus, statistics prove you spend much more with plastic than cash.

2. Create an Emergency Fund. Stuff just happens, right? Dave Ramsey suggests saving $1,000 in an emergency fund as the first thing you do in your financial plan. Most emergencies fall within this amount, so having this set aside will ensure that you can move forward with other financial priorities and not be stressed about a furnace repair, your child breaking your glasses, or your muffler falling off. Oh, and Christmas is not an emergency.

3. Pay off All Debt Besides Your House. Sure, one day you should work towards your house, but not at first. Dave Ramsey suggests something called “The Debt Snowball” to help you do this. My wife and I had combined student loans totaling $28,500 coming into marriage. My wife was in school our first couple years of marriage, so we didn’t get ahead much in that season, but we did learn how to live off of just my income. When she got hired as a teacher, we tithed 10% of her income, saved 10% and put 80% towards our student loans. We paid them off in two years, one month before our first child was born. As new parents, the feeling of having no debt besides our house was phenomenal. Sure, we sacrificed putting A/C in our house amongst other things at the time, but it was worth it.

This whole conversation is about deciding what’s most important and what you can live without. Driving used cars we’ve paid for in cash has allowed us to start a 529 plan for our son and give more. We’d like to remodel our bathroom, but are choosing not to until we’ve saved the cash to do it. All in all, it’s encouraged us to be more content and enjoy the things we do have rather than always looking ahead to what we’d like to have.

What’s one thing you can do starting right now to fight the tide against debt? Make a plan and act on it!

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