Counseling One Another

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Counseling One Another

Bye, Bye Debt—Hello, Freedom

Today is a glorious day for my wife and me! After 41 long months of intentional, aggressive debt reduction we are free of credit card debt for the first time in a long, long time (the weary memory is very foggy). We are so thankful to the Lord for the perseverance and encouragement He has given us and the sound, biblical counsel from others who are wiser than we have been. Though written after we began our debt reduction plan, the financial counsel given in John Temple’s small booklet, HELP! I’m Drowning in Debt, is identical to that given to me by a fellow church leader to whom I made myself accountable. By following this counsel we have begun to experience what I call “phase-one freedom” that will, Lord willing, increase in the years to come as we get more and more of our financial house in order.

John’s Story: Here’s how John begins the booklet.

Some years ago, a postgraduate student won a scholarship to fund his studies in another country. The home country was not aware of the cost of living in his new country, so the scholarship awarded was wholly inadequate. As a foreigner, his wife was unable to take a job, so the couple took in a boarder to help spread their accommodation costs. The student also took on two teaching jobs, despite putting his registration as a full-time student at risk. They lived frugally, but none of this averted the need to borrow money to survive. Eventually, the student completed his studies and returned home. Setting up a home, buying a car and feeding a wife and, by now, two children was not easy. There was no possibility of paying off the loan and, now that the studies were complete, the interest started to pile up. The only solution was to borrow more money to pay for the interest! Does this sound familiar? It is very familiar to me because I was that postgraduate student. In short, my family was drowning in debt.

Some debt may be unavoidable and even justifiable. The situation that we found ourselves in may have been such a case. The debt was incurred despite every attempt to avoid it, and we certainly kept it to a minimum. It was also incurred for a good cause—education—the outcome of which should have helped us repay it. Maybe you are in a position similar to the one I faced. If you are concerned about debt—whether because you wish to reduce your own debt, you want to learn how to avoid it, or you want to help others who are sinking in debt—this booklet is for you.

Our Story: Until this blog post the author of the booklet and I, the editor, were the only ones who knew that the following testimony in his booklet was actually written by me.

“My wife and I have been drowning in debt for many years. As the Lord has convicted me … I came to realize that one of my chief sins is self-sufficiency … By not trusting in the Lord with all my heart (Proverbs 3:5–6) during the early years of our marriage … and the first ten years at our church, which was very small and unable to pay me a full salary the first few years (I worked many outside jobs), I believe borrowing became a way that ‘I’ could solve our problem … Unfortunately, my pride led to bigger problems. Pride that says, ‘I made this mess, I can clean it up,’ or the pride that manifests itself in being silent about one’s legitimate needs. I chose the ‘drowning’ metaphor because it fits how I have felt for a long time.”

Even though this family’s debts were probably justifiable, the pastor’s confession is that he tried to tackle the solution on his own and got into deeper trouble in the process.

4 Practical Steps to Getting Out of Debt

Please don’t make the same mistake I made. Don’t allow your pride to keep you trying to dig out of deep debt alone. Get help from others. In the final chapter of John’s helpful booklet, he asks, “Having taken the above steps [determining assets, liabilities, and a family budget], how then can you get out of debt and stay out of debt?” Here’s the counsel that we applied.

  1. Stop Saving. Yes, stop saving, even for such noble causes as your children’s college education. It is futile to save and borrow at the same time. You are merely enriching the banks. Use whatever savings you do have to clear some of your debts. If not, you are borrowing at a high interest rate (say 6 percent) and saving at a lower rate (say 4 percent) and, in effect, borrowing your own money back and enriching the banks by at least 2 percent in the process!
  2. Decide Which of the Debts Listed in Your “Statement” Are Justifiable. Justifiable debts (see Chapter 1) might include the mortgage on your home, which can be seen as no debt at all because the loan is simply set off against the value of the house. In reality, you are slowly buying the house that you are renting from the bank. You own only the difference between the marketable value of the house and the mortgage, known as your “equity.”
  3. Pay off Debts Costing You the Most Interest. Assuming that you have been able to make some cash available to pay off some of your debts, first pay off those that cost you the most interest. But there is a catch. Many debt contracts specify that you cannot pay them off early; if you do, you will get no reduction in interest, or may even pay a penalty.
  4. Pay off Debts that Will Incur no Penalty. Do this as quickly as you can. What if you have no lump sum with which to repay debts? Your only hope is to work your way out of the problem as soon as you can. See my book Family Money Matters (reviewed by Tim Challies here) for a worked example.

Now that our credit card debt is obsolete our intention is to only use plastic wisely and pay off the balance each month. Our repayment attention is now turned to the next item in my cross-hairs—our auto loan—to which I hope to also say Bye, Bye very soon. Please pray for us as we strive to become more faithful stewards of God’s resources.

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  1. This is an awesome story Paul! Thanks for opening yourself up and sharing.

  2. Whoo hoo! Congratulations!

  3. Thanks, Chris. And thanks for telling me about I love it! It’s already so helpful in helping me to keep constant tabs on where we are at with our finances.

  4. Paul, thanks for sharing and thanks for your blog. I ran across it awhile back and have been very blessed by it. This is my first time commenting, but I wanted to ask a little more about the first point of advice given to stop saving and use whatever savings you have to pay down debt. I’ve been through the Crown curriculum a couple times and they advocate saving as a biblical principle and a part of wise stewardship. Scriptures like Prv 21:20, Prv 30:24, Prv 21:5, Prv 13:22 and then narratives like that of Joseph in Egypt putting away during time of plenty for the 7 years of famine etc. So their is a principle of saving along with giving etc. that all make up wise stewardship. I agree, we definitely do not want to borrow to save. That doesn’t make any sense, but it seems the goal should be to stop borrowing completely and then budget in a way that we can sacrificially give and also put away an amount to provide for and care for our families when those emergencies come up (1 Tim 5:8). Otherwise, to drown all savings to pay off debt will likely land us right back into debt and borrowing the next time something unexpected comes up….which is not our goal of course. Anyway, just some thoughts on that to consider. If you have thoughts to balance me out I’m all ears. Thanks again for your ministry. You’ve been a blessing to me!

    • Yes, these are good points, Mike. Since we have an old van it seemed that every time we started to make progress it would break down and we would go backwards. So, having at least enough in savings to cover some car repairs would have enabled us to get rid of the cc debt faster. All in all, I think John Temple is not saying we should not have any money at all in savings, but that we should not focus on saving while we are paying more in interest. He will be teaching in our church in March so I think I will ask him about this in person.

  5. Congratulations, Paul! Once you get rid of the car loan, you’re going to find it easier to start socking away an emergency fund that will make it less likely you’ll go into credit card debt again. My wife and I have only a mortgage payment at this point, after aggressive debt reduction, and we’re paying our mortgage down at 2.3x every month. What we have found is the freedom and lack of stress we feel without the debt load. We are able to give, and take advantage of situations we might not have been able to before.

    • Thanks, Jerry. Yes, the emergency fund and a replace-the-old-van fund are next on the list! Then we can begin to attack the mortgage. Thanks for your encouragement.

  6. Paul,

    What a wonderful testimony to God’s working in your life in the important area of finances. What I noticed was your obedience to the leading of the Holy Spirit 41 months ago. Three and a half years is a long time to be persistent about anything. But on the other hand, it is a small price to pay to be well on your way to financial freedom. So much ministry goes unfunded because our church people are not financially free. Where is the generosity and sacrificial giving? Your family’s example is sending a powerful message about the power of God to meet all our needs. When financial freedom becomes more common, I suspect there will be more funding for new and much needed areas of ministry in the church.

  7. We appreciate hearing the stories of Christians getting out of debt. It encourages everyone that it can be done. Our story is a bit different. We are middle age, a pastor and wife. When Art wanted to go to seminary in 1996, we sold everything we had, cashed in our savings and retirement, and went to seminary on a cash basis, graduating debt-free but with no assets. Art was offered a pulpit that gave him $1,100 a month. 14 years later, he is still receiving the same amount, although the church gave him a $50 a mo. raise this year. As you can guess, ours is a small country congregation with a small annual budget. So, how do we “make it?” Well, the answer is that we are content with what God supplies each month, and if we don’t have it, we do without. We have rented a small cabin for $385/mo for all these years, and when we needed a newer vehicle 5 years ago, we just let the need be known to 10-15 friends and prayed. Within 2 months, enough was given to us to buy a good used van that is still running well. We don’t own our own home which saves us a lot of money on maintenance. Our income is so low, that we usually don’t pay much in taxes. There have been many heart-breaks in the dysfunctional group that is our flock, but one thing that has helped alot is that we have no financial anxieties. This kind of lifestyle might not be palatable for everyone, and I must admit that it is humbling to shop at Good Will and have to depend on the Lord to supply cars, housing, food and travel, but it is also a tremendous relief of the burden of debt. If God wants us to have it, He supplies it. I always remember that Richard Wumbrand never owned a house or a car. He lived a simple life with few possessions. But Voice of the Martyrs ministry continues to have an enormous impact all over the world. Art and I have a small circle of influence, most seminary men would never even consider wasting their education and talent on such a small group, but God definitely called us here, so we just want to be found faithful in the spot that He has planted us. We feel thankful and grateful that He allows us any place at all in His fields of harvest. So this is our story. Not exactly the middle-class American dream, but it is our Kingdom-class dream. from Connie McCafferty, Montana

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