Financial Freedom Series: Debt – What is Debt?

Welcome to part 4 of our Financial Freedom Series, where we’re looking into God’s Blueprint for Building Wealth and Managing Your Money Well!

We dive into biblical principles and cutting-edge money management wisdom to help you…

• Honor God with your money
• Build wealth
• Shrink your debt
• And build toward financial freedom

“The rich rules over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7)

“But remember the Lord your God, for it is he who gives you the ability to produce wealth.” (Deuteronomy 8:18)

“Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.” (Proverbs 21:5)

“I will guide you along the best pathway for your life. I will advise you and watch over you.” (Psalm 32:8)

So many people are…

• Battling to make ends meet, 
• Living above their means,
• Cash-strapped,
• Debt-ridden,
• Just trying to survive,
• Going through the motions, and
• Disillusioned with life.

Over the next few weeks, we are going to focus on DEBT. 

We are going to look at…

• What is debt? We’ll also be exposing the consequences that it has on you. 
• Why do so many get into debt?
• How to get out of debt? We will give you solutions for facing your debt, being accountable, and shrinking your debt.
• A debt attack strategy that works.
• A practical way you can avoid the debt trap.
• How you can break the debt cycle and become financially free.

Debt…

• Enslaves,
• Steals cash flow,
• Causes tension and unnecessary pressure,
• Stops many from attaining financial freedom.

Debt is a huge problem for many and causes much PAIN, STRESS, and BONDAGE.

• Are you in debt?
• Do you feel like you are being strangled by debt?          
• Is your debt spiraling out of control?               
• Would you like to be debt-free?     

If you answered YES to any of these questions, this series will benefit you. 

Many have experienced the negative impact of debt at some point during their working lives. I want to shed some light on debt and give you a few practical ideas and tips on how to avoid debt and, secondly, how to become debt-free. 

“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” – Ogden Nash

Debt is often brought on by poor discipline and bad spending habits.

What is Debt? 

The dictionary defines debt as “something (typically, money) that is owed or that one is bound to pay.” 

If you borrow money, go into an overdraft, or buy goods on a store or credit card, you are in debt until you pay back what you owe, together with any interest due on the money you have ‘borrowed’. 

Debt can be a huge bondage and can lead to stress, strained family relationships, and much heartache.

“The rich rules over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7)

“When you get in debt, you become a slave.” – Andrew Jackson.

In a nutshell…

DEBT is all money that you have borrowed (plus interest due) that you owe and need to repay. This includes credit cards, store cards, personal loans, bank overdrafts, motor car loans, money borrowed from friends and family, and home loans. Therefore, debt is something you are bound to pay. It puts you in bondage to the person or institution you owe. 

Some debts are unavoidable, like buying a home, but watch out for those small debts, which can build up quickly and seriously mess up your cash flow.

“Owe nothing to anyone—except love.” (Romans 13:8)

Good Debt vs Bad Debt

There are basically two types of debt:

• ‘Good debt’ 
• ‘Bad debt’

‘Good debt’ allows you to buy items that appreciate (increase in value) over time or could provide you with an additional source of income, like a property. 

‘Bad debt’ only buys you items that depreciate (lose value) over time, like a toaster, a TV, a fridge, microwave ovens, clothing, or a car. 

These items need to be bought for cash, or if bought on credit, they should be paid for at a faster rate than they depreciate. It doesn’t make sense to ‘pay off’ a TV over 5 years when its ‘life expectancy’ is only 2 years. 

A new car is also generally viewed as a ‘bad debt.’ When you buy a brand-new car and drive it off the showroom floor, it immediately loses 20% of its value. 

Statistics also show that many are even getting deeper into debt by buying things that have no value attached to them. Some get into debt by spending money on entertainment and takeaways. This is an extremely bad debt as it has no asset value, but it still leads to a debt having to be repaid.  

“Never spend your money before you have it.” – Thomas Jefferson 

Don’t wrack up bad debt. Think twice before you charge it to your credit card.

A Word of Caution

Be careful! Even so-called ‘good debts’ can be bad if you live above your means. 

You need to earn more than you spend. Or put another way, you need to spend less than you earn. Your INs need to be more than your OUTs.

I would also suggest that you make provision for potential future interest rate increases. You may be able to afford your debt repayments currently, but if interest rates rise in the future, will you be able to afford them? It is vital that you build margin into your budget.

Although we all know that we should have a budget (or financial plan) in place to manage our finances, the reality is that many people don’t have a plan in place. 

I would suggest that you:

• Put a budget in place
• Be disciplined with your money management
• Don’t buy unnecessary things on credit  
• Keep a record of your spending

Debt puts you in bondage, and the short-term satisfaction of buying something on credit may leave you broke, debt-ridden, and stressed out over the longer term.

Before you buy items you cannot afford, ask yourself—IS IT WORTH IT?

When it comes to debt, be smart. If you are seriously planning to get out of debt and stay out, you need to plan how to use your finances wisely.

And it all begins with your budget…. your financial plan to success.  

There can be no doubt that debt, or rather unchecked debt, can be a major problem for most people.

But is it?

Is it really the problem, or is it the symptom of overspending and under-saving? The way to get out of debt is to change your habits. Get rid of the bad habits and introduce new effective habits. 

“The wise are cautious and avoid danger; fools plunge ahead with reckless confidence.” (Proverbs 14:16)

Do Not Underestimate Your Debt

Many people vastly underestimate how much they owe.

NerdWallet conducted a survey comparing credit card debt totals reported by lenders with estimates from consumers of what they owed. 

Guess what they found? 

There was a huge discrepancy between what people stated they owed on their debt compared to the actual debt they owed. 

Some of the discrepancy may have stemmed from people being too embarrassed about how much money they owed. Unfortunately, many bury their heads in the sand and pretend that they do not have a debt problem. Acting this way will not make your debt go away. This approach will only make your bad situation even worse.

I suggest that you do some homework: Review your debts. Get a full list of what you owe, the interest rate, and the term of your loan or debt repayment. You will need this when we help you design a Debt Attack Strategy in a few weeks. 

Be Honorable

I want to ask you to be a person of honor and to pay your debts. So many borrow money, and they don’t repay their debts.

“The wicked borrow and do not repay, but the righteous give generously.” (Psalm 37:21)

“Do not withhold good from those to whom it is due, when it is in your power to act.” (Proverbs 3:27)

The Unpayable Debt

We all owed a debt we could not repay. It is called sin! 

“For the wages of sin is death, but the gift of God is eternal life in Christ Jesus our Lord.” (Romand 6:23)

Sin puts us in bondage, but I have GOOD NEWS for you. Jesus Christ came and paid the full price of our debt so that we could be free. He paid the debt of sin with His life when He shed His blood on the cross so we could go free. 

Today, you can take God’s gift.

It costs you nothing, but it cost Jesus everything.

God offers you a new start, free from the debt of sin.

“For God so loved the world (THAT IS YOU) that he gave his one and only Son (JESUS), that whoever believes (TRUSTS AND PUTS THEIR FAITH IN HIM) in him shall not perish (IN HELL) but have eternal life (WITH GOD).” (John 3:16)

We were cut off from God due to our sins, but Jesus paid the full price on the cross so that we could be set free and reconnected to God. God loves you so much that He made a way for you to become part of his family. He wants to share forever with you.

If you want to start or restart your walk with God, click here to pray a simple prayer we have set up for you.

Cast Your Cares on God

Give God your burdens. Give him your life. Give him your debts. Give him your sins.

Trust God. He will see you through!

“The Lord is good, a refuge in times of trouble. He cares for those who trust in him.” (Nahum 1:7)

If you want to get your life right with God and be set free from the debt of sin, why not surrender your life and your sins to God? You can start or restart your walk with God as His beloved child. What are you waiting for?

PRAYER: Father, I give you my life along with my debts, burdens, and failures. Lord Jesus, I ask you to be my Savior. Be the central part of my life. Today, I put my life in your hands. Lord, please help me to manage my money well and to live a life that pleases you. I ask you to please pour your favor on my life. In Jesus’ name. Amen.

If you have prayed this prayer, please let us know. We would love to pray for you and send you an incredible eBook to help you on your journey with God.

Debt causes so much pain and stress, but with God at your side, you can shrink your debts. It is time to declare war on your debt. You can break the debt cycle! You can build towards a more fruitful financial future by managing your money better.

Next week, we will continue our discussion of Financial Freedom and look at a few practical ways to avoid the debt trap. In the weeks to come, we will also give you a strategy to help you break the debt cycle and build towards financial freedom.