Dealing with Symptoms or Cause

Scriptures: Prov 22:1; Eccl 5: 4-5; Ps 37:21

Should you consolidate your debt?  How is this better than just paying one debt off at a time?  Are there any other ways of getting out of debt? 

The biggest challenge with getting out of debt is properly dealing with the cause of the debt and not just the symptoms.  It’s like the old story about the man who has a headache and is told to take aspirin, yet what he really needed to do was to get eyeglasses. 

When trying to get to the root cause of a problem, there is a technique known as: asking why five times.  The process is simple, ask why to each reason you give for being in debt.

Let’s give it try! 

1.    Why are you in debt? It’s because I use my charge card a lot and I only pay the minimum balance. 

2.    Why do you use your charge card a lot? It’s because I don’t carry cash or my check book around with me. 

3.    Why don’t you use your check book for purchases?  It’s because I usually don’t have enough money in the account to cover what I want to buy and I don’t always know how much I have because I don’t always balance my account.

4.    Why are you buying something that you can’t immediately pay for?  Sometimes it’s because it’s an emergency and sometimes it’s because I just want it now because it’s on sale.

5.    Why is it so important to have that one thing now rather than waiting?  I guess it’s because I am impatient and maybe a little selfish.

As you can see, asking why five times can get down to some interesting issues that if you are honest with yourself and I mean really honest with yourself, you will most likely discover an attitude problem that needs to be addressed before you start fixing your overall debt problem.

1 Chronicles 29:11 states that God owns everything!  Well, if He owns everything, then what do you own?  Actually nothing, you are only offered the opportunity to use it for a while. You bring nothing into the world and you leave with nothing. Therefore, everything you have is loaned to us to use.  This is why you are called a steward.

My favorite analogy is to say that a steward is like a pet sitter.  You don’t own the pet, yet you care for it while its owner is away.  You care for it as if it was your own because you love your neighbor enough to do so.  So it is with what the Lord has blessed us to care for.  Therefore, we must be certain that our attitude is that of a steward.

Once we get our attitude aligned, we can set about straightening out our finances.  To use a car analogy, you wouldn’t keep buying front tires for your car without checking your front-end alignment.  But with a properly aligned front-end, it’s then perfectly logical to replace your tires.

So, what can our five whys example tells us about what needs to be fixed? 

Here are a few options for paying off the credit cards.

·         Start by writing down all of your debt, recording information such as:

o   Creditor’s name, remaining balance, minimum payment, interest rate.

·         Then consider these options:

o   Use the Debt Snowball method. 

§  Typically this starts off with paying off the highest interest rate credit card first and then, once it is paid off, you apply that payment to the next highest interest rate credit card until it is paid off and so on. This also means paying more than the minimum amount due, otherwise you will be paying off that debt for years.  Note that federal law now requires credit card companies to print on your bill how long it will take to pay off the balance with just the minimum payment.  The main objective here is to eliminate the debt that costs you the most in interest payments. 

§  Alternatively, you can start with the lowest balance credit card and pay it off first.  The idea here is to have some quick wins in the debt battle – these quick wins really help your attitude and will build excitement about doing it again.  The rest of the process is the same; apply the payment you were paying to the first credit card to the next credit card and so on. 

§  Clearly, a combination of both can be employed as well. 

o   Consolidate all of your credit card balances onto a 0% interest rate credit card.  Then pay off that credit card within the first year, since the 0% interest rates typically only last for only one year.  (I am not sure if these still exist any longer but you might get lucky and find one)

o   If you have a 401K, investigate if you can take a loan from it to pay off your debt.  Depending on the plan, you may only have to pay 6% interest versus the typical 18% interest rate of the credit cards and you are paying the interest to yourself instead of a bank.  Look out though – Many plans require you to pay off the remaining loan balance if you were to loose or change your job.  Therefore, be very certain about your job’s security.

o   At one point in time, you could also consider getting a home equity loan.  But as we know today, this is also very risky.  Most of us today have little or no equity in our homes and some are upside down in our mortgages.  I do not advocate this option since it literally places the roof over your head at a greater risk than it needs to be. 

And here are just a few things beyond paying off the credit cards.

·         Put $1000 into savings to cover emergencies.

·         Balance your checkbook every month and always keep the ledger up to date.

·         Use your budget. Don’t just create it and then let it gather dust.

·         Demonstrate restraint by using the 30-Day Rule. If after 30 days you still want that something, then plan on buying it with cash.  If after 30 days you discover it really wasn’t worth it, then you are probably better off. 

But what about those companies that help you get out of debt?

Many of these companies work with the creditors to write-off part of your debt such that you are no longer obligated to pay all or some of your balance.  In some ways this is similar to declaring bankruptcy, but to a much lesser extent. (Yes I know that there are different chapters to bankruptcy and not all involve abdicated from debt, but I will leave this topic for another time)  Before you go down this road, though, do consider Ecclesiastes 5:4-5 and Psalm 37:21.  

Also, tax laws are being considered that would define debt that is written off as income and therefore you would be responsible for paying income taxes on this amount. 

In my opinion, it is better to deal with the pain of getting out of debt thru sacrifice; You will be a much better person for it.  Consider James 1:2-5.

To Give or Not to Give – Tax is the Question!

Scriptures: Rom 13:1-7;  1Chron 29:11-13

Does your faith or the IRS determine your charitable giving?   If the charitable deduction changed next year: Would you give more, less, or the same?  What drives your charitable giving? 

These are tough questions because they will reveal something about you that you may not want to be revealed. And the fact of the matter is that we love to pay fewer taxes, but is this the only reason to give to a charitable organization? 

Why am I asking about this?  Well, the Congressional Budget Office (CBO) published in May 2011 their report for Options for Changing the Tax Treatment of Charitable Giving, where they outline several ways of changing the tax subsidy the US government provides to the taxpayer that makes charitable donations. 

Therefore, if the US government is thinking about this, I feel we should be too. After all, what is our motivation for giving to the church or any charitable organization?  How much is our giving determined by our faith and how much by the tax law?

First, I want to make a distinction in terms – The tithe is what is given to the church and a gift is offered to other charitable organizations; but as far as the government is concerned, they are all gifts/donations to a charitable organization.

Most of us probably don’t think of the government as subsidizing charities, but that is exactly what is happening when the government gives you tax relief for having donated funds or property.  For example, it is believed that if you give to churches, the government can say that this will lower crime rates and therefore lower law enforcement costs, which is of interest to the government.  And so it is, the government is interested in supporting charities, especially when it is in their benefit to do so. 

But why do you give to charities? Is it because the bible says you should tithe? Is it because you have a charitable heart and love to help others?  Is it because you want to lower your tax burden?  Maybe it’s all or none of these. 

When you ponder the Scripture, 1 Chronicles 29:11, it states that God owns everything!  And if He has blessed you with more than you need, is it not in God’s Will that you provide for the needs that others have?  Maybe it’s supporting the food bank or giving to the benevolence fund or simply donating my gently used clothing to the local thrift shop.  Whatever it is, shouldn’t you be considering those who are less fortunate than you are and seeking ways to help them?  If you are doing these things then the IRS says you deserve some tax relief. 

It’s in Romans 13 that we read about government and God’s role in creating it.  And so, while many of us would say disparaging things about our government officials these days, they were placed there by God and whether they are aware of it or not, involved in His Will; which is why we need to always pray for our elected officials.

But should tax relief be the only reason for our giving to the church or charities?  Is a tax deduction the only thing that determines how much we give?  Are we not investing into the welfare of our family/community but also into God’s Kingdom?

I guess I will close with one last question: Have you built your budget to allow for giving to charities? If not, please prayerfully consider doing so.