Sunday, July 10, 2011

Should Christians Be in Debt

Did you ever wonder why a negative item has to stay on your credit report for 7 years? No one was able to give an answer other than what is stated in the Fair Credit Reporting Act (FCRA). I always wondered what the answer was myself but was never satisfied just knowing that someone decided to use the magic number 7. Upon research I found out why creditors, banks and other companies you do business with keep an item on your credit report for 7 years.

Deuteronomy 15:1

[The Year for Canceling Debts] At the end of every seven years you must cancel debts.

Negative items on your credit report are the result of not paying a debt. The recession had a long-lasting effect on Americans. Many Americans still have not changed their spending habits. Many people are allowing fear to cause them to make hasty decisions. Don’t let fear cause you to make a decision you will regret in the future. If something sounds too good to be true or requires you to pay money to receive a service that usually is free - don’t pay for it. You can’t have faith and be fearful.
Isaiah 41:13

For I am the Lord, your God, who takes hold of your right hand and says to you, Do not fear; I will help you.

If you owe debt you should pay it off. It will maintain your relationship with your creditors, stop harassing creditor calls, increase your credit score and reduce stress. It will also help you to align yourself with God. You can’t focus on the things of God when you are stressed out about your finances and being in debt. To pay back debt and stay out of debt you have to change the way you think about money. Money is a tool that can either be used to generate debt or to generate wealth. Taken from the bible:

Proverbs 13:22

A good man leaveth an inheritance to his children's children, and the wealth of the sinner is paid up for the just.

Think outside the box and think of creative and unique ways for getting out of debt. Thinking out the box will require great commitment, determination and sacrifice. One way to think about the box to get out of debt and stay out of debt is the follow the Voluntary Simplicity movement which states that you don’t buy anything new other than basic necessities such as food and clothing. Shelter is a basic necessity but doesn’t mean you should buy a home you really can’t afford or a home that has more rooms than you will use. It means examining every aspect of your life to determine what is most important and eliminating everything else.

Many entrepreneurs started their businesses by living below their means or spending less than they earned. They understood the importance of sacrifice which allowed them achieve their goals. Here are 8 ways to get out of debt.

1. Tithe. Once you align yourself financially with God by tithing, you will find it easier to get out of debt and plan for retirement as referenced in Malachi 3:8.

2. Pay in full. Pay the balance in full each month prior to the due date or as soon as you receive the bill which helps to avoid paying finance charges.

3. Pay more than once. You can send in payments multiple times a month. You can pay half of the bill balance with 1st paycheck of the month then pay the remaining balance with 2nd paycheck of the month. Pay weekly instead of monthly. Pay the minimum monthly payment the first week after you get the bill, and then each week pay as much as you can toward the monthly balance and repeat every month. You can also pay as much as you can when you get the bill, and then pay more towards the bill when you get extra money.

4. Avoid late fees. Pay your bills on time. If you are unable to make a payment, contact the creditor right away to setup a payment plan or make other arrangements. Contact your local post office to find out how long it takes your payment to arrive by mail.

5. Negotiate. Contact the company to negotiate a lower interest rate, get fees waived or change terms if your account is in good standing.

6. Pay more than minimum. If pay the minimum monthly payment you will end up paying 2 to 3 times the cost of the item you purchased due to finance charges that accrue on the balance. Send more than the minimum monthly payment each month. If your finance charges are less than your minimum monthly payment your balance will go down faster.

7. Spend less than you earn. Buy needs vs. wants, control your spending, don't buy in excess or more than you need, keep debt (excluding mortgage or rent) at 15% or less of your total monthly income (after taxes). Reduce expenses by bringing your lunch to work, taking public transportation, shopping at wholesale stores and downsizing. Delay buying the things you want until you have the money to purchase them.

8. Pay with cash. Use credit cards for emergencies only. Use cash to pay for purchases.

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