Have you ever been in debt? I guess at one point in our lives, most people, if not all, have been into debt in one form or another. But I’m talking about bad debts. I must confess that due to bad decisions that I made earlier in life, I, too, was a victim of bad debts. Being in debt is never easy and I’d like to share some ideas how I try to overcome it.

But first, why do people get into debt?

Here is one reason why people get into debt:

Income – Expenses = Savings

Most people derive their expenses from this formula. From their income, they take out their monthly expenses, bills and all, and whatever is left, that will be allocated to savings. The problem with this formula is that most, if not all the time, nothing is left. Clearly, this is a lack of Financial Planning on their part. So when they don’t have enough savings left, then that’s the time they will start borrowing money to pay for a necessity or want.

What are bad debts? Bad debts are simply debts that make your life miserable. How?

There are many ways how bad debts can make your life miserable. Maybe I just experienced item no. 4 before but not anymore and I thank God for His grace and mercy for delivering me out of my financial woes. Here are some of the examples of how bad debts can affect you based on my observations in other peoples’ lives who are mired in debts:

1. When you’ve reached a point when you borrow money just to pay your debt.

2. When relationships have been broken because you are hiding from your creditors because you cannot pay.

3. When you are having sleepless nights and in the course of it, you look older than your age.

4. You don’t have peace of mind.

5. It will stress you mentally, physically and spiritually, enough to give you a major health breakdown in your life.

Debts are supposed to help you and not to make life difficult for you. This is what you call good debts. For example, you take a loan to buy a car or a house. You buy a car to make life convenient for you and if it’s useful to your work thereby enabling you to become more productive, then I would consider that a good investment. The same with getting a loan when you buy a house. You buy a house, flip it and make instant profit or rent it out, to create passive income for you. This is how you earn from real estate, not by living in it after purchase. Buying a home for comfort and security is another reason for investing in real estate but this is way out of context so let us just stick to the debt issue.

Now it becomes a bad debt when you take a loan, buy a car when your lifestyle can’t really afford it. On top of your  monthly expenses, now this monthly amortization plus the maintenance expenses, gas, repairs, tune up and all, will add up to your financial woes. The same with buying a house via bank financing. Even if you were able to hurdle the bank financing requirements of banks here which are more stringent, it is not advisable when in the end, you could barely live a comfortable life. You really have to weigh your capacity to pay in the end before you buy something BIG.

These are but a few examples that come to mind how a nagging debt problem can make your life miserable, if not ruin your life.

Here are some ways to reduce or pay off your debts.

1. Be prudent.

Budget wisely by cutting costs. Be prudent in how you spend your money. Do not buy or invest in things that depreciate. If you already have a cellphone or a laptop and it’s working, why will you buy the latest? Or for example, my car is almost 20 years old but I do maintain it regularly and keep it in good running condition. I don’t change it. For one, I can’t afford to buy another car to be honest about it. Two, I consider it a liability. The last time I checked, no cars appreciate over time except vintage cars. Between my car and my neighbor’s brand new car, there’s not much difference. We can get to the same destination.

If you need to upgrade, what is your reason for the upgrade? Will it help you earn more when you upgrade what you presently have? I mean is that really necessary? Think a million times before you buy something you don’t really need.

2. Pay your debts gradually.

Be faithful. Pay it regularly and pay off your small debts first. That way, you can tackle your big debts in the end. Don’t miss a payment schedule so you won’t incur another penalty or interest. Here’s a formula I recommend:

Income – Payment for Debts = Expenses

Income – Savings = Expenses

Advocates of Financial Planning like me recommend the 2nd approach to achieve your dreams. We all have dreams in life. We dream of buying something for ourselves and one way to get it done is to set aside a fixed amount from your income, and just spend whatever is left for the expenses. This way, you will be forced to adjust your lifestyle. But since you are in debt, in lieu of savings, set aside a fixed amount first for debt payment, until you have fully paid your debt. Then, you can use the same formula and set aside a fixed amount for your savings.

3. Generate more income.

Money does not create money, but IDEAS. Think of ways to make more money to help pay your debts. Is it advisable to invest while you have debts? Not at this time. Clean up your debts first and when you are already free financially, you can start investing in small amounts and make your money work for you in the long term.

By paying off your debts first, you also save yourself from the big interest applied monthly that is killing you.

Other ways to make money are:

1. Sell unused, hardly used items that can still benefit others. Example, books, clothes, shoes, etc. Do not sell your old phones or laptops so you can buy a new one. That is not what I mean. Stay focused on your goal to pay your debts first.

2. Work hard. If you need to get another job to augment your income, why not? If you have a skill or talent to share, offer your services. Or work extra time to get overtime pay. Or refer a sale or talk to an agent who will be more than willing to share commissions with you if you give a successful referral. There are 50,000 agents each in the insurance and real estate industry. I’m sure you know someone or you can reach out to someone you can trust.

And now, here’s the radical part in paying your debts.

3. Give. Wait, you might say to yourself. I am in debt and you are asking me to give??! Yes. bible and debt

I believe in this biblical verse: Give, and you will receive. Your gift will return to you in full–pressed down, shaken together to make room for more, running over, and poured into your lap. The amount you give will determine the amount you get back.”(Luke 6:38).

This might be a radical way of getting over the bump. But my point is, when you freely give, you freely receive.  (Matthew 10:8) Again, this is another promise from the Bible.  Bless others who are in need. Do not use the reason that you are also in financial dire straits that’s why you cannot give. You can bless your church by tithing or by giving to other charitable institutions that are in need of financial support. But give from the heart. God loves a cheerful giver. (2 Corinthians 9:7). And trust me, no… trust God, to open up the floodgates of heaven, when you tithe, because He Himself has promised that if we will give one tenth of our income to Him (or more), He will bless us abundantly. Malachi 3:10 says, “Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the LORD Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that there will not be room enough to store it.”

Therefore, we go up another notch and here’s the radical formula:

Income – Tithes + Savings = Expenses

So, you can no longer say, how can you give when the budget is just right or not even enough? Maybe you need to generate more income then. Maybe you need to wrack your brains to find ways how you can increase your cash flow. I’m not merely saying that you adopt this radical formula without doing something creative. You have to map it out based on the above recommendations. Seek advice from a mentor or an expert. Best to talk to someone you can trust. And most importantly, don’t forget to pray. Never underestimate the power of prayer.

When God speaks to you, do as He tells you to do and God will give you more than you asked for.

If you want to be a generous receiver, you must be a generous giver! That is how God’s economy works!

In closing, it is unbiblical to be in debt. For the Bible says, Let no debt remain outstanding… (Romans 13:8a).

But sometimes that’s a reality. You might say you don’t have a choice sometimes that’s why you end up in debt. Nothing is too late. I strongly believe that if you will align yourself with the Word of God, ultimately you shall be debt-free because God has a good plan for you. He has plans to prosper you and not to harm you (and that means you were not born to be in debt forever!).

The Bible says: For I know the plans I have for you,” declares the LORD, “plans to prosper you and not to harm you, plans to give you hope and a future. (Jeremiah 29:11)

You have to claim God’s promises for you in your life. He only desires your obedience in His Word and He shall prosper you.


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