Debt and Credit Management Part 1

The sad truth is that most Americans have been conditioned to believe that debt is a normal part of life. Since the late 1960’s (when the credit card was introduced), DEBT has become a product that has been aggressively marketed. Millions of Americans surrender daily to the bait laid in the trap by marketing professionals whose #1 goal is to make you feel good about becoming a slave to debt. For example, most Americans today feel that the only way to purchase an automobile is with debt (payments). The question asked today is not, “Can I buy the item?” but rather, “Can I make the payments?”.
Credit is the means to pay later for goods or services obtained now. When the privilege of credit is accepted to purchase an item or a service a debt is incurred. With the ease of obtaining credit, Americans are pumping up their current lifestyles in exchange of their future financial well being. Debt has become the cancer that is claiming the financial lives of many households across America (see Money Management Bible Study – “Living Without Debt” and In The News)
Statistics tell us that the average American is spending 10% more than they make each month. With 70% of all Americans living paycheck to paycheck, it is only a matter of time until their debt becomes unmanageable. This voluntary financial demise that results in the lives of those who choose to live beyond their means has resulted in the skyrocketing increases in filings for personal bankruptcy. In 1999, 1.3% of all households in America filed bankruptcy. That is up from .8% only five years earlier in 1994.
Are you considering filing bankruptcy? Before you jump, calm down and get a little education. You will not be sent to prison for not paying your bills (there is no debtors prison in the U.S.). Most people who file bankruptcy are not bankrupt. (Bankruptcy Law)
If you answered “yes” to the questions above, you must do the following things immediately:
1. Destroy all credit card accounts with balances and STOP trying to borrow your way out of debt. Once the account balance reaches “$0”, at that time, either close the account or if you have other credit card balances, you can negotiate a low interest balance transfer to that account. This technique will allow you to reduce an existing high interest rate credit card debt without initiating credit inquiries or acquiring additional credit cards.

2. List all of your creditors and the balances you owe them starting with the lowest balance at the top of the page and the minimum payment required by each creditor to keep the account current (Form 5).

3. Attempt to reduce high interest rates by rolling existing balances to lower rate offerings (check your mailbox for the best offers). Call your existing creditors and attempt to negotiate a lower rate (see item #1 above). A report by the Massachusetts Public Interest Research Group found that over half of customers who complained to card issuers about their high rates got them reduced by about one-third.

4. Put together a bare bones monthly budget plan listing only the total minimum payments required for all of your debts on the line for debts (see BUDGET). The main purpose for the budget is to protect your savings.

5. Follow the 5 step plan for “What to do with my savings” (see SAVING).

6. Sell any items around the house that are collecting dust that can be used to help speed up the process (boats, campers, guns, motorcycles, etc.). Pick up more hours at work. Get a temporary part-time job.

7. If you are married, hug your wife/husband and tell her/him that you love them and that together you are going to walk out of the mess that either you created or that has come your way as a result of circumstances that were beyond your control.

8. Pray and ask God for grace and wisdom as you put together a recovery plan and begin the journey towards a great future that awaits you!

9. Provide for your family FIRST and then pay your creditors.

10. Don’t let anyone take your HOPE away, this too shall pass (Proverb 13:12)!
Parts 2 & 3 will run the next 2 months.
Mike Coe is the President and Founder of the non-profit teaching ministry,
Christian Oriented Education, Inc. He specializes in seminars, classes and
speaking engagements dealing with personal finance from a Biblical and
practical perspective. To learn more about his ministry you can link to his
web site Mike will be doing a monthly feature on Christians
and their money, so stay tuned for more each month.
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