Part 4: Free Me!
ILL: How many of you have ever played the board game, “The Game of Life”? Here’s what the box looked like in the 1960’s when I was playing this game with my sisters—and beating them! It was great fun: you spun the dial and moved your little car around the board going to college (or not), getting a job, getting married, having kids (adding little pink or blue pegs in your car), making money and buying things. At the end, the one with the most cash won. I won…a lot!
Have you seen the new version, “The Game of Life: Twists and Turns”? It came out in 2007, and here’s the twist: it’s cashless! That’s right, every player is given a credit card, like this. In the new Game of Life, you buy everything with plastic!
Who is the genius that thought of this? I am so excited to teach my grade school kids to slap the plastic down whenever they need or want something! I guess the banks weren’t satisfied just targeting teens with credit card applications; now they’re taking aim at grade schoolers!
Such is the world we live in. We’re in debt up to our eyeballs and sinking fast. Money talks, and it’s pleading, “Free me! Free me!” That’s what we’re talking about today.
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Introduction and offering:
This is part 4 of Money Talks in which we’re discussing what the Bible says about money. It says a lot: over 2000 verses about money and things. Here’s what we’ve discussed so far.
Money talks and it says, “Serve me.” Jesus warns us about the dangers of loving money too much. Money is a great tool, but a lousy god; but money is the dominant idol in our culture. You can’t love both God and money!
Money talks and it shouts, “Spend me.” Our biggest problem is our out-of-control spending. We need to spend less than we earn. We need to remember that it all belongs to God and spend as He directs. Your budget is a theological document: this is how God wants me to live.
Money talks and it whispers, “Save me.” The Bible shows that saving for future needs is just good common sense, but it also warns against selfish hoarding, particularly in view of all those in desperate need around us. How much is enough? How does God want me to live? Let the questions drive you to Christ.
Money talks and it pleads, “Free me.” Today we are discussing what the Bible says about debt. Here’s the Big Idea: God wants you free of debt. Debt is bondage, and God wants you free!
Let’s dive in.
1. Money talks: it says, “Free me!”
“Free me?” Why am I using that language? Because debt is bondage.
A. Debt is bondage.
Michael Mihalik has written a book entitled, Debt is Slavery. That’s a strong title, and true. Debt is slavery; it’s bondage. It’s not just Michael Mihalik who says that; the Bible says the same thing.
Proverbs 22:7 The rich rule over the poor, and the borrower is slave to the lender.
The borrower is a slave to the lender.
Why is the borrower a slave to the lender? When you borrow, the lender now owns part of you. For example, when you borrow to buy a car, who owns the car? The lender does; if you don’t make the payments, the lender will take his car back. When you borrow to buy a house, who owns the house? The lender does; if you don’t make the payments, they’ll foreclose on the house. When you borrow money to buy something, whose money is it? It is the lender’s money; you are using someone else’s money. So when you borrow, the lender owns part of you. You are a slave to the lender; that is, you are not free to do what you want.
You are not free to spend as you like, or save or give as you want. And if you have enough debt, you may not be free to take a different job that you’d really love; or to help your kids with college; or to simply say no when your boss demands more hours. You’re a slave to debt.
Think of the Seven Dwarves marching off to the mines every morning, singing, “I owe, I owe, it’s off to work I go.”
Debt is disastrous. Our culture’s attitude toward debt has changed enormously.
ILL: It used to be that debt was discouraged; now if you don’t have and use credit cards you are an oddball. Do you know that the banking industry calls people who pay off their credit cards every month and so avoid paying any interest? Deadbeats! That is what we used to call people who wouldn’t pay their bills; now that’s what we call those who pay them on time!
Debt is a product and we’re buying it in huge quantities.
ILL: In one year (2004), how much did Mastercard, Visa, American Express and Discover spend for advertising—take a guess. $567 billion! There are more than 6 billion direct mail solicitations sent out for credit. Most homes receive an average of 5 credit card offers per month. Why are they spending billions to get you to use their cards? Because they make billions more on the interest you pay. The average credit card debt among households with credit card debt is $14,750. The average interest rate on credit cards with a balance is 13.67%.i
177 million Americans had credit cards in 2008. One in seven had more than 10 cards; the average is 3.5 cards. 80% of them say their cards are at or near their credit limits, and 37% have borrowed from one card to make payments on another. 84% of undergrad students carry plastic, and the average balance $3173. Hold that thought.
A few years ago, Sears has 63 million cardholders and averages over 360,000 new applications a month. When you buy something, they ask, “Would you like to apply for a Sears card and save 10% today?” That’s because they charge you 21% on your card! Interest accounts for 40% of Sears operating income! Analysts consider Sears a finance company as much as a retailer. And I’m not picking on Sears—change the name to Target, or Macy’s…it’s all the same.
Credit is a product; they are selling and we are buying, and it’s killing us.
Debt is disastrous. It costs you far more than you think.
ILL: Let’s go back to that college undergrad that is carrying an average balance of $3173 on his/her credit cards. Most of them will make the minimum payment of $79.33 each month, which is exactly what the bank wants you to do. How long will it take them to pay off that $3173 making the minimum payment each month? 19 years! That is assuming that they don’t buy anything else in that time! And they will have paid $4183 in interest.
Worse, let’s punch in the numbers for that $14,750 average household balance. At 14% interest (the average), making the minimum monthly payment of $319.58, it will take you 31 years to pay it off, and you will have paid $16,708 in interest!
When you buy on credit, you end up paying much more than the purchase price. But the true cost of indebtedness is not only the interest you pay, but also the interest you don’t earn on that money. Every dollar that is tied up in debt repayment is a dollar that is not available to be working for you, earning interest. When you save, you make interest work for you: that is compounding. When you are in debt, compounding is working against you doubly: in the interest you pay and the interest you lose.
ILL: Let’s go back to that $14,750 credit card balance. What does it really cost you? Way more than you think! If you had paid cash rather than credit for those purchases and then put the $320 payment in a mutual fund averaging 10% for those 31 years, you would end up with $809,815. You could retire on what you lost by making the minimum payments on your credit card balance!
You may be thinking, “But I don’t have the cash saved to buy that $14,750 worth of stuff.” Then don’t buy it. Here’s a novel idea: buy only what you can afford! Don’t spend money you don’t have!
Debt is disastrous! It is killing us as a nation: our national debt is over $14 trillion dollars—that’s about $46,000 per person—and growing at $4 billion a day! And our total revolving debt (credit cards) is $800 billion—almost $2600 per person.
One more bad thing about debt: it can ruin relationships. How many of you have ever loaned money to a former friend? Debt creates hard feelings. Debt changes the relationship. Don’t loan money to a family member or friend, or borrow money from them, unless you just want to get rid of them.
ILL: I love this sign that hangs in an Alaskan store: “You ask for credit, we don’t give you , you get mad. We give you credit, you don’t pay, we get mad. Better you get mad.”
Debt is disastrous. Because of this:
B. God wants you free of debt.
The Bible doesn’t completely forbid debt. There are times when debt may be acceptable, for example, purchasing an appreciating property such as land or a home; getting an education; starting a business—times when you are using debt to buy something that will produce value or income in the future. However, even this can be tricky. Real estate is usually one of the safest investments, but in the past 3 years values have dropped by one third across the nation, leaving many people owing more on their home than it is worth. Still, over the long haul, buying real estate has been a positive investment. The Bible does not forbid debt, but it discourages it.
In Deuteronomy 15:1-10, God gave the Israelites directions about debt.
Deuteronomy 15:1 At the end of every seven years you must cancel debts.
God didn’t want anyone stuck in debt or sinking deeper into debt, so every seven years, the slate was wiped clean and all debts were forgiven. God wants people free of debt.
And in Deuteronomy 28, God promised to bless the Israelites so that they wouldn’t need to borrow.
Deuteronomy 28:12 You will lend to many nations but will borrow from none.
Obviously, God thought it better to be lending (earning interest) than borrowing (paying interest). Debt is generally discouraged, but when we incur debt, we are expected to pay it back.
Psalm 37:21 The wicked borrow and do not repay, but the righteous give generously.
To borrow and not repay is to be wicked—the opposite of righteous. It’s not right to borrow and repay; it’s stealing.
Romans 13:8 Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.
Every debt should be repaid; the only one that we can’t repay is our debt to love each other.
God wants to be free from debt. How can you do it?
2. Steps to freedom.
This isn’t rocket science. If you want to get out of debt, you need to do three things.
A. Stop using credit!
Call a halt to all credit purchases. You can’t get out of debt until you stop going in! For some of you who lack self-control, that will mean plastic surgery: cutting up your credit cards and not getting any new ones.
By the way, if you are a deadbeat, you should know that the mere use of credit cards will cause a family to spend 34% more, regardless of whether the full statement is paid off each month or not! When Ron Blue read that figure, he found it hard to believe, so he tested it. For the next year, he and his wife retired their credit cards and paid cash for everything. The result: their living expenses decreased 33% from what he had thought before to be a “bare bones” level. It is harder to part with cash than to slap down a card, so you tend not to buy so impulsively with cash as with a card.
Stop using credit. Buy only what you can afford now.
One example. Perhaps the most over-funded item in America is the automobile. Cars have become personal statements rather than transportation, consequently millions of people are car-poor. The cheapest car to own is the one you presently drive unless it is sold and the proceeds are reinvested in a lower priced car. Your old car may not be as nice as that shiny new one, but the thrill of driving the new one will wear off long before those $400 payments run out. And you won’t lose thousands of dollars in depreciation and find yourself upside down in your car, where you owe more than the car is worth. First year depreciation on a new car averages 31.5% of the purchase price. In other words, that $30,000 car is worth less than $21,000 only a year after you bought it! Chances are that you still owe more than $21,000–you’re upside down in your car!
Buy only what you can afford now. Cut up your cards, or at least be a deadbeat and charge only what you can pay off each month. Stop using credit.
B. Start repaying your debts.
Set up a schedule of debt repayment and stick to it; and throw everything you can at getting out of debt. Here are some ideas.
First, consider the snowball plan, made famous by Dave Ramsey. List all of your debts and the minimum payments, and plan on making those each month. But concentrate on eliminating the smallest debt first—throw everything you can at it—double, triple or quadruple the payment. Then when the smallest debt is paid off, you can apply what you’ve been paying on that to the next biggest bill, and so on until you’re out of debt altogether. As each debt is paid, the amount you put toward the next debt “snowballs.”
Second, pre-commit any extra income or extra amounts in your budget to debt repayment. If you get a raise, a bonus, a tax return or a birthday gift, throw it at debt repayment. Have a little fun money in your budget, but anything extra put toward debt retirement. Get serious about this—it’s killing you financially.
Third, you might also consider selling assets you have to pay off debt. You probably have unused items sitting around that you could turn into cash and retire your debt. ILL: When I made a stupid decision years ago that landed us in $12,000 of debt, I sold my baseball card collection for more than $5,000 and applied it to the debt. Was it worth it? Absolutely! I rarely looked at those cards and didn’t miss them when I sold them. You probably have things like that you could sell and put towards debt retirement.
Fourth, reduce your interest rates. Call your credit card company, and ask them what your effective rate is, and tell them it’s too high and you’d like them to lower it. They will say “no”, and when they do, tell them that you’ll be closing your account and transferring your balance to a competitor that offers better rates (you should have the competitor’s name handy). Ask for a supervisor; they usually have the authority to cut your rate right there on the phone. And if they won’t reduce it, consolidate your debt on your lowest interest card.
Get out of debt! Then you need to stay out of debt and to do that you need to:
C. Create a new spending plan.
We talked about this in week 2. We’ve got to become planned spenders, not impulse spenders. We’ve got to spend less than we earn. We’ve got to buy only what we can afford.
A budget is a theological document; it is a statement that says, “This is how God wants me to live.” When you create a budget, you start by taking out four non-negotiables:
Tithe: we give to God first.
Taxes: the government takes their share.
Debt retirement: pay it off as quickly as possible.
Savings: the future is coming!
These four things come out of the gross, and what is left is our net spendable income.
Spending: this is our net spendable income, what we live on.
Why is spending last? Because our lifestyle is discretionary. You can choose how you live. Choose to live on what you have. Spend less than you earn! Don’t buy what you can’t afford. Don’t use debt to finance a lifestyle you can’t afford.
ILL: In Texas, they say a man is “all hat, no cattle”. They mean that he looks like he’s worth a lot of money, but it’s just looks. He has financed an extravagant lifestyle with debt, without the income to back it up. He’s all hat, no cattle.
Don’t be all hat, no cattle. And don’t try to keep up with the people who are! Live within your means. Create a spending plan that keeps you out of debt.
One last thing:
3. Getting free from your biggest debt.
In Matthew 18, Jesus told a story about a man who owed his king 10,000 talents. A talent was a unit of money worth about 20 years wages. So this represented close to 5000 lifetimes of salary—and you thought you were deep in debt! When the king demanded payment, the man begged the king for mercy: “Have patience with me and I’ll pay you everything.” What a joke! He would need at least 5000 lifetimes to pay that back! That’s a lot of patience. The king, out of compassion, forgave the debt—the whole thing! Stunning!
Not long after that, this man came across a man who owed him a hundred denarii—a denarius was one day’s wage, so this was 100 days wages, four months wages. Not pocket change—but a drop in the bucket compared to 5000 lifetimes. His enormous debt has just been forgiven; what do you expect him to do? Forgive the other man. Instead, he demands payment, and when the man begs for mercy, “Have patience with me and I’ll pay you everything,” he refuses and throws him into jail.
The king heard about this and had told the first man,
Matthew 18:32–33 ‘You wicked servant,’ he said, ‘I canceled all that debt of yours because you begged me to. 33 Shouldn’t you have had mercy on your fellow servant just as I had on you?’
Then the king threw him into jail until he could pay his debt. Jesus finished the story by saying:
Matthew 18:35 “This is how my heavenly Father will treat each of you unless you forgive your brother or sister from your heart.”
It’s a startling story about debt and about forgiveness. Who is the King? God is. Who is the man with the huge debt? You. Me. Each of us.
The biggest debt you have is your debt before God. Whatever anyone has done against you is small compared to what you have done against God. We all underestimate our sin—“I’m not that bad.” Yes I am. Jesus said my debt is so huge that I could never repay it. The fact that I don’t think I’m that bad just reveals how ignorant I am of God’s holiness and my own sin. My biggest debt is before God—and it is huge. I can never repay it.
Here’s the good news. God has taken care of your debt—it was paid in full when Jesus died on the cross.
Colossians 2:13–14 When you were dead in your sins and in the uncircumcision of your flesh, God made you alive with Christ. He forgave us all our sins, 14 having canceled the charge of our legal indebtedness, which stood against us and condemned us; he has taken it away, nailing it to the cross.
That phrase, “the charge of our legal indebtedness” translates a Greek word that was used of a handwritten IOU. Jesus took our IOU, our debt to God that consisted of all our sin, and rebellion, and indifference, and pride, and self-centeredness—Jesus took it all and nailed it to the cross.
When Jesus died, His last words were “It is finished.” That was a Greek word, tetelesthai, that meant “paid in full”. It was the word stamped across a bill or IOU when it had been paid. When Jesus died, He stamped “paid in full” across your IOU. “He forgave us all our sins.” This is the good news: in Christ, God has forgiven you; God has paid your debt in full; God has set you free to live a new life.
What is your response? I hope you will live in grateful surrender. “Lord, I owe you everything. I belong to You. Here is my life; I will live it for You.”
i From CreditCards.com. http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php.