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Short Term Debt

If you have trouble with this bucket, you are not alone! However, this bucket is the first one you can and should eliminate. You can get rid of your short-term debt by living within your means and then paying the debt down over time. When you get rid of this bucket, you will be free to put your money in the other, more productive, buckets. Short-term debt is not always wrong, but it always presumes upon the future and it always affects your financial flexibility. Scripture strongly warns that debt creates bondage, and my desire is to see freedom come into the financial lives of those who are seeking God’s direction for their money.

How do I live in light of economic uncertainty?

We can be certain that there will always be economic uncertainty.

Four principles:

  • Spend less than you earn. (Live within your income.)

  • Avoid the use of debt. (Do not live so that you obligate your future.)

  • Build liquidity or flexibility by having reserves set aside.

  • Set long - term goals. (Know where you are headed and what your priorities are.)

These principles will work no matter what your income level, where you live, what your circumstances are, or what your stage of life is.

What are the dangers of debt?

There are many hidden dangers when it comes to borrowing money.

Economic danger:

  • The magic of compounding is working against you and for the lender.

  • To repay debt you have to earn the money you owe, plus taxes, plus your tithe. All debt is paid back with after tax dollars.

  • Debt always mortgages or pre-commits the future.

Spiritual consequences:

  • Going into debt violates the biblical principal of not presuming on the future.

  • Borrowing money denies God the opportunity to provide. It also puts the lender in the place of God.

Psychological Implications:

  • Whenever there is any debt in a household, it tends to cause a high stress level in a family, especially in the wife. Debt threatens a woman’s sense of security.

  • Debt can cause marital conflict. Husbands, use your wife’s counsel as an admonition to keep you out of danger.

  • If you cannot repay your debt, it can damage or ruin your Christian testimony.

Should I follow rules when it comes to borrowing money?

There are 3 simple rules when it comes to borrowing money:

  1. The economic return on the amount of money borrowed must be greater than the economic cost.
    This is usually the case with a home mortgage, and sometimes with investment debt. It is not the case with credit card debt or with car debt. If you use a credit card, plan to pay it off, completely, every month.

  2. If you are going to borrow money, you should have a guaranteed way to repay it.
    For example, when you borrow money to buy a home, if you cannot make the payments, the bank can have your house. This repays the debt. If you borrow money on a credit card for a vacation, you do not get an asset that you can use to repay the loan.
    Biblically, we are commanded not to presume on the future. James 4:13-15 “Come now, you who say, ‘Today or tomorrow, we shall go to such and such a city, and spend a year there and engage in business to make a profit.’ You do not know what your life will be like tomorrow. You are just a vapor that appears for a little while and then vanishes away. Instead, you ought to say, ‘If the Lord wills, we shall live and also do this or that.’” (NIV)

  3. Spouses must be in total agreement on any borrowing decision.
    Generally, husbands and wives think differently about debt. Many times a husband has been saved from financial problems by listening to his wife’s counsel.

Financially, what is the best car for me to drive?

Mathematically, the cheapest car that you can drive is the one that you presently own. Over time, the cost to drive a car typically goes down. Maintenance costs might increase, but insurance costs decrease, and depreciation decreases.

Three principles:

  • Save for your car purchases.

  • Always pay cash for your car.

  • Drive your car as long as possible.

Should I buy or lease my new car?
  • It always makes more sense to buy a new car than it does to lease one.

  • When I buy a new car, I have the cost of borrowing, depreciation, and maintenance. When I lease a car, I have all of these costs, plus the lender adds on their profit margin.

  • Paying cash for a new car always makes more sense than borrowing money to buy one.

Are special, low interest rate loans for a car a good idea?
  • Lenders know that most people do not pay off these low interest rate loans in the time frame of the offer. They will then convert the loan to a higher rate loan.

  • Paying cash for a new car is always best. If you do this you will make a better decision than if you take the lender’s gimmick of a low interest rate.

  • If you have the cash to pay for a new car, and you get an offer for low or no interest, it is okay to take the offer. Make sure you put the money you have saved for your car in an interest bearing account, and when the time frame for the special offer is over, pay off the loan.

How big of a house is it right for me to buy?
  • One of the biggest budget mistakes people make is buying a house that is too big or too grand.

  • When you buy a house, you buy a lifestyle. You may buy a house that requires you to send your children to private school, or that has higher taxes or utilities, or one that makes you feel like you need to keep up with the neighbors.

  • The best way for you to decide what you can pay for a house is to determine a total lifestyle budget, and then allocate what you can afford in terms of a mortgage within that budget.

  • Remember that a house is place to live; it is not an investment. An investment is something that you sell when it goes up in value. A house is a place to raise your family, to generate a lifestyle, and to do things that are non-financial.

What are the most important factors to consider when taking out a mortgage?

See the following sites for good mortgage calculators:


The best kind of mortgage is the one with the shortest term, the lowest interest rate, and one with a fixed payment.

  • It is always better to live with certainty when it comes to a mortgage payment.

  • Avoid an interest only mortgage, because you are not building equity in your home.

  • Avoid an adjustable rate mortgage unless you plan to pay it off within the first adjustment period.

How much of my budget should I allocate to my home?
  • Financing institutions would say that no more than 25 to 30% of your spendable income should be allocated to your mortgage payment.

  • I would recommend that you try to keep your mortgage payment around 20% of your spendable income, so that when you add taxes, insurance, and utilities your total comes to around 25 to 30%.

Should I pay off my mortgage?
  • Any time you have an opportunity to pay off your mortgage, you should do it.

  • When you pay off your mortgage, there is obviously an economic benefit. However, there is also a psychological benefit, a marital benefit, and the benefit if more security.

  • What about the tax deduction you get from the interest you pay on your mortgage? It is always better to pay higher taxes and have fewer deductions than to pay lower taxes with higher deductions. The reason for this is you pay 100% of the deduction, but you only get back 20 to 40% of that amount in taxes. So it is never a good idea not to pay off your mortgage because of the tax benefit.

Is having a credit card wrong?
  • It is not wrong to have a credit card; it is just not always the wisest thing to do.

  • There was a study done that showed that when people use a credit card instead of cash, they will spend 34% more, on average.

  • In our society, there are some cases where you need to have a credit card, such as paying for travel or hotel rooms, or even for your safety and convenience. But if you have a problem with overspending on your credit cards, don’t carry them with you.

What is the best kind of credit card to have?
  • No annual fee

  • Low interest rate

  • Pay off each month

What is the best investment there is?
  • I hesitate to give investment advice. However, I do have one investment I endorse: this investment will give you a guaranteed return of 18 to 30%, with no risk, tax-free. The investment is to pay off your credit cards!

  • The best way to start your financial planning is by paying off all of your credit cards. If you do this, you will save yourself whatever percentage the credit card company is charging you – it is like earning that amount of return on an investment.

How do I get out of credit card debt?
  • Unfortunately, getting into credit card debt is a lot easier than getting out.

  • Ask yourself this question: What are the things that caused me to get into this problem? Some examples would be:

    • Poor discipline

    • Poor self worth

    • Poor money management

    • Marital conflict

  • Debt is just a symptom. You need to deal with the underlying problem.

  • The first step to take to get out of credit card debt is to stop going into debt.

  • The second step is to begin some type of repayment plan. I suggest that you take the credit card with the smallest balance and pay that one off first. Then take that payment and apply it to the card with the next highest balance. Continue until you have all of your credit cards paid off. This may take a while, but it is worth it in the long term.

Should I ever borrow money from my 401(k)?
  • A 401(k) is a great vehicle for planning for retirement. If your employer matches any part of your contribution, you should maximize what you put in, in order to maximize your long - term benefits.

  • You are allowed to borrow money from your 401(k) for a number of reasons, including a down payment on a house, or a medical emergency.

  • You should borrow from your 401(k) only in the most extreme or unusual circumstances. People who borrow from their 401(k) often find it very difficult to repay themselves. Do not ever borrow for another investment, or to spend the money on a consumer item. When you do, you have taken part of your future out of play, because you no longer have the magic of compounding working for you.

What do you do if you are too far in debt to give?
  • Many people are in a crisis situation, where they have more expenses than they have income, because of a job loss, a medical emergency, or an accident: things beyond their control.

  • If your expenses are greater than your income, what should you do? I Cor. 16:2 “On the first day of every week, each one of you should set aside a sum of money in keeping with his income, saving it up, so that when I come, no collections will have to be made.” (NIV) This verse says to give as God has prospered you. If you are in financial trouble, it can be okay to give less. If you do reduce your tithe, make sure:

    • You have someone, such as your pastor, hold you accountable.

    • You have a plan.

    • You have someone to give you encouragement.

  • You should always try to give some amount, even if it is only $1, every week, as recognition that God owns it all and that you are dependent on Him and not your money to meet your needs.

What do I need to know about mortgage insurance and credit life insurance?
  • This is insurance that credit card companies and mortgage companies offer “really cheap” that will pay off your credit cards or mortgage in the event of your death.

  • It is usually 20 to 50 times more expensive to purchase these types of insurance than it is to buy a straight term life insurance policy.

  • You do need life insurance to cover the debts that you have. But it is much better to buy your own insurance and assign your benefits to the lender or creditor.

Should I ever borrow to invest?
  • When someone presents an investment opportunity to you, it is never as a bad investment. The opportunity always looks good up front. However, no investment is guaranteed, or without risk – even cash is a somewhat risky investment because it can lose its value due to inflation.

  • It is okay to take risks, and to make long-term investments. But never, ever borrow to make an investment.

Planning for Christmas.

My best advice is that your credit card bills should never surprise you in January. You set yourself up for poor stewardship and a debt situation when you cannot pay off your Christmas credit card bills in full when they come in January.

What you spend on Christmas gifts is a personal matter. The important thing is not WHAT you spend, but sticking to your budget. What you spend on Christmas is not a reflection on who you are.

Here are a few tips for Christmas spending:

  1. Have a budget that works for your family.

  2. Plan to pay off your credit cards in full after Christmas. One way to plan is to enter each charge in your checkbook register, so that you do not forget what you spent.

  3. Remember that the greatest gift at Christmas is God’s gift of His Son. Be grateful for that tremendous gift as you plan your budget.

James 1:17
“Every good and perfect gift is from above, coming down from the Father of the heavenly lights, who does not change like shifting shadows.” (NIV)

Crown Financial Ministries, “How to Save Money on Christmas Gifts”

Click Here to View the Full MasterYourMoney.com Blog

When to Refinance?

There are two main questions to ask yourself when you consider refinancing your home.

  1. Can you lower your interest rate by at least 2%?

  2. Are you going to stay in your house for at least 5 more years?

If you can answer yes to both of these questions, you will want to consider refinancing your home.

When you decide to refinance, shop around. Not all lenders are equal, nor will they treat you equally. Ask them about closing costs and prepayment penalties.

James 4:14
“You do not know what will happen tomorrow. For what is your life? It is even a vapor that appears for a little time and then vanishes away.” (NKJV)

Crown Financial Ministries, “After the First Mortgage”

Click Here to View the Full MasterYourMoney.com Blog

Finding Basic, Good Financial Advice

The best way to find a counterfeit is to hold it up to the real thing. Hold up any advice that you get against God’s Word as a test. If the advice is not consistent with the Bible, then it is not good advice.

There is no easy way out of financial trouble. You need to follow Scriptural principles. I believe there are four steps to getting out of financial trouble:

  1. Set up a budget. Reduce your expenses as much as you are able.

  2. Pay off short-term debt with the cash you free up when you make your budget.

  3. Save money for an emergency fund - for the unexpected things that happen in everyone’s life.

  4. Set long-term goals. Prioritize your goals so that you can organize your finances according to a plan.

Luke 16:11
“So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches?” (NIV)

Crown Financial Ministries, “Long-Range Investing Goals”

Click Here to View the Full MasterYourMoney.com Blog

Dangers of American Debt Habit.
  • I believe that the economy is resetting itself. Whenever there is a violation of a Biblical principle, there will be a resetting, before conditions eventually come back to the norm.

  • As Americans, we may have come to expect a way of life that we do not necessarily have a right to, because we have borrowed to get there.

  • Do not try to borrow your way to contentment or to prosperity.

  • The only thing you can do, personally, is take a look at how you are spending your money, and do not try to borrow your way out of your problems.

Hebrews 13:5
“Keep your lives free from the love of money and be content with what you have, because God has said, “Never will I leave you; never will I forsake you.” (NIV)

Crosswalk, “Contentment”

Click Here to View the Full MasterYourMoney.com Blog

Is now a good time to buy a house, given the change in the economy (2009)?

In short, yes, this is probably a good time to buy a house – but this does not necessarily mean that you should buy a house.

This is a great time (mid 2009) to buy if you can answer these two questions satisfactorily:

  1. Are you in a good financial position to be able to afford a new house?

  2. Will it put a strain on your finances if you buy a house?

If you have to sell first before you buy, think about this decision. This is a good time to buy, buy not a great time to sell. So keep that in mind as you try to sell your old house. You will probably have to sell it for less than you could have two years ago. So when you look at the new houses that you might want to buy, remember that you may get less for your old house, and do not overspend because you forgot to take this into account.

Proverbs 24:3-4 (NKJV)
“Through wisdom a house is built, and by understanding it is established. By knowledge the rooms are filled with all precious and pleasant riches.”

Matthew 7:24 (NIV)
“Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock.”

Psalm 61:4 (NIV)
“I long to dwell in your tent forever and take refuge in the shelter of your wings.”

Steve Diggs at Crosswalk, “Why Home Ownership May be Unwise”

Click Here to View the Full MasterYourMoney.com Blog

Preparing Children for College.
  • When children leave for college, they will be confronted with financial decisions in a much bigger way than they ever have before. They will have debt made available to them in the form of credit card applications, and they will have greater peer pressure.

  • I believe that you begin preparing your children for college when they are about eight years old by giving them responsibility with some amount of money.

  • When your child gets to high school, I think it is a good idea to give them a credit card and teach them how to use it. Remember, though, if you give your child a credit that you teach them that they can use it for convenience only, and they must pay it off every month.

  • Another way to teach your child financial responsibility is by having conversations with them about how they will handle their finances. Have many of these conversations as your child grows up, so that your advice is part of their thinking process.

  • When our children turned eighteen, we had a formal conversation with each one of them where we “cut the apron strings.” We told our children that they were on their own from then on to make their own financial decisions. My wife and I let them know that we would always be there for them, but they were old enough to make their own decisions, and we trusted them to do that wisely.

Romans 12:1-2 (The Message)
“So here's what I want you to do, God helping you: Take your everyday, ordinary life—your sleeping, eating, going-to-work, and walking-around life—and place it before God as an offering. Embracing what God does for you is the best thing you can do for Him. Don't become so well adjusted to your culture that you fit into it without even thinking. Instead, fix your attention on God. You'll be changed from the inside out. Readily recognize what He wants from you, and quickly respond to it. Unlike the culture around you, always dragging you down to its level of immaturity, God brings the best out of you, develops well-formed maturity in you.”

2 Corinthians 13:11 (NLT)
“Dear brothers and sisters, I close my letter with these last words: Be joyful. Grow to maturity. Encourage each other. Live in harmony and peace. Then the God of love and peace will be with you.”

Tanya Ruiz at Crosswalk, “Tips on College Success (For Parents)”

Click Here to View the Full MasterYourMoney.com Blog

Cars for Young Drivers.

There are two important components of deciding what kind of car your new driver should have.

  1. Predetermine what your parameters will be before your child turns 16.

  2. Communicate clearly with your child what they can expect from you relative to a car.

  • Transportation is critical and time consuming for most families with children at home, so for your 16 year old to have a car to drive can be a big help to the main driver in the family. We bought our oldest child a used car at age 16, but it was clear to her that it was our car for our convenience.

  • It can be difficult when your children’s friends are getting a nice new car, but if you have communicated what they can expect ahead of time, your choice for them will be easier for to accept.

  • One option you have is to tell your child that you will in some way match whatever they save towards a car when they turn 16. A matching plan can be very motivational to some children, and many children will take better care of a car that they have worked to help pay for with their own money.
    Finally, avoid the pitfall of trying to keep up with peers and friends.

Luke 6:40 (NIV)
“ A student is not above his teacher, but everyone who is fully trained will be like his teacher.”

Click Here to View the Full MasterYourMoney.com Blog

Short Term Debt

If you have trouble with this bucket, you are not alone! However, this bucket is the first one you can and should eliminate. You can get rid of your short-term debt by living within your means and then paying the debt down over time. When you get rid of this bucket, you will be free to put your money in the other, more productive, buckets. Short-term debt is not always wrong, but it always presumes upon the future and it always affects your financial flexibility. Scripture strongly warns that debt creates bondage, and my desire is to see freedom come into the financial lives of those who are seeking God’s direction for their money.


Money Purpose Joy tells about paying off debt.

Money Purpose Joy gives a list of articles about debt.

Crosswalk has an article about finding freedom from debt.

Christian PF gives 7 steps to getting out of debt.

Yahoo gives a different view of making the minimum payment on credit cards.

Proverbs 31 shares God’s provision and direction to get out of debt.

Learn the Bible offers a biblical perspective on getting out of debt.

Wisebread shares false assumptions about being debt free.

Short Term Debt

If you have trouble with this bucket, you are not alone! However, this bucket is the first one you can and should eliminate. You can get rid of your short-term debt by living within your means and then paying the debt down over time. When you get rid of this bucket, you will be free to put your money in the other, more productive, buckets. Short-term debt is not always wrong, but it always presumes upon the future and it always affects your financial flexibility. Scripture strongly warns that debt creates bondage, and my desire is to see freedom come into the financial lives of those who are seeking God’s direction for their money.

ThExodus 22:25-27
If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest. If you ever take your neighbor’s cloak as a pledge, you are to return it to him before the sun sets, for that is his only covering; it is his cloak for his body. What else shall he sleep in? And it shall come about that when he cries out to Me, I will hear him for I am gracious. (NASB)

Psalm 15:5
He does not put out his money at interest, nor does he take a bribe against the innocent. He who does these things will never be shaken. (NASB)

Psalm 37:21
The wicked borrows and does not pay back, but the righteous is gracious and gives. (NASB)

Proverbs 3:27-28
Do not withhold good from those to whom it is due, when it is in your power to do it. Do not say to your neighbor, “Go, and come back, and tomorrow I will give it,” when you have it with you. (NASB)

Proverbs 11:15
He who is surety for a stranger will surely suffer for it, but he who hates going surety is safe. (NASB)

Proverbs 17:18
A man lacking in sense pledges, and becomes surety in the presence of his neighbor. (NASB)

Proverbs 22:7
The rich rules over the poor, and the borrower becomes the lender’s slave. (NASB)

Proverbs 22:26-27
Do not be among those who give pledges, among those who become sureties for debts. If you have nothing with which to pay, why should he take your bed from under you? (NASB)

Ecclesiastes 5:5
It is better that you should not vow than that you should vow and not pay. (NASB)



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