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Finance Lesson #08

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Bible Perspectives
FINANCIAL TRUTHS FROM THE BIBLE
Lesson #08
FREEDOM FROM DEBT

    • Memory verse: Psalms 37:21
    • In our discussion of the theme on debt, we have considered many principles from the Bible.
      • We have read the scriptures that show us what is wrong with debt in the life of the Christian.
      • We have discussed the plan of having a budget to guide the expenses of the Christian.

 

  • To be free from debt in God’s economy:

 

  • We have learned that all things belong to God and that we need to surrender to God all of our possessions.
  • If you have discovered the cause of your debt by means of the list of your expenses over 90 days, you have already achieved the first step. You have come to know how you spend money.
  • Now we need to make a plan to be free from debt. Of course, the person that has a large quantity of debt requires more time to be free from debt than the person that has a small quantity of debt.
  • A long-term plan is a requirement and the Christian must be determined to work toward the goal of being free from debt. In this way, every year the Christian will be more free of debt than the previous year. Progress forward is the important concept.
  • Freedom from automobile debt:
  • One major area of debt is the debt of an automobile.
    • Because we need transportation in this modern society, the debt of an automobile is an area that is easy to rationalize.
      • However, the automobile is not an asset that increases in value. To the contrary, the value of an automobile diminishes drastically the moment the person takes possession of a new car.
      • The majority of automobiles are financed by debt.
      • The majority of automobiles will last for 10 years, but the average person keeps his car for from 3 to 4 years more or less.
  • To avoid the trap of the debt of an automobile:
    • =1= Going forward, make the decision to keep your automobile for at least 6 years.
    • =2= Pay the debt of your current automobile as rapidly as you can because the elevated interest of this debt puts you on the negative side of compound interest.
    • =3= After you have paid this debt, continue to pay the same monthly amount to a special bank account in your name.
    • =4= Maintain this special account until you are ready to buy the next automobile. Use the money in this account to buy your next car with the value of your current car as a trade in.
    • =5= Your next automobile must be one that you can buy without debt even though this vehicle may be a used car.
  • Freedom from the debt of a house:
  • An example that relates to our discussion:
  • The mortgage of $75,000
  • Interest at 12%
  • The length of the mortgage is 30 years

The first year of the Mortgage

# of Payments The Month The Payment The Interest The Principal The Principal Balance
1 January $ 771.47 $ 750.00 $ 21.47 $ 74,978.53
2 February $ 771.47 $ 749.79 $ 21.58 $ 74,956.85
3 March $ 771.47 $ 749.57 $ 21.90 $ 74,934.95
4 April $ 771.47 $ 749.35 $ 22.12 $ 74,912.83
5 May $ 771.47 $ 749. 13 $ 22.34 $ 74,890.49
6 June $ 771.47 $ 748.90 $ 22.57 $ 74,867.92
7 July $ 771.47 $ 748.68 $ 22.79 $ 74,845.13
8 August $ 771.47 $ 748.45 $ 23.02 $ 74,822.11
9 September $ 771.47 $ 748.22 $ 23.25 $ 74,798.86
10 Octuber $ 771.47 $ 747.99 $ 23.48 $ 74,775.38
11 November $ 771.47 $ 747.78 $ 23.69 $ 74,751.69
12 Dicember $ 771.47 $ 747.52 $ 23.95 $ 74,727.74
The Total for the Year $9,257.64 $ 8,985.38 $ 272.26

  • Remember that a home mortgage is permissible because generally the house and the land under the house are an asset that increases in value.
  • However, you must consider the advantages of being free from debt primarily it puts the Christian on the negative side of compound interest.
    • For example, the payments of a home mortgage in the first years pay primarily the interest. (in the example above, compare the amount of interest with the balance of the principal over the year.)

 

  • First you must determine if you can pay more than the monthly payment without penalty. Some companies charge a penalty to terminate a mortgage before the initially contracted time. The company that has your mortgage can tell you the answer to this question.
  • Usually a person deducts the interest of a home mortgage from his income taxes. Determine the consequences of the taxes if you pay the entire home mortgage and do not have this deduction from your taxes.
  • If you determine to pay the entire home mortgage to be free from debt, you must inform the company that holds your mortgage what will be your plan.
  • If you determine to pay the entire home mortgage, there are various methods:

 

  • =1= A method of paying the home mortgage totally:
  • Increase the monthly payment sufficiently to reduce the duration of time.
    • In our example above, the monthly payment is $771.47. If you increase the payment to $900.17, you will totally pay off the mortgage in 15 years instead of 30 years.
    • This additional payment will save $138,864.00 over 30 years.

 

  • =2= Another method of paying the home mortgage totally:
  • Pay the amount of the principal for the coming month together with the usual payment.

 

  • In our example above:
    • In January pay $771.47 + $21.68 (the principal for the month of February).
  • Remember that in the first years of a mortgage the amount of the principal is not very much. Of the monthly payment, every year the amount of the principal increases and the amount of the interest decreases. You must examine the schedule of payments for your own mortgage to decide what is best for you.
    • The principles for paying off any other debt:
      • Read Pro 3:27
      • Read Luk 20:22-26
      • Read Mat 17:24-27
        • Guard carefully your credit history to maintain your integrity of faithfulness by means of paying your bills in an appropriate manner.
        • Do not cause a penalty payment to your bank, to the credit card company, or to any other company because of a late payment. Remember that it affects the history of your credit.
          • This principle is important to maintain your testimony as a Christian. How?
            • If you have developed the habit of paying your bills late,
              • …it is a testimony that your God does not provide for you what you need.
              • …it is a testimony that your God does not have sovereignty over your life.
              • …it is a testimony that your God does not have control of circumstances.
              • …it is a testimony that you are not obedient to God.
    • Freedom from any kind of debt (including credit cards)
    • =1= Determine the percentage of interest on each debt.
      • The debts with the highest interest must be the first debts from which you want to be free.
    • =2= Make a payment plan to pay a little bit more than the minimum monthly payment.
    • =3= It is important that you not open new debts.
    • =4= It is important that you do not fail to pay the other bills to remove a debt. (Remember your credit history and your Christian testimony.)
    • =5= If there are debts that you cannot pay, you must be in contact with the company to express your desire to pay something.
    • =6= Make a plan to pay this debt in a different way that is acceptable to the company.

 

  • The guide for actions while you wait on God

 

  • When the Christian first makes the decision to move into God’s economic system, the test of your decision will come.
    • God always tests the steps of the believer’s faith.
      • Read Pro 3:5-6
      • Read Mal 3:10-12
      • Read Jam 1:2-4
  • The Christian with a lot of disorder in his finances will require more time to disentangle the complex details of his financial life.
    • However, God will begin to work as the believer maintains his faith in the provision of God and as he continues to operate the principles of God.
  • When the plan of God does not operate according to your expectations:
    • Here is a list to check:
      • Are you following the plan to give to God in a consistent manner the amount that you decided?
      • Are you trusting in God’s provision as your source by means of your faith in the promises of God? (If you see your work as your source, God does not receive the glory for your provision.)
      • Have you transferred your business, your house, your car, your live to God as the owner and does He have control of all these things?
      • Are you misspending a large amount of money outside of your budget without asking God?
        • Read Luk 15:1-2
      • Are you serving God or money?
        • Read Pro 28:25
        • Read Mat 6:24
      • Do you have an open hand to share with other people?
        • Read Pro 19:17
        • Read Pro 28:27
        • Read Pro 21:13
        • Read 1Joh 3:17-18
      • Do you have a mind to work?
        • Read Pro 10:4
        • Read 2The 3:10-16
        • Read Pro 22:13
        • Read Pro 20:4
        • Read Pro 14:23
      • Do you use dishonest practices in your business?
        • Read Pro 28:8
        • Read Pro 14:27
        • Read Pro 22:16
        • Read Pro 16:11
        • Read Pro 20:17
      • Do you use money in a worldly manner?
        • Read Pro 28:19-20
        • Read Pro 13:11
        • Read Pro 23:19-21
      • Do you have a spirit of pride?
        • Read Pro 13:18-19
        • Read Pro 24:3-4
      • Do you have a wise plan over which you have prayed?
        • Read Pro 21:5
      • Do you seek wise counsel before you:
        • …buy something large that requires much money?
        • …make the decision to invest your money?
        • …enter into debt?
          • Read Pro 23:23

HOMEWORK
This is a self-study. Please do not send homework answers to the teacher forcorrection.

  • Examine your debts and you list of expenses. Make a specific plan to reduce them over the next year. Write your plan here.
    • In your plan, determine how you will reduce the #1 debt on your list.
    • In your plan, consider the following resolutions:
      • Destroy all your credit cards.
      • Avoid buying on impulse.
      • Cancel your paid associations in clubs, subscriptions, etc.
      • Cancel your plans for vacation.
      • Combine your local trips to save money on transportation.
      • Cancel your visits to restaurants.
      • Cancel professional help for things that you can do for yourself like haircuts, garden maintenance, house cleaning, etc.
      • Cancel the costly level of your cable television and buy only the basic level.
      • Do not buy fast foods.
      • Investigate the prices of various insurance companies.
      • Buy your clothing in a second-hand store.
      • Find a way to share transportation with other people to work or to school.
    • In your plan, consider the following ways to increase your income:
      • A second temporary job.
      • Selling something that you have.
      • Selling a costly vehicle to buy something cheaper.
      • Selling your costly house to buy or rent something cheaper.
  • Memory verse: Proverbs 12:15
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About Joyce

Joyce
I came to faith in the Lord Jesus Christ in 1963 giving my heart to Jesus in a Billy Graham crusade in Los Angeles, CA. I have been teaching the Word of God since 1964, Usually two to three adult classes a week.

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