Part 9: Family and Debt

First, let’s quickly review. We want God to be in charge of our money – not ourselves or a lender. We set our priorities carefully, beginning first with the work of God, then our obligations to the government, our expenses that cover essential needs and investing some for future needs. Next comes what I am calling Family Needs.

It may seem odd to you that these weren’t covered under Essential Needs, but I have broken them down this way to insert the modules on Savings and Investing IN FRONT of non-essential needs. You are probably thinking “whoa, wait a minute. Why should investing come before Family Needs?” The reason is simple: if investing came after Family Needs, you might find you had nothing left for a decent investing plan. I would rather you budget your investing activity BEFORE looking at what is available for the last three priorities. It’s easier from a math point of view, and I think more likely to produce good long term results.

The Family Needs in this section cover an important area that a household head must attend: human development within the nuclear and extended family. We are called to care of aged parents who no longer can care for themselves as well as our young children. Beyond the Essential Needs we talked about in Part 7, there are many ways a family can enhance the development of an older person or a young child under the broad budget category I am calling Family Needs.

Christian school, travel experiences, summer camps, semesters abroad, study trips, sports, mission trips – all of these types of activities can help enhance human development at the family level. Others might even feel like they should “pay up” for better clothing, finer flour, organic food, health supplements and even a membership to an athletic club or a sports club under the context of meeting these non-essential Family Needs. And today we are inundated with literally thousands of technology gadgets that could “enhance” our human development. All of these are valid considerations, but you can see how quickly expenditures in this broad category could expand to eat up all remaining incoming cash.

Further, Proverbs advices in chapter 19, verse 14, that “A good man leaves an inheritance to his children’s children.”

These potentially desirable activities MUST fit within the means of each individual family with some slack for the next two priorities, so it is dealing with this section of needs that people often get themselves into trouble. My attitude is that our children and aged parents deserve our best – not what is left over after we satiate ourselves with experiences that are fleeting. These desirable expenditures are attacked on two fronts.

The first attack is from Pleasure. Proverbs 21: 17 says “He that loves pleasure [shall be] a poor man.” We burn a lot of money on pleasure and ego satisfying activities, and the money goes up in smoke the minute the experience is over. Exotic food, alcoholic drinks (and even coffee), cable TV, sports events, designer clothes, fancy cars, concerts, vacations – all of these can rob you of the ability to give your children or aged parents special developmental opportunities. Why? Americans are addicted to Pleasure.

The other attack is from Debt, and debt is fueled by its friend, Pleasure. So to look at creating a meaningful budget strategy for Family Needs, we unfortunately have to deal with three sub-issues: living within your means, seeking deliverance from excessive Pleasure and getting out of Debt.

Pace Yourself: Live Within Your Means.
We need to live within our means, and leave our unmet needs up to God. This seems so obvious to me, but it is hard to accomplish in a society gone wild with credit. The only real solution is to follow the Apostle Paul’s clear injunction from Romans 13:8: “Owe no man anything except to love one another.” Or as Dave Ramsey says, flee debt like a gazelle flees a cheetah.

It may be hard for you to believe, but fifty years ago, there were NO credit cards, and most people HAD to live within their means. You might have an account at a department store, but there was no technology for a plastic card. Even today, if you are a French citizen, you still cannot be issued a credit card. But in America, banks are lined up to issue you credit, and it has caused a serious widespread addiction.

Think for a moment about the wonder of compound interest that we talked about in the module on investing. A simple rule of thumb that I use almost daily is how to calculate the number of years it will take a starting investment to double. The rule is called the “Rule of 72,” and it is very simple. You take the rate of interest and divide it into the number 72. The answer is the number of years it takes for your investment to double. For example, if you can make an investment that earns 14% per year, it will take approximately 5 years for your investment to double in value (72 divided by 14 equals 5.1 years).

Unfortunately, the miracle of compounding interest works in reverse when you are borrowing. Let’s do an example. Suppose as in the example above you have a starting credit card debt of $10,000. At 14% interest (many credit card companies charge 22 percent or more!), if you don’t pay anything down except the small minimum most cards require, your debt will DOUBLE in 5 years. But that is just the beginning of the problem. It will double again in five years and you will then owe $40,000! In another five years, you will owe $80,000! In another five years, $160,000! Unbelievable. So debt seen in this light is like a malicious virus which will end up robbing you of all of those good things you want to do for your family, church and friends. As scripture says, “The borrower is slave to the lender.” (Proverbs 22:7). No wonder I hate debt!

And don’t think for a second that debt is a matter of your income – that if you had a bigger income, you would not have debt. In our society our wants typically expand faster than our provision, and a high income person is likely as upside down on his or her finances as a family with modest means. Debt is a decision YOU make and no one else. You CAN live within your means – particularly in a Christian covenant community.

Jesus underscores the proper approach to expenditures (and avoiding debt) in Luke 14:28-30. In just three sentences, he sums up the right approach to any expenditure: “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.” If you don’t have enough money, you don’t buy! My friend Steve gave me this reflection: “If I can’t write a check and pay for it, I don’t to do it.” That’s a clear simple rule that eliminates a lot of potential trouble.

So, if you are in debt, get out of it. Cut up your cards, and celebrate. One sweet couple I know burned their cards in a family celebration, and the entire family danced about and shouted. After getting rid of your cards, reduce or totally eliminate every discretionary expenditure, and put the dollars you saved into reducing your debt balance, starting with account with the highest percentage interest. Of course, if you have multiple credit cards, you must pay the minimums on all of them each month until you work them all away. A spouse shared the following scripture that came to her mind: “At once all the prison doors flew open, and everybody’s chains came loose.” (Acts 16:26b). What a great feeling!

A family with whom we are friends have been living a life following Christian financial principles for nearly thirty years. The parents recently shared their thoughts about how they avoided both debt and frivolous spending:

“Two themes that surfaced early in our Christian walk were delayed gratification and low or no expectations. When we were raising our family and funds were especially tight, we never had the latest or newest gizmo and didn’t really expect it. We were the last people we knew to get a VCR and that was acquired because we won one at a company picnic.

“We somehow had the grace to trust God’s economy, and that He had us where we were financially for His own purposes. Tithing was always important to us and we held to certain practices that helped our finances over time: purchasing used vehicles for cash or very short car notes, regularly paying extra on the principal of our home, agreeing together on a budget and expenses, not carrying a credit card balance, planning family trips that were within our budget, eating out infrequently, intentional meal planning and grocery shopping, and many do-it-yourself projects. Saving for emergencies and retirement were a couple of our weak areas. One additional strength and great safeguard was in not having expenditures that were unknown to the other.

“We learned to be content with what we had – which was not always easy. But we also were surprised many times with blessings that were not the result of our own labors. God’s economy functions so differently than our minds can reason.”

So thoughtfully budget for meeting the important family needs for which you are responsible. My encouragement is to leave enough slack in your budget that you can also include the least two priorities: outside ministries and being especially generous with those who work for you. We will cover those two topics in our next two modules.

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