Focus on the Family

Six Steps to Debt-Free Living

Following these six steps can start you down the path of becoming debt free.

by Crown Financial Ministries
  1. Have a Written Plan

    A written plan is an absolute necessity to escape debt's death grip. This plan's success depends on your family doing two things: creating an itemized list of all your expenses, in their order of importance. And two, classifying our needs, wants and desires. Here are the differences between the three groupings:

    • Needs. These are life's basic necessities. Food, clothing, employment, home, medical coverage all fall into this category.
    • Wants. Wants involve making choices about the quality of goods we consume: dress clothes versus work clothes, steak versus hamburger, a new car versus a used car.
    • Desires. These are the goods and choices we make not essential to our survival, safety or well-being.
  2. Determine Essentials for Living

    Eliminate unnecessary living expenditures, and look for services around the home that can be done without outside cost. If you hire a cleaning lady, roll up your sleeves and scrub the kitchen yourself or learn handyman skills yourself. Tile and grout your floors, build a deck or paint the house to save costs.

    One more important thing to remember: We assume "expenses" are essential only because of the messages our society sends.

  3. Think Before Buying

    If your family is in debt, evaluate every purchase (see Proverbs 24:3).

    • Is it a necessity? Have I assessed whether it is a need, a want, or a desire?
    • Does the purchase reflect my Christian ethics? (For example, certain magazines on the market do not reflect Christian ethics.) Can I continue to subscribe to magazines or belong to book, CD, or movie clubs while I owe others?
    • Is this the best possible buy I can get, or am I purchasing only because I have this credit card?
    • Is it a highly depreciative item? Am I buying something that will devalue quickly? (Swimming pools, boats, and sports cars fall into this category.)
    • Does it require costly upkeep?
  4. Cut up the credit cards

    If you are in debt from the misuse of credit cards, stop - totally stop - using it. Cut up the cards and mail them back to their respective companies and ask them not to send you any more. Include in your letter the plan for paying that credit card debt back and commit yourself to buying solely on a cash basis.

    While handing out the green for your purchases engrain new attitudes in your daily spending. After all, you'll have to sacrifice some of the wants and desires in life to break free from debt; otherwise, you will continue to borrow and only get deeper into bondage.

  5. Avoid Leverage

    When in debt, avoid the use of what is called leverage. Leverage is the ability to control a large asset with a relatively small amount of invested capital.For example, if you bought a piece of property that cost $10,000 and required $1,000 down, that represents a nine-to-one lever. You have invested 10 percent of your money and borrowed 90 percent.

    Borrowing money to invest is not a scriptural principle, because when a Christian borrows the money from a bank to invest, the repayment of the bank loan is dependent on the investment making a profit. But if a profit is not made and the investor can't make the payments, he or she loses the investment and still owes the bank. The result? Financial bondage.

  6. Practice Saving

    Practice saving money on a regular basis. This includes those who are in debt. Even if it is only $5 a month, develop a discipline of saving.This does not mean you should store up a large amount of money while failing to pay your creditors, but one of the best habits a young couple can develop is to save a small amount on a regular basis.

    Families living above the poverty level have the capability to save money, but many fail to do so because of the misnomer that small amounts can't make a difference. Others believe that God frowns on saving anything. Neither of these two reasons is scriptural. The prevailing thought presented in the Bible is to save on a regular basis, and it is important that Christians develop good habits to replace bad habits.