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Money Goals for 2022 – 4: Debt Consolidation

Money Goals for 2022 Day 4: Debt Consolidation

The rich rules over the poor, and the borrower is the slave of the lender. (Proverbs 22:7, ESV)

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

Be not one of those who give pledges, who put up security for debts.  If you have nothing with which to pay, why should your bed be taken from under you? (Proverbs 22:26-27, ESV)

Owe no one anything, except to love each other, for the one who loves another has fulfilled the law. (Romans 13:8, ESV)

“There are three kinds of people: the haves, the have-nots, and the have-not-paid-for-what-they-haves.” – Earl Wilson

It’s amazing how easy it is to get into debt and how difficult it is to get out of it. We in the United States are inundated with credit card offers in the mail, commercials for credit cards on TV, payday loans, adjustable-rate loans, and plenty of other types of readily available debt. The pleasure of having what we want is put at the forefront while the pain that comes from having to pay for it is put on the backburner. And that’s just commercial debt. There are also auto loans, student loans, mortgages, medical debt, gambling debt, and just about any other type of debt you can imagine. 

Debt is simply going to be a part of our lives in 21st-century America. Even if you consider yourself to be risk-averse and conservative with your finances, odds are that you probably at least have a mortgage on your home. If that’s the case, what can be done about debt? The Bible is very clear that those who borrow are slaves of those who lend. The Bible also says that a person is wicked if he borrows money and does not pay it back. If you find yourself in debt, I am not here to litigate why that’s the case. Most, if not all of us, have gone into debt for many different reasons, both legitimate and illegitimate. The goal of this study is to enact a plan to get out of debt, recover from that Christmas spending, and get a better handle on our finances in 2022. 

As far as repaying debt goes, two of the most popular methods are paying down debt in order of interest rate (highest to lowest) and paying off debt in order of balance (lowest to highest). The interest rate method has the financial benefit of limiting the amount of interest you pay over the long term because the debts with the highest rate of interest will be taken care of first. The downside of this method is that, depending on the size of the debts, it can be a bit demoralizing to see limited progress on the number of debts repaid. The balance method has the psychological benefit of seeing accounts paid off and closed since you are starting with the smallest loan first and working your way to larger loans as they are repaid. The downside of this method is that you may end up paying more in interest over the course of your debt consolidation since you may not be starting off repaying the loan with the highest interest rate.

If it were up to me, I would choose the interest rate method to save on interest payments, but that’s because of my personality. If you have made the decision to work on getting out of debt, you should choose the method that works best for you. Just to be clear, I am not lumping in a mortgage in this debt repayment scenario because of the historically low interest rates and the length of standard mortgage terms. There is a different discussion to be had about whether it makes sense to pay off your house early (opportunity cost of investing that money now, the freedom of being debt free, etc.) or not. For our purposes, I am speaking about all non-mortgage debt (although not having a mortgage sounds pretty great right now…). 

Whichever method you choose, make sure you stick with it and see it to the end. Perhaps you and a friend can start the journey to freedom together by holding each other accountable. Regardless, it may very well take a lot of prayer and determination to see it through. Cast your burdens on the Lord as you make your way through this journey. It would be my prayer that anyone reading this would be encouraged to start to repay that debt. We serve the One who paid in full the debt of our sin. How great it would be to be debt free in more ways than one in 2022!

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