Managing Well Series – Part 2 – November 2, 2008
Act your own wage!
We live in a culture of instant gratification. Buy it now and pay later. Now this causes enormous complications both personally, as couples, and for our households.
The Bank of Canada reports that ‘for every dollar of disposable income, Canadian households owe nearly $1.25 in debt, a record high, and nearly double the 67 cents per dollar of income they owed in the mid-1980s.
The Bank of Canada concludes that Canadian debts continue to rise much faster than our incomes.
"Household debt continues to rise at a robust pace - about 10 per cent year per year ...," it says. "The increase in debt has contributed to a further rise in the debt-to-income ratio."
I have entitled this message, part two in our Managing Well Series, ‘Act Your Own Wage.’ Last week we clearly saw that God owns everything – and he commands Christians to use worldly wealth now for his kingdom purposes. In fact Jesus called the Jewish farmer a fool for coveting all his goods for this lifetime and not being rich towards God’s work.
Today I am going to give you a simple message on how to become debt free. There are several points to this message but they are all necessary for D-Day, debt free day.
So were here to talk about the debt trap. Now you may be thinking why is debt a trap? It is a trap because it enslaves you. King Solomon, in the 10th century BC wrote ‘Just as the rich rule the poor, so the borrower is a servant, literally a slave to the lender.”
The dictionary defines debt as ‘money owed to credit card companies, bank loans, money borrowed from relatives, a home mortgage, and automobile or leisure loans. Bills that come due such as the monthly utilities, house taxes, gas and oil bills, are not considered debt if they are paid on time.
Any time you take a loan you are obligated to pay it all back to the lender.
Now here is the type of thing I get in the mail. Dear Mr. Hamel. Congratulations, you are one of the preferred people who are approved for a new MC Credit card with $20 thousand privileges.
Credit is convenient and offers benefits cash doesn’t.
• $0 fraud liability.
• You can’t replace cash, but it’s easy to replace your Capital One MasterCard
It’s smarter because credit gives you added benefits and features that other methods of payment can’t match.
• Credit cards are great for renting cars, reserving hotel rooms, making internet purchases and having emergency cash.
• You get a 25-day interest-free grace period when you pay your balance in full each month—giving you the extra time you need to pay back purchases.
• Plus, detailed monthly statements help you keep track of exactly how much you are spending and where.
Here is what they do not tell you:
o Those who make all their purchases on credit cards spend up to 33% more each month
o If you cannot pay it off each month you will pay 19% interest each month until the whole original balance is paid off
o You will become our slave once you sign for this. If you cannot pay we will come after you with legal recourse and we have lawyers you will never be able to afford
And whenever you see those credit applications there are two words you will not find anywhere, slave and debt. Nobody likes those words. Make no mistake about it – they are selling you debt. We want you to be in debt to us.
Here are 5 danger signs of the debt trap. These are warnings that were going to get ourselves in trouble.
i. Were living on credit to maintain our standard of living (Prov. 22:26-27). We can fight that by using cash and debit cards as much as possible – don’t put off paying to the future by using your credit card. An example would be a new living room set at Gould’s and making monthly payments. How do you know if you’re living on credit? It is really simple – the balance is going up and you’re not able to clear the whole amount every month. I heard about a man whose wife’s credit cards were stolen but he did not call to cancel them. The reason, he said, "the thieves were spending less than she was." Indeed debt has become a big problem for many of us.
Of course the flip side is you guys spending $10-15 thousand on an ATV or boat and yelling at your wife for spending $100 at the Norwex party
Living on credit shows two basic problems:
a. Were spending more than what we have. “Any government, like any family, can for a year spends a little more than it earns. But you and I know that a continuance of that habit means the poorhouse (Franklin D. Roosevelt, 1932). You have kids and they have needs for clothing. But they do not need designer clothing. There is nothing wrong with a good used winter coat or a second hand bike.
b. Were living presumptuously (James 4:13-15) – we have pre-determined that were going to have health and income in the future – God never guarantees me that I am going to make as much in the future as I do today – He only promises to look after my needs
o What if you’re disabled next week?
o What if your job is gone next week?
o Let’s just admit it right up front ‘it is fun to spend money’
ii. Delaying payments, late payments and the minimum due amounts. That is a red flag that something needs to stop regarding my spending (Romans 13:8)
iii. Were unable to tithe or save (Mal. 3:8). Based on this scripture if I am over-extended and cannot give then I am using God’s money to pay my bills or to buy things I don’t need. I am robbing God of what is His and using God’s funds for other things.
iv. I am unable to pay taxes; either income taxes or municipal taxes
v. I have extravagant spending –Prov. 23:20-21. Don’t indulge in luxuries, fine wine, fine food – they are unnecessary. Filet mignon and white crab legs with expensive wine. You don’t need to eat that richly – a good salad and one burger is just as healthy for $3.00 as fine wine, crab legs, lobster tails – you get the picture.
You have often heard it said it is hard to buy something for the person who has everything. That is not true – our baseball caps wear out. Our portable coffee mugs break down. Our socks wear out. A package of fishing jigs is $5.00. It is not true. It is actually easy to buy a gift for the person you perceive has everything. And those are all under $20.00.
One advertisement offered a premium nose hair removal for $199.99. Wow we have arrived! My advice to you – don’t buy it – there is a cheaper way! Well, I won’t go there.
When you think I will get it all on credit – watch out your headed into the debt trap.
Extravagance can go into the area of cars and boats. Let’s take a practical example.
You’re thinking of getting a new car because old Betsy is going out to pasture. You’re thinking I cannot get $250 for this beast. And the advertisement says ‘drag it in here and we will give you $1000 for Old Betsy. You may think this is great but they got you on the other end. You buy a new Toyota Corolla for $23,900 taxes out. Great small car. Drive it off the lot and you have lost $7000. Furthermore make car payments and you will pay $28098 with an effective rate of interest of % 6.65, their best rate.
A better plan would be to but a used Toyota Corolla like mine. It is fully certified with only 128 thousand KM and will sell for about $10 thousand. That is a difference of $18 thousand. If you do your oil changes on the used car it will last for seven more years. I can go all the way to Winnipeg on $30.00 in gas. You can use the savings, $18,000 to pay off your mortgage faster.
Here is another area of extravagant spending. We have to get a new home; got to have 3,000 square feet. After all the baby needs more space, even though the baby cannot even talk yet.
Then you both have to work full time; the kids never see you; when all they want is your time; you have to work Sunday or your so exhausted God’s work takes second fiddle. Don’t get into that trap.
Another sign is your always looking for get rich quickly ideas. The Bible says run from quick get rich ideas (Prov. 21:5). We need to just steadily work toward being better off – don’t wait for your ship to come in. It is not coming in!
Some people are always playing the lottery – there is a name for lottery players – loser. You are more likely to get hit by a falling star than to win the lottery. For example, the Canadian 6/49 Lottery has 6 numbers drawn from a total of 49 balls with the numbers 1 through 49 on them. The probability here is 1 in 13,983,816. Keep your money. Do you want to know what one of my pet peeves is about the malls in Winnipeg? You cannot get any information from the clerk at the Information Booth because they are too busy selling lottery tickets – they line up twenty deep to buy them.
Furthermore stay out of casinos. God’s Word teaches that we are to love others more than ourselves. God’s word teaches us to seek first the Kingdom of God and His righteousness. When we do things that hurt others, we violate that principle.
I believe gambling is a sin according to the Bible. The scripture is full of verses about God being our provider; we do not need to gamble for our needs. I worked in Social Services for 13 years. If you think that no one is hurt by gambling, then go back in time with me to the people who have gambling addictions. The fact is the government takes in gambling tax dollars and pays some out for gambling counseling. Ask about the wives, husbands, and children of gamblers. These are the real losers. Toddlers whose baby milk is being gambled. Don’t do it and do not be part of it. The Bible says that in the last days people will be ‘lovers of pleasure rather than lovers of God.’ Going to casinos has nothing to do with godly living and everything to do with pleasure.’ Furthermore you are gambling alongside people with laundered money; yes criminals who have made money with drugs and human trafficking. Gambling is foolish – it is like you have taken your brain out and set it on a shelf – don’t do it.
It was not that long ago that someone sat in the parking lot of the casino in Winnipeg and shot himself. You should count it a blessing that we do not have casinos, VLT machines and strippers in the Red Lake area.
The Bible says don’t gamble – don’t go to Lost Wages for your vacation. You would be better off to spend that money packing shoe boxes for Samaritan Purse (Psalm 82:3).
I have met with people whose debts looked humanly impossible but there is a way out. If you will follow God’s financial plan you can beat this thing. Now if I did not believe there was any hope in getting out of debt I would not waste your time today with this message. There are lots of other things to speak on. But these principles are from God’s word and if you follow them you can have success. What are they?
1. Commit to becoming debt free now. Not tomorrow, next month, next year, but today. It always starts with a commitment (Psalm 37:21). God says when you make a commitment to incur debt He wants you to pay it all. Bankruptcy is legal but it is not moral. It is wrong to make other people pay for our excesses. It is wrong to make others pay for our bad decisions. It is easier to get into debt than out of it. It is going to take endurance and persistence to get out of debt. But most of all it takes character to get out of debt. The only way to get out of debt is to plan and work at it.
2. Start paying God and myself first. That means right off the bat I get my cheque and I apply the 10-10-80 principle. I pay God the first fruits, 10% to God at the local church. I pay myself second; I save 10%. You save for a rainy day – you save 10%. Then you live on the rest. If we cannot do it then were spending too much or we may need to earn more. But I will help you. We have Crown Financial – they will help you. Apply God’s principles and you will slowly become debt free. Where does your ability to make wealth come from – God and yourself – yet these are the last two entities we often don’t pay. Were paying all our creditors for things and robbing God and ourselves.
You say I cannot afford to tithe; I cannot afford to save – you cannot afford not to. If we want God’s blessing in our lives financially we must do it God’s way. The Bible says the purpose of tithing is to teach us to fear God (Deut. 14:23).
Can I be very practical? Let’s say your thirty years old. Let’s say household income is $80,000 per year, which I understand is about normal for this area and many of you make considerably more. Let’s say you work at that salary level for 35 more years. Here is an example of what you can do:
1. You begin to tithe at 10%. That amount would be $280 thousand to God’s work over 35 years. Now any Christian, who does that, should be proud, that is in a good way, for the contribution to God’s work. You will have contributed to the greatest investment you can ever make; the work of the Lord Jesus here on earth – you are storing up treasures in heaven. Imagine how many lives could be touched, how many church plants could be funded. I worked for the automobile industry; then heavy duty earth moving equipment. In the end it is just equipment; things that rust. But when you invest in God’s work you’re playing for keeps, for eternity.
2. You begin to pay yourself second. You save at 10%. You contribute to an RRSP, not a risky one, at $8,000 per year for 35 years. If you earn only 4% per year, your fund will have $612,787. That is on top of any pension funds you may have. That is a nice sum – which you can use for later years in life, God’s work, to help your children or grandchildren. Ask anyone who is my age and up – their advice to you will be save early and do it consistently (Prov. 13:11).
3. Reduce your taxable income. With an RRSP of $8,000 per year your taxable income will be lower by approximately $2,500 to $3,000. You can take that refund and tithe the first 10%; then you can apply the balance directly against your home mortgage. It will go directly to the principle on the loan and will cut years off your mortgage. Do it every year and watch your mortgage dissipate.
Folks this works; you just have to work at it.
4. Do an inventory of your financial net worth. If you don’t know what you own and owe how can you evaluate where you’re at?
5. Sell some things – use this cash to pay your debts down. You have to decide whether you want status or stress. Take cars for instance. Cars are not for status. They are to get you from point A to point B. If you have two or three vehicles do you really need that many? Many people have leased vehicles and are now in shock. They got them to have the status of a new vehicle. When the lease is up they are returning them to find out there is this whopping repair bill at the dealership. Some of us have two cars, a newer boat, an ATV, snowmobile, all these things – but now were thinking we need a new boat, new car, new ATV – we don’t stop and think we have to maintain all those things and insure them. Think it through carefully – maybe there is something you can sell. Each of us needs to seek God in prayer about our finances. If God speaks to you to sell an item and you say ‘I could never do that’ there is a word for that item ‘an idol.’
6. Set up a repayment plan. You will never get out of debt accidentally. You must have a plan. Even if it only starts with $20 per week – well that is a plan. One person told me about their plan and sadly they never attend a local church – they work so much – debt is a stranglehold – and it can happen to you and me.
7. Get Advice (Prov. 15:22). If you had a major illness you would get some medical advice. If you got some major car issue you would get some mechanical advice? Why would you not seek financial advice? Why? When you’re ready to make a big purchase your emotions get in the way? Now I have worked with people for a long time. At one time we owned a tax business and I am a Certified Management Accountant, and worked in Counseling. I noted that many people come for marital advice, depression counseling, pornography addictions, alcoholism, anger issues, and all kinds of things.
But very few ask anyone for financial advice. Do you know why? I will tell you why. ‘I want what I want when I want it and I don’t want anyone telling me I cannot have it.’ But that is what is needed. You need someone to objectively tell you, someone who is not emotionally involved, to tell you no. No, you cannot afford that 4,000 square foot home on the lake. No, you cannot afford that $40,000 vehicle. Patch up the old one. Debt is like any other addiction but ‘in the multitude of counselors there is safety.’
I recall working with a couple in Southern Manitoba. She was paying $30.00 per month in service charges for her chequing account. They had come for financial counseling but really chose to ignore my advice. I said you paid $1,000 in service fees in the last three years that is totally unnecessary. I bank with Presidents Choice, a division of CIBC. They have no service fees. I have saved $3,600 in service fees over the last 10 years. My advice to you is to switch financial institutions. Her response was ‘I do not believe you. There must be a catch.’ I stopped counseling them – they did not want to listen to anything I had to say.
8. Pray – Luke 18:7. You will be amazed at what you can do with God on your team. God plus you equals the majority
9. Stop over-spending. Here is a helpful tip. Let the best money manager in your marriage manage all your finances – 100% of the time (Ephesians 5:21).
10. Learn to spend less than you make every month
11. Add no new debt. Most of you got into debt for one reason – you spent more than you make. So here is a solution. If your way in debt because of too many credit cards go home and do some major surgery. Take your scissors and cut up all your cards. Use cash only to buy things. Do not borrow any more money. Or you say I know that is my problem, too many credit cards but cutting them up will not work. OK, then have a baking party. You have Norwex and other parties. Take out a cookie sheet and put all the cards on it. Heat your oven to 350 and put the cookie sheet in there. Watch them melt away. I am encouraging you, if you cannot handle the cards, then do plastic surgery (Hebrews 13:5). Jesus tells us to be content with our pay. When your charging things with credit that you cannot afford your into a viscous trap.
12. Share my plan with my creditors. Write a letter to your creditors and let them know you have a plan. You can even beg for mercy. If you will be honest with your creditors most will have mercy on you (Prov. 16:7). Sherry and Dennis story.
13. Stick with the plan (Gal. 6:9). Getting out of debt takes discipline, prayer and time.
With that background start reducing your debts. Start with your highest debt. That is the one you’re paying the highest interest costs on. Begin to pay that down. For example, if you have a credit card debt of $5,560 at 18% interest it will cost you $1,000 in interest annually. If you pay the lender $1,000 each year for 40 years he will have earned hundreds of thousands of dollars if he earns 18% on your payment. He knows how to make money off you. It is called loan sharking.
Then after you pay off your highest debt take the payment you have been making and use it to pay the next debt off. You’re already paying that out so apply it to the second debt; then the third and so forth until you get it all paid off.
I want to make it clear that borrowing is not a sin. Christians who borrow and churches who borrow are not in sin against God. But the Bible usually speaks of borrowing with negative consequences so be careful.
Romans 13:8
Proverbs 22:7
Duet. 28:1,2; 12
What then is the basic problem with borrowing or debt? It presumes upon tomorrow. We are making the assumption that we will have enough tomorrow to pay off the debt. Scripture cautions us against presumption (James says not to boast about tomorrow)
So are you saying Pastor we should have no debt? Scripture is silent about when we can owe money. Crown Financial advises that it is ‘possible to owe money for a mortgage or a business or vocation. This possible debt is permissible if the following three criteria are met:
1. The item purchased is an asset with the potential to appreciate or produce an income (that is not a car).
2. The value of the item equals or exceeds the amount owed against it
3. The debt is not so large that repayment puts an undue strain on your budget
Rick Warren says “It has become such a prevalent addiction in our society that there are organizations such as ‘Debtor’s Anonymous’ and ‘Shopper Stopper’ set up to deal with it. These organizations come up with all sorts of creative ways to help people break the impulsive buying habit. They suggested to one lady that she keep her credit cards in a bowl of water in the freezer. Then, if she got the urge to spend, she would have to wait for them to thaw first. By then, they said, the urge would have passed and hopefully her sanity would have returned!”
Warren says he told this story to his congregation. Later, he received a letter from a fellow in his church. The letter said, “Pastor Rick, a certain husband in our church buried his wife’s credit cards in the cement of the new room addition because ice cubes melt…”
Conclusion
Let me summarize this up:
o Pay God first at a 10% tithe
o Pay yourself second at 10% savings
o Live on the rest
o Begin to pay down your highest interest cost debt first
o Then work on the next debt
Wouldn’t it be exhilarating to be debt free? I am working on these principles right now. You can to. With God’s help and applying God’s principles you can do. Why don’t you start today!
As I thought about this message there is one debt that we can never repay.
That is the debt of your sin. But if you’re a Christian today remember this, Jesus paid it all. He paid the debt. He paid it in full (Col. 2:13-15).
When you accept Him as your savior, the debt is paid and the guilt is gone (Romans 8:1).
Now you may be able to pay your financial debts in this lifetime. But our sin is a debt we can never repay.
Communion.
