Debt Sermon
Proverbs 22:7
As the calendar turned to the New Year, the talk of the country was the “Fiscal Cliff.” That started the conversation about our country’s national debt. As of this week, our national debt as a country is $16,822,348,570,124.50. The country’s annual budget deficits have exceeded 3 trillion dollars the last few years. But the debt that most people aren’t talking about is the average American household debt. Last week, we talked about American’s attitude of entitlement. Nowhere does that attitude do more damage than in one’s finances. An attitude of entitlement leads us to believe we’re deserving of whatever we don’t have or what others have. So we go out and spend money we don’t have, putting it on credit cards and worrying about paying for it later. This is the phenomena of “Keeping up with the Jones” and it’s widespread. CNN Money writes, “The rich are getting richer, and everyone else is going deeper into debt trying to keep up.” The average American family is in debt. They have an average credit card debt of $15,950. But our debt doesn’t stop there. The average student loan debt is approximately $23,000. The average household mortgage debt is $149,782 and many of those households owe more than their home is currently valued. Today, the average American owes approximately $47,000 while the average American salary was $41,673.83.
Excessive personal debt is taking a huge toll. First it causes emotional and physical problems. Debt causes stress and depression leading to lost sleep, lost hair and health issues including ulcers and stomach problems as well obesity. Second, it affects our work causing more missed days of work and diminished performance over time. Third it is the #1 cause of divorce. Excessive debt leads to feelings of anger, blame and arguments that divide and harm marriages beyond repair. Fourth it causes bad credit which can impact your ability to purchase a home or a car. Fifth is eviction from a current residence or even foreclosure. Sixth is wage garnishment or even bankruptcy.
That’s the bad news. The Good News is that the overall average debt of Americans is down $524 billion nearly 40% since the recession started in 2008 and for the first time in decades Americans are actually saving money rather than spending more than they earn. And while owing less is a good thing, the study shows that we're burning through our savings to pay our debts down. The overall net worth of the average American is down nearly 40% from 2007 to 2010, though a large part of that is due to the housing market.
The debt and credit system has always been with us. It was an active and important economic component of the Israelite community. There are, however, crucial differences between our debt system and theirs. In ancient Israel, debt was a function of survival and a ministry to the poor. Those without any other survival options were forced to borrow. As a result, the lending systems was established as liberally as possible. You would not charge interest (Ex. 22:25), you would not remove items necessary for one’s livelihood to pay their debt (Deut. 24:10-14), and you would forgive all debts every seven years (Deut. 15:1).
The biggest biblical concern with debt revolves around two issues: servitude and obligation to debt creditors. The Bibles speaks about a nation’s debt. The Lord was promising to make Israel a powerful nation and spoke in terms of borrowing and lending to represent the strength and weakness that is inherent in lending and borrowing. Deuteronomy 15:6 says, “For the LORD your God will bless you as He has promised you, and you will lend to many nations, but you will not borrow; and you will rule over many nations, but they will not rule over you.” When a nation is indebted to someone, they can exert influence over you. Our nation’s leaders should listen to Biblical commands about debt and stop spending money we don’t have. Our enormous debt as a nation is going to be a burden passed on to future generations.
The Old Testament also speaks about individual debt: “Just as the rich rule the poor, so the borrower is servant to the lender.” Proverbs 22:7 When you’re in debt, you’re a slave to the lender. You might not realize it, but they control a good deal of what you do – what you buy, where you go and even how or where you live. God does not want us in bondage to anyone or anything. Instead, he wants the freedom that Christ provides us spiritually to be experienced in every other area of our lives. 1 Corinthians 7:23 says, “God purchased you at a high price. Don’t be enslaved by the world.” Debt ties us down and dictates our future. Each debt we assume offers us less personal choice for the future. Eventually, our false hope for the future will be sold away because of our discontentment with the present and the spending it causes.
While the Bible warns against debt and extols the virtue of not going into debt, it does not forbid debt. The Bible does have harsh words of condemnation for lenders who abuse those who are bound to them in debt, but it does not condemn the debtor. Several times in the Bible we see that a fair interest rate is expected to be received on borrowed money (Proverbs 28:; Matthew 25:27. In ancient Israel, the Law did prohibit charging interest to the poor (Leviticus 25:35-38). This law had many social, financial, and spiritual implications, but there are two worth mentioning. First, the law genuinely helped the poor by not making their situation worse. It was bad enough to have fallen into poverty, and it could be humiliating to have to seek assistance. But if, in addition to repaying the loan, a poor person had to make crushing interest payments, the obligation would be more hurtful than helpful. Second, a lender foregoing interest on a loan to a poor person was seen as an act of mercy. The lender would be losing the use of that money while it was loaned out but also helping someone in need. Not charging interest to the poor was seen as a tangible way of expressing gratitude to God for His mercy and the grace He has extended to them. Just as God had mercifully brought the Israelites out of Egypt when they were nothing but penniless slaves and had given them a land of their own, so He expected them to express similar kindness to their own poor citizens (Lev. 25:38). And for us, Jesus has paid our debt to God caused by our sin. Thus, as we have opportunity, we can help others in need with loans that do not escalate their troubles. Jesus even gave a parable along these lines about two creditors and their attitude toward forgiveness (Matthew 18:23-35.)
The Bible neither expressly forbids nor condones the borrowing of money. Instead it teaches that it is usually not a good idea to go into debt. Debt takes away our freedom and makes us a slave to the one who provides the loan. With that in mind, a Christian can take on the burden of financial debt or loan if it is absolutely necessary, as long as money is being handled wisely and the debt payments are manageable, The reality is consumer debt drives the American way of life. Debt allows you to buy your home, get an education, and purchase a car without having to save for it.
But all debt is not created equal because of the interest rate. There is a wide range of interest rates on different kinds of debt. Some cars are being sold at 0% interest or 1.9% interest. As of today, the average rate for a 30-year mortgage is around 3.6%. Compare that to the average credit card interest rate at more than 13%. There are two main types of consumer debt: revolving debt, like credit cards, and non-revolving debt, like auto loans and mortgages. Revolving debt is meant to be paid off every month. Non-revolving debt or loans are meant to be paid off over time. Both stimulate economic growth. When we buy things and finance them, jobs are created. A part of what has caused the greatest economic slowdown since the Great Depression is that people have stopped spending, albeit many times spending money they didn’t have. And so the government’s answer to our economic slowdown is to try to get you to spend more of money which was part of the stimulus funds you received. Their hope was to return you to the spending levels prior to 2008 when a large number of Americans were living above their means. Odysseas Papdimitriou writes, “At the heart of the problem is the notion that economic recovery allows us to revert back to pre-recession spending habits.” This mindset is ingrained in us. Consider the title of this article in the NY Times: “Rise in Household Debt Might Be Sign of a Strengthening Recovery.” In that article, Annie Lowery leads off her article with these words: “In a shift, Americans are taking on more debt than they are shedding, indicating that a more resilient recovery is on the way.” Do you hear how crazy that is? As Christians, we cannot continue to live above our means, spending money we don’t have and going deeper in debt, even if it means economic recovery. Because eventually, the weight of that debt burden will come crushing down as it did in 2008.
Yet, the reality is it’s almost impossible to live debt-free; most of us can't pay cash for our homes, our children's college educations or even a new car. If we live with debt, we need to realize that there is good debt and bad debt. Good debt includes anything you need but can't afford to pay for up front without wiping out cash reserves or liquidating all your investments, like a home, your education, or a car. The key is just to make sure you don't borrow more than you can afford to pay back, and when you do finance something, shop around for the best rates. In cases where debt makes sense, only take loans for which you can afford the monthly payments and still meet all of your other financial obligations. Bad debt includes anything don't need and/or can't afford (that 70” flat screen TV). The worst form of debt is credit-card debt, since it usually carries the highest interest rates. Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full or just pay cash. People spend 34% more when they are charging it on a credt card than they do when they spend cash. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.
If you’re in debt and are ready to make a change and follow God’s advice for you, follow the snowball plan from Dave Ramsey. First, list your debts from smallest to largest. Show the amount owed on each debt and the minimum monthly payment on each. Second, focus on paying off the smallest debt first. Each month, pay the minimum payment on all remaining debts but the smallest one. Pay the remainder of your budget for debt payments on the smallest debt. This will allow you to retire this first debt quickly, gain some confidence, and move on to the second debt on the list. Third, once the smallest debt is paid off, move to the next smallest debt remaining and attack it. Fourth, continue the snowball until all of the debts have been retired
Francine Bostick keeps her monthly bills in a basket on her desk at home. Also in that basket is a clear plastic sandwich bag containing 13 cut-up credit cards – a reminder (and a warning) of the decades of credit card debt she built up. Francine and her husband, Jim, didn’t look like they were in debt. They had no fancy cars or clothes. They’ve never owned a flat-screen TV or the latest smartphones. Neither was laid off or faced a (major) medical problem….And they suffered no addictions to alcohol, drugs, gambling, or even shopping. She says, “I really can’t point at one thing,” Francine recalls. “We just didn’t realize (how much) we were spending…If we wanted something, we just bought it. If it cost $200, we didn’t think about whether it should cost $50.” With none of the typical warning signs – a mansion, Porsche or exotic vacations – their debt grew steadily and quietly. It was so unnoticeable to family, friends, and even themselves (at first) that Francine describes it now as “easy.” For a long time, Francine knew she was in trouble but did nothing about it. “I was not sleeping, trying to figure out how I was going to pay my bills,” she says. The hardest part was admitting she had a problem. She got credit counseling, drew up a budget which took three times to get it “right” because she just couldn’t understand she didn’t need things like cable when she only watched four stations. She just didn’t quite understand the concept. Even worse, “she didn’t know how much debt she had – because she didn’t want to know. But she and her husband put a plan in place. For five years, she worked second jobs working four hours a night, four nights a week for her local school district – as a janitor and selling Avon on the weekends. They lived on a very lean budget, and paid $2,496 each month toward their debt repayment plan.” And in five years, she paid off $120,000 of credit card debt and now is building up a modest savings account and re-establishing her credit. She doesn’t want her children or grandchildren to make the same mistake she did. She was afraid because she didn’t want to have to work till I’m 80.” Now she knows she won’t have to. (From the Christian Science Monitor)
God doesn’t want you to be in debt. It’s as much a financial issue as it is a spiritual one. Jesus died that you might have freedom, freedom in every area of your life.
