In God We Trust

Teaching You How to Get OUT of Debt and Live Debt-Free

Archive for the ‘Debt’ Category


At some point in assessing your debt situation, it becomes clear that you are under water, upside down — in trouble. What to do, what to do?

If you had been living by Spending Less than You Earn, you most likely wouldn’t be here, But, here you are with no idea where to go next.

Your debt comes from several decisions or circumstances.

  1. You bought a car
  2. You bought a house
  3. You bought lots of “stuff” using credit cards
  4. You lost your job
  5. You got sick
  6. You went to school

One of the temptations is to “consolidate” your debt to make it more manageable. This means to gather your outstanding debts and roll them into one larger loan, and make the payments lower.


Most Financial Planners will recommend that if you have any available equity in your home, that you take an equity loan and pay off your credit cards and car loans. They tell you that you’ll be paying tax-deductible interest at a lower rate than the credit card rates.

This is true, But, it also puts your home as collateral for that loan. This puts your home in jeopardy of foreclosure for that hamburger you ate 3 years ago and have still been paying for with your minimum payments.

Replacing many debts with one big one is not Avoiding Debt.

Experience shows us that unless you conquer your Spending Problem first, you’ll just balloon debt up to un-manageable levels and THEN what will you do?

And if you don’t have a house?

The only time Consolidation makes much sense is your Student loans. When your loans begin to come due, chances are good that your dream career hasn’t taken off, yet, and the payments are too steep for your income. The government has made it easy to consolidate or re-finance these loans. They can actually work in your favor.

No, consolidation is generally one of the last places to go when getting your debt under control.

The first place to go is your Spending. Get your Spending inline with your Income and not your dreams. Then you can make progress OUT,


You have a SPENDING Problem.

Ecclesiastes 5:10 – Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income.

In all our counseling with couples and individuals in debt trouble, we find that most had simply spent their way into a precarious credit situation. They were not thoughtful about how they spent their income. They had no budget, no discipline, no good habits, no plan. They spent themselves into trouble.

When trouble came in the form of illness, or accident, or layoffs, their financial indiscretions came due. They were “upside down” and did not have enough current income to cover past-due bills.

It seemed like an income problem, but its roots were in past spending.

Spend Less Than You Earn

This is the key to any financial plan. You MUST have a surplus each month, or you will end up in debt. I like to have any Spending Plan end up with “Plus 1”. If you end up the month with only $1 ahead, you are ahead for sure.

The problem with most people is that they count their credit card Payments as spending. They forgot that they Charged MORE than they had. If you can’t pay off your Credit Card bill – in full – each month, you are spending more than you earn.

How does this work?

The credit card companies will gladly extend “credit” to you in exchange for you paying them “interest”. That is their business – earning interest on your purchases. You gladly let them charge you interest because you WANT that something more than you want the money it costs.

Each Billing Cycle, your bill arrives with a Minimum Payment listed for you to pay. In fact, it might be hard for you to locate your actual total due. You THINK that the Credit Card company is giving you a financial break by only making you pay 2-2-1/2% of your balance each month.

“WhooPEE! I have extra money to spend this month!!!”

No. You don’t.

The Penalty of Interest

If you can track down the figures on the bill, you’ll find the “Monthly Service Charge” for the month. If you do some simple arithmetic, and subtract that Service Charge from the Minimum Payment, you’ll be astounded to find that nearly ALL of your minimum payment is in this Interest or Service Charge.


The Credit Card companies are in business to make money. They make it by charging you Interest. They know how to make a LOT of money. When you pay just the minimums, THEY make lots and lots – from YOU. And you LET THEM!

Many studies show that just paying the minimums – without making any more purchases – will take 18-30 years to pay off. Do you even remember what you bought 20 years ago? You’ll be paying for THIS thing for another 20. Is it REALLY Worth it?

AND, you keep on buying and buying and buying, because the Payments are affordable!

As long as you keep on buying, charging, and paying the minimums, you are the Credit Card companies’ FAVORITE Customer. They’ll give you Preferred Status, enlarge your credit limit, give you incentives and gifts and prizes. And YOU love this and keep on doing what THEY want you to do – Buy – Pay Minimums.

The ONLY Way Out

Well, you’ve probably figured out what I am going to say. But, It needs to be said. You can’t keep doing what you’ve always done and expect to get different results.

  1. Stop Adding Purchases to your Credit Cards.
  2. Pay Cash for what you need to buy.
  3. Pay MORE than the Minimum payments on your Credit Card Bills.
  4. Spend Less Than You Earn.

We’ll discuss ways to do all this in future posts.

In the meantime, become aware of just how much you are spending by keeping track for a month. Take a pocket notebook, or piece of paper and just write down Everything you spend for a month. When you are done, add it all up. Did you KNOW this was how much you were spending? YIKES!

Keep your eye on what is going OUT.