My husband and I were looking at our dream house. Wood floors, three bedrooms with a bonus room over the garage, and the master bath garden tub I'd always wanted. After taking a job in a new city, we'd been living in a hotel for six weeks with our 2-year-old son. Now we were walking with our realtor through the empty rooms of the house we just knew we were supposed to have. But we couldn't convince the mortgage company to agree.
The problem was our debt ratio. We had credit card balances, student loans, and car notes but no savings or down payment. After many desperate, tearful prayers and discussions, we quietly moved out of the small hotel room into a rented condo, wondering if we'd ever be home owners.
Caught in the frenzy
If you've been through a similar tale of disappointment because of debt, you're not alone. Household debt levels continue to rise. As consumers who love to share the wealth, the average household splits its debt among seven to 10 credit cards. Few people are paying those monthly credit card balances in full - piling on even more debt in the form of interest and finance charges.
In convincing ourselves that our rate of spending is normal, that we deserve more, and that we can't live without more, we become slaves to debt. And the effects of debt are felt way beyond the wallet. The burden of owing someone weighs heavy on relationships, work, attitude, fulfillment - virtually every area of life. It puts major stress on marriage and families. In fact, financial stress is the leading cause of divorce today.
But the good news is you don't have to be a slave to debt. No matter how bleak your debt situation, there is light at the end of the tunnel. For most, however, it's a matter of first regaining hope.
"Debt, which robs your ability to build wealth, is usually the result of lost hope," says Dave Ramsey, host of "The Dave Ramsey Show," a nationally syndicated radio program. "We have been sold debt so thoroughly that it has stolen our hope. People who have hope, grown from vision based in values, are savers and investors; they think long-term. Where there is a lack of hope, we cripple our ability to build wealth and long-term relationships of value."
Turning things around
Scott and Donna MacPherson of Alexandria Bay, N.Y., admit that financial freedom eluded them for much of their 25 years of marriage. Both in their early 40s, they had well-paying jobs but consistently lived paycheck to paycheck. After going through a finance course at their church, they knew that had to change. "We had more than $200,000 in debt at the time," Donna says. "The lowest point for us came after realizing how much debt we had and seeing what we owed versus what we owned. We had nothing. Everything had a loan attached."
The MacPhersons started selling many of the "toys" they'd bought over the years - a 33-foot boat, a 23-foot camper trailer, even Scott's 1966 Thunderbird convertible. They established a budget. They cut up more than 20 credit cards. They did away with extras like cable television and eating out. That was two years ago. Now they're completely debt-free, including their house.
For most of us, success stories like the MacPhersons' tug at the core of our hearts. Why? Because we long for freedom in our lives. Think about it: If you were debt-free, what would you do differently? Work fewer hours? Invest in a worthy ministry? Save for your kid's college? Spend more time with God?
The path to financial freedom
Obviously, you can't arrive at financial freedom overnight. The journey to debt-free living involves commitment, perseverance, and discipline - and lots of it. Once you've established a sense of hope and have resolved to turn your situation around, you can begin your journey following these steps:
Step 1: Acknowledge God's ownership
Stewardship isn't just about tithing. It's an active attitude of acknowledging that what you have isn't yours; it's God's, and you've been entrusted to manage it.
People experience an enormous sense of freedom when they're no longer "slave to the lender," as Proverbs 22:7 says. That freedom increases with the joy of being able to use money - once tied to debt - for ministry.
Step 2: Develop a cash-flow plan
Most people cringe at the thought of planning a budget, and Glenn and Joann Banfield of Horseheads, N.Y., were no exception. "A budget seemed like such a foreign concept," Joann says. "But it helped us see where all our money was going."
After writing down their typical expenditures, the Banfields were shocked to discover they spent more than $1,000 on Glenn's truck each month, including monthly payment, insurance, upkeep, and gas. They quickly sold the truck, instantly eliminating $40,000 of debt.
Step 3: Build an emergency fund
Like it or not, Murphy's law comes into play when you're on a mission to break free from debt. Without anything saved for a rainy day, the smallest mishap could end up costing you big-time. What happens when the brakes go out in your car? Unless you have a knack for auto repairs, you'll have to pay someone to fix them, usually for a minimum of $500.
If you roll that onto a credit card already loaded with a $2,000 balance and pay only the monthly minimum, at 14 percent, your yearly finance charges will add up to almost another $500. That's a brake job that's hardly been paid off by the end of the year! The typical minimum payment on a credit card is 90 percent interest and 10 percent principle, yet 48 percent of consumers pay only the minimum each month.
You can avoid accruing debt by creating an emergency fund. Begin by saving up $1,000 in the bank right off the bat. Your emergency fund goal, according to Ramsey, should be three to four months' salary in savings. Then you'll have cash freed up when Murphy makes a house call.
Step 4: Attack with vengeance
Whether you owe a little or a lot, deciding to be debt-free can drastically improve your family's future. But every war against debt needs a battle plan. Begin by identifying your debts.
Make a list of every debt you owe, from smallest to largest. Attack the smallest first, while making minimum payments on the others. Once the first debt is paid, concentrate on the next in line. Take the money you used for the now paid-off debt and put it toward the next debt on your list, along with the minimum amount you were paying for this debt, until they're all paid.
Sounds simple enough, doesn't it? It's what Ramsey calls the "debt snowball" method. By the time you reach your final debts on the list, your payments are large, and the payoffs come quickly.
As you progress, cut excess spending and apply those savings to debt reduction. That may mean taking a weekend trip rather than a week-long vacation. It may mean going cable-less for a while or cutting back on your phone plan. If you have children, it may mean attacking debt as a family and teaching your kids how to save. Take a hard look at every dollar you spend.
The truth is, we're called as Christians to be good stewards of our money. As much as God desires us to bear fruit from our individual gifts and talents, He wants to see us free from financial bondage. For many, this requires a change in thought patterns and spending habits.