Over the years I've seen several trends in how people approach debt. Some people fully embrace the idea of Christ-centered financial wellness. They work diligently to get out of debt as quickly as possible.
Others reject it completely, choosing instead to continue to live their financial lives the same way they did before coming to know about our plan.
Everyone else...the vast majority of people...choose to live at the corner of comfortable and debt free.
They see the value in making a change to their current situation, immediately begin to implement a zero-based budget, get beyond their current crisis (typically the reason they started the process to begin with) and promptly...do nothing else.
They quit. They lose their enthusiasm. They stop making extra debt payments. They go on vacation. They buy a new something and do not use cash, thereby incurring more debt. They eat out often.
3 KINDS OF PEOPLE
If you're on fire to get out of debt as quickly as possible, chances are really good that nothing is going to stop you. Keith and I have been these people since we got married, picking up steam on our debt snowball and continuing to plow through it with a vengeance. Even with all of the obstacles we've faced (just got a $2000 tax bill from the IRS for 2015...not 2016...2015), we're determined to press through to live a life free of debt.
If you're at the other end of the spectrum and continue to live without a budget and beyond your means, there's nothing anyone can do for you. Jeremiah 7:24 says "Yet they did not obey or incline their ear, but walked in their own counsels and in the stubbornness of their evil heart, and went backward and not forward." These people just aren't ready to do the work needed to make the change. That's okay, too.
But the ones in the middle...the ones at the corner of comfortable and debt free...those are the people we help the most.
Here are 3 reasons you need to move from the corner...firmly on the path to debt freedom and financial wellness.
People underestimate the danger of risk. They forget why they felt a sense of urgency in the first place. They are lulled into believing that going back to making minimum payments and enjoying the breathing room they have created is good enough.
But that's the problem...it isn't good enough.
The reason is because the next crisis is not too far away. We're all either starting a crisis, in the midst of a crisis or coming out of one. People who live at the corner of comfortable and debt free forget just how close they are to the next crisis. When I talk to them, I hear them say things like...
"Bummer...it's April 14 and we forgot to do a budget this month...oh well!"
"I'm a little over on the grocery budget, but it doesn't matter. It's my money anyway, right?"
How about this one..."I'm tired. I don't feel like cooking tonight. Let's go out for dinner instead."
It's easy to do. But while they're doing it, they're removing margin from their lives. And when they need margin the most (during the next crisis), it won't be there. Then panic sets in. Then poor decision making. Then they're worse off than they were before.
Money magazine had this to say about risk and debt: "'Paying off credit card debt has a [no risk] return that averages 14 percent, which no other asset class can match.' Essentially, there is no better investment a person...can make than to pay off [a credit card] bill."
Dave Ramsey is known for saying that "your biggest wealth building tool is your income."
Not debt...income. But you can't build wealth if you're saddled with debt.
I remember actually asking myself that question years ago when I was clueless about money. "Why do I save if I have debt??" Even then, before I knew anything about money, I realized the interest rate I was paying on debt was higher than the interest I was making on savings. I just didn't follow through. I didn't know enough to get rid of the debt so I could THEN focus on wealth building.
Below are 4 things I've learned about true wealth building.
- True wealth building comes not from sending payments to others but from paying yourself. It comes from being intentional with our income and having a plan.
- True wealth building is all about living below your means. And living below your means does not happen when you choose to use debt for purchases.
- True wealth building means having a cash emergency fund, not spending all of your cash on stuff and using a credit card for emergencies.
- True wealth building is counter intuitive. It requires planning. It means saying "no" to material possessions today in order to be ready for the unforeseen things of tomorrow.
Proverbs 13:22 says "A good man leaves an inheritance to his children's children, but the sinner's wealth is laid up for the righteous." The key is that we will leave one of two legacies...either a legacy of financial wellness or a legacy of status quo living.
The old adage "more is caught than taught" is definitely true when it comes to teaching kids about money. From having a strong work ethic and understanding the importance of giving and saving...to healthy spending habits and the power of negotiation, our kids have watched us go through it all.
They have watched us transition from using credit cards to paying cash for our purchases. They've seen us budget and have benefited from the sacrifice of sandwiches in the car on road trips in order to enjoy and experience a nice evening out for the four of us.
If you're not choosing a life of financial wellness for yourself, think about doing so for your kids. Not a guilt trip...just a thought.
So now that we've talked about the 3 reasons to move from the corner of comfortable and debt free, what are you going to do about it? Before you answer...one final thought.
There is an old anecdote about a boiling frog. "The premise is that if a frog is put suddenly into boiling water, it will jump out. But if the frog is put in cold water which is then brought to a boil slowly, it will not perceive the danger and will be cooked to death. The story is often used as a metaphor for the inability or unwillingness of people to react to or be aware of threats that arise gradually." (Wikipedia)
Debt is the pot of water. Those who live at the corner of comfortable and debt free are the frog. And while it may sound extreme, your financial life truly does depend on whether or not you chose to stay at the corner and die a slow death or jump up and attack your debt with the vengeance God described in Proverbs 6:5 (GW) "Free yourself like a gazelle from the hand of a hunter and like a bird from the hand of a hunter."
You will never know the true joy of financial wellness until you do.
Tough love this week. Would love to hear what you think.
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Until next week...be well...be encouraged.