How to tame the debt monster

Looking at statistics, it is not hard to see why debt generates so much news and discussions. The average American family devotes at least 25 percent, some 50 percent, of its spendable income to paying outstanding debts. And that's during sound economic growth. In financially difficult times, indebtedness can imperil our survival. Unfortunately, indebtedness has become a pillar of America's financial framework.

Can you continue to meet your financial obligations - car payments, credit card bills, housing instalment loans, and the like - if you lost your job? We now have to view debt through the window of possibly one of the greatest financial crisis since the Great Depression. We have to find answers that will enable you to approach debt with a proper perspective.

Debt is not something that seems to to really bother buyers in good times. Yet borrowing money has its price - and it is a cost far greater than you realize. Anytime you use credit to borrow money, you precommit your future income. The effects of such obligations can range from simple inconvenience to financial devastation. Many are now paying that price today.

There are two simple principles to keep in mind if you want to work to strengthen your financial position. First, you must increase your financial flexibility, and second, you must reduce your financial constraints. If borrowing money limits financial flexibility, the absence of debt makes for a lifestyle of financial freedom and opportunity. With no, or even low, financial precommitments, you will be at liberty to pursue your goals and desires.

For Christians, the freedom from the financial obligations of debt can spell all the difference in how effectively personal resources can be used by God. Getting rid of any debt, whether it is large home mortgage or a relatively small credit card balance, is a guaranteed profitable investment.

How to get out of debt? Whether your debt is due to unwise overspending or an unexpected calamity, one thing is certain: Getting out of debt is always harder than getting in. The most effective way to get out of debt is to cut your spending. Establish a realistic repayment plan and discipline yourself to follow it. Beware of overambition. Once your strategy is in place, all you need is the self-discipline to make it work.

Ultimately, it all boils down to 3 simple rules in financial planning: First, spend less than you earn. Second, avoid the use of debt. And lastly, save up for financial uncertainties.

Today's Bottom Line

Debt does not have to threaten your survival or that of your family. Debt may be a monster, but it is a beast you can tame.

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