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Debt Relief - The Real Story

Americans are the victim of a sneak attack – consumer debt. Many of us are living a lifestyle we can’t afford and it’s being funded by debt. Here is the result of pursuing the “good life” we can’t afford: stress and anxiety. The Bible does not prohibit borrowing. There might even be a difference between “good debt” and “bad debt.” “Good debt” might be used for an appreciating asset like a home or a business. Consumer debt, however, is “bad debt.” Scripture does strongly caution us about the use of debt. Consider, for example, Proverbs 22:7:

“The rich rules over the poor, and the borrower becomes the lender’s slave.”

Scary trends: The Federal Reserve Bank of New York reports that outstanding consumer debt reached $11.34 trillion in the fourth quarter of 2012.1 The American Bankruptcy Institute states there were 1.46 million personal bankruptcies in 2011. One out every two marriages will fail today-and Dave Ramsey lists money problems as the biggest cause of divorce.2 Danger:  Advertisers and marketing gurus are using our human nature against us. Their campaigns are insidious, focused, and relentless. We need to separate our needs from our wants and stop funding a lifestyle built on credit.

Practical Help

When saving, compounding interest has been called “The Eighth Wonder of the World.” The problem is, when you’re talking about debt, compounding works against you. Here is the secret to paying off debt. Consider the following example:

Mary has three credit cards-

Card A-balance $4000, interest 12%, minimum payment $40

Card B-balance $8000, interest 10%, minimum payment $60

Card C-balance $6000, interest 18%, minimum payment $70

Assume Mary can only pay $200 per month toward her debt. She has a $30 margin (extra payment) that should be applied to the highest interest rate-not the highest balance. When Card C is paid off, Mary should apply the entire $100 margin ($30 + $70) to the next highest interest rate (Card A). The payoff margin becomes $140 ($30 + $70 + $40) when Card A is paid off.

Consider making a change-use cash instead of plastic-you’ll think twice about that purchase and avoid a shipwreck that doesn’t need to happen. Imagine the interest payments that could be freed up for ministry-that’s exciting!

1 Federal Reserve Bank of New York, Household Debt and Credit Report 2012 Q4.

2 Four Things to Talk About Before Marriage, Articles: Life and Money--Relationships and Money,, June 20, 2012.

The views are those of Bruce Olmstead and not those of Summit Brokerage Services. Investments in securities do not offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested.  No system or financial planning strategy can guarantee future results