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Freedom from Long Term Debt

A significant and financially freeing long-term goal that you might have is paying off your home mortgage. I’ve never met someone who paid off his or her mortgage and then regretted it! Many people think that they would need a windfall or an inheritance to be able to pay off all of their debt, including their mortgage. In reality, most people can pay off their mortgage in its entirety with just a bit of intentional planning. This bucket will help you to explore that possibility in your own situation and help you to plan for it.

What are the dangers of debt?

There are many hidden dangers when it comes to borrowing money.

Economic danger:

  • The magic of compounding is working against you and for the lender.

  • To repay debt you have to earn the money you owe, plus taxes, plus your tithe. All debt is paid back with after tax dollars.

  • Debt always mortgages or pre-commits the future.

Spiritual consequences:

  • Going into debt violates the biblical principal of not presuming on the future.

  • Borrowing money denies God the opportunity to provide. It also puts the lender in the place of God.

Psychological Implications:

  • Whenever there is any debt in a household, it tends to cause a high stress level in a family, especially in the wife. Debt threatens a woman’s sense of security.

  • Debt can cause marital conflict. Husbands, use your wife’s counsel as an admonition to keep you out of danger.

  • If you cannot repay your debt, it can damage or ruin your Christian testimony.

Should I follow rules when it comes to borrowing money?

There are 3 simple rules when it comes to borrowing money:

  1. The economic return on the amount of money borrowed must be greater than the economic cost.
    This is usually the case with a home mortgage, and sometimes with investment debt. It is not the case with credit card debt or with car debt. If you use a credit card, plan to pay it off, completely, every month.

  2. If you are going to borrow money, you should have a guaranteed way to repay it.
    For example, when you borrow money to buy a home, if you cannot make the payments, the bank can have your house. This repays the debt. If you borrow money on a credit card for a vacation, you do not get an asset that you can use to repay the loan.
    Biblically, we are commanded not to presume on the future. James 4:13-15 “Come now, you who say, ‘Today or tomorrow, we shall go to such and such a city, and spend a year there and engage in business to make a profit.’ You do not know what your life will be like tomorrow. You are just a vapor that appears for a little while and then vanishes away. Instead, you ought to say, ‘If the Lord wills, we shall live and also do this or that.’” (NIV)

  3. Spouses must be in total agreement on any borrowing decision.
    Generally, husbands and wives think differently about debt. Many times a husband has been saved from financial problems by listening to his wife’s counsel.

What are the financial facts regarding widowhood?

Some startling statistics:

  1. 80% of American women will face widowhood. (www.investmentnews.com)
  2. 32% of women age 55 or older are widows. (US Census Bureau, 2000)
  3. About 700,000 women become widows every year, and the life expectancy of a widow is 14 years after her husband dies. (US Census Bureau, 1999)
  4. 28% of widowed women live in poverty. (www.investmentnews.com)

Most women are not prepared financially for losing their husband.

There are many ways to prepare for widowhood. Husbands, you need to take into account the fact that your wife is most likely to outlive you. Your job is to try to help her be prepared financially, emotionally, and spiritually.

What has a higher priority . . . debt repayment or giving?
  • Begin with the principle that God owns it all. It is ALL His, and He is interested in every spending decision that you make.

  • Ps. 24:1 “The earth is the Lord’s, and everything in it, the world and all who live in it.” (NIV)

  • Every time you spend money, you are making a Biblical, or stewardship, decision.

  • When you give as your highest priority, you will begin to have the right perspective on the rest of your spending decisions.

  • If you are in a crisis situation and cannot pay your debts and give, there are three things you should do:

    • Get counsel. Your pastor is a good person for this.

    • Have a plan. Decide when you will stop tithing, how long it will take you to get out of your crisis situation, and when you will resume your tithe.

    • Have someone hold you accountable to your plan.

What do I need to know about mortgage insurance and credit life insurance?
  • This is insurance that credit card companies and mortgage companies offer “really cheap” that will pay off your credit cards or mortgage in the event of your death.

  • It is usually 20 to 50 times more expensive to purchase these types of insurance than it is to buy a straight term life insurance policy.

  • You do need life insurance to cover the debts that you have. But it is much better to buy your own insurance and assign your benefits to the lender or creditor.

What are the most important factors to consider when taking out a mortgage?

(See the following sites for good mortgage calculators: www.mortgage-calc.com, www.bankrate.com, or www.mortgageloan.com.)

The best kind of mortgage is the one with the shortest term, the lowest interest rate, and one with a fixed payment.

  • It is always better to live with certainty when it comes to a mortgage payment.

  • Avoid an interest only mortgage, because you are not building equity in your home.

  • Avoid an adjustable rate mortgage unless you plan to pay it off within the first adjustment period.

Should I pay off my mortgage?
  • Any time you have an opportunity to pay off your mortgage, you should do it.

  • When you pay off your mortgage, there is obviously an economic benefit. However, there is also a psychological benefit, a marital benefit, and the benefit if more security.

  • What about the tax deduction you get from the interest you pay on your mortgage? It is always better to pay higher taxes and have fewer deductions than to pay lower taxes with higher deductions. The reason for this is you pay 100% of the deduction, but you only get back 20 to 40% of that amount in taxes. So it is never a good idea not to pay off your mortgage because of the tax benefit.

When to Refinance

There are two main questions to ask yourself when you consider refinancing your home.

  1. Can you lower your interest rate by at least 2%?
  2. Are you going to stay in your house for at least 5 more years?

If you can answer yes to both of these questions, you will want to consider refinancing your home.

When you decide to refinance, shop around. Not all lenders are equal, nor will they treat you equally. Ask them about closing costs and prepayment penalties.

James 4:14
“You do not know what will happen tomorrow. For what is your life? It is even a vapor that appears for a little time and then vanishes away.” (NKJV)

Crown Financial Ministries, “After the First Mortgage”

Click Here to View the Full MasterYourMoney.com Blog

Is now a good time to buy a house, given the change in the economy (2009)?

In short, yes, this is probably a good time to buy a house – but this does not necessarily mean that you should buy a house.

This is a great time (mid 2009) to buy if you can answer these two questions satisfactorily:

  1. Are you in a good financial position to be able to afford a new house?
  2. Will it put a strain on your finances if you buy a house?

If you have to sell first before you buy, think about this decision. This is a good time to buy, buy not a great time to sell. So keep that in mind as you try to sell your old house. You will probably have to sell it for less than you could have two years ago. So when you look at the new houses that you might want to buy, remember that you may get less for your old house, and do not overspend because you forgot to take this into account.

Proverbs 24:3-4 (NKJV)
“Through wisdom a house is built, and by understanding it is established. By knowledge the rooms are filled with all precious and pleasant riches.”

Matthew 7:24 (NIV)
“Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock.”

Psalm 61:4 (NIV)
“I long to dwell in your tent forever and take refuge in the shelter of your wings.”

Steve Diggs at Crosswalk, “Why Home Ownership May be Unwise”

Click Here to View the Full MasterYourMoney.com Blog

What is a Biblical View of Debt?
  • Debt is any money that you have borrowed that you will have to repay.

  • Biblically, borrowing money is not a sin. However, in many ways, it may be unwise. The Bible says that the borrower becomes the lender’s slave.

  • Being in debt may indicate a deeper problem. Why are you in debt? Are you spending money to fill some other need in your life?

Proverbs 22:7 (NASB)
“The rich rules over the poor, and the borrower becomes the lender's slave.”

Bob Lotich at ChristianPF.com looks at what the Bible says about debt.

Click Here to View the Full MasterYourMoney.com Blog

What is Good Debt vs. Bad Debt?

Some debt is better than other debt.

  1. There are two economic criteria in determining if debt is “good”:
    Do you have a guaranteed way to repay? An example of a good guaranteed way to repay is a home mortgage that is guaranteed by the value of the house.
  2. Is there some type of expected economic return that is greater that the cost of the debt? In other words, is the appreciation on the asset for which you are borrowing expected to be greater than the interest rate you are paying? If you buy a house, it may appreciate at a rate greater than the interest in the mortgage note. However, if you put a meal out at a restaurant on a credit card with an 18% interest rate, and then take months to pay off that credit card, that is “bad” debt.

Luke 14:28 (NASB)
"For which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it?”

The bondage of debt at ChristianPF.com.

Click Here to View the Full MasterYourMoney.com Blog

True Financial Freedom: The Salvation Decision

What is the process of achieving true financial freedom?

The first, fundamental decision that you have to make on the road to financial freedom is to deal with your relationship with the creator God. Trusting Him as Savior of your life is a necessary first step to financial freedom.

This decision is between you and God, and you have to make this decision before you can begin the process of true financial freedom.

John 3:16 (NASB)
“For God so loved the world, that He gave His only begotten Son, that whoever believes in Him shall not perish, but have eternal life.”

Campus Crusade for Christ tells how you can know God personally.

Click Here to View the Full MasterYourMoney.com Blog

True Financial Freedom: The Lordship Decision

What is the process of achieving true financial freedom?

The second decision you need to make is the Lordship decision. Once you have a relationship to God and His Son Jesus, you need to decide who is on the throne of your life as Lord. God is either Lord of all or He is not Lord at all. This is the second decision you need to make on the road to financial freedom.

Ephesians 4:22-23 (NIV)
“You were taught, with regard to your former way of life, to put off your old self, which is being corrupted by its deceitful desires; to be made new in the attitude of your minds.”

The Navigators writes a devotional about making Christ the Lord of your life.

Click Here to View the Full MasterYourMoney.com Blog

True Financial Freedom: The Calling Decision

What is the process of achieving true financial freedom?

The third decision you need to make is: What has God called you to do vocationally? You may be called to be a doctor or a lawyer, or you may be called to be a stay at home mom or a volunteer. But each person has a work that God has called him or her, specifically, to do.

Ephesians 2:10 (NASB)
“For we are His workmanship, created in Christ Jesus for good works, which God prepared beforehand so that we would walk in them.”

Dan Miller asks the question, “Can your job and your calling be the same thing?”

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to View the Full MasterYourMoney.com Blog

True Financial Freedom: The Steward Decision

What is the process of achieving true financial freedom?

The fourth decision you need to make is to commit to managing everything that God has entrusted you with for His honor and His glory?

I Peter 4:10 (NASB)
“As each one has received a special gift, employ it in serving one another as good stewards of the manifold grace of God.”

Randy Alcorn explains how to send your treasure ahead of you to heaven.

Click Here
to View the Full MasterYourMoney.com Blog

True Financial Freedom: The Treasure Decision

What is the process of achieving true financial freedom?

The fifth decision you need to make is to lay up treasures in heaven. You can decide to be a pipeline of God’s resources, rather than acting as a bucket that hoards resources. You cannot take your resources with you when you die, but you can send them on ahead as treasure in heaven.

I Timothy 6:18-19 (NIV)
“Command them to do good, to be rich in good deeds, and to be generous and willing to share.  In this way they will lay up treasure for themselves as a firm foundation for the coming age, so that they may take hold of the life that is truly life.”

Charles R. Swindoll encourages us to be a joyful pipeline of generosity.

Click Here
to View the Full MasterYourMoney.com Blog


Freedom from Long Term Debt

A significant and financially freeing long-term goal that you might have is paying off your home mortgage. I’ve never met someone who paid off his or her mortgage and then regretted it! Many people think that they would need a windfall or an inheritance to be able to pay off all of their debt, including their mortgage. In reality, most people can pay off their mortgage in its entirety with just a bit of intentional planning. This bucket will help you to explore that possibility in your own situation and help you to plan for it.

 

www.dollartimes.com gives debt calculators

The Motley Fool offers a strategy to get out of debt and stay out of debt.

Christian PF offers a simple explanation of the danger of the bondage of debt.

Learn the Bible offers a biblical perspective on getting out of debt.



Freedom from Long Term Debt

A significant and financially freeing long-term goal that you might have is paying off your home mortgage. I’ve never met someone who paid off his or her mortgage and then regretted it! Many people think that they would need a windfall or an inheritance to be able to pay off all of their debt, including their mortgage. In reality, most people can pay off their mortgage in its entirety with just a bit of intentional planning. This bucket will help you to explore that possibility in your own situation and help you to plan for it.

Exodus 22:25-27
If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest. If you ever take your neighbor’s cloak as a pledge, you are to return it to him before the sun sets, for that is his only covering; it is his cloak for his body. What else shall he sleep in? And it shall come about that when he cries out to Me, I will hear him for I am gracious. (NASB)

Psalm 15:5
He does not put out his money at interest, nor does he take a bribe against the innocent. He who does these things will never be shaken. (NASB)

Psalm 37:21
The wicked borrows and does not pay back, but the righteous is gracious and gives. (NASB)

Proverbs 3:27-28
Do not withhold good from those to whom it is due, when it is in your power to do it.
Do not say to your neighbor, “Go, and come back, and tomorrow I will give it,” when you have it with you. (NASB)

Proverbs 11:15
He who is surety for a stranger will surely suffer for it, but he who hates going surety is safe. (NASB)

Proverbs 17:18
A man lacking in sense pledges, and becomes surety in the presence of his neighbor. (NASB)

Proverbs 22:7
The rich rules over the poor, and the borrower becomes the lender’s slave. (NASB)

Proverbs 22:26-27
Do not be among those who give pledges, among those who become sureties for debts.
If you have nothing with which to pay, why should he take your bed from under you? (NASB)

Ecclesiastes 5:5
It is better that you should not vow than that you should vow and not pay. (NASB)

   


 

 
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