Christian Debt Management Basics

The term Christian debt management has become synonymous with companies that offer credit counseling and debt management plans and that may or may not be affiliated with the Christian faith. Some of these companies truly have a Christian-centered perspective; others simply use the term to lure in people of the Christian faith. The truth is that you do not need a Christian debt management company to employ some Christian debt management principals.

The first thing to understand is that debt restricts your freedom and removes your agency. You no longer have full control over the decisions you make, because your creditors own you. As a Christian, you may profess to follow Christ, but your full ability to do so is hampered by your debts and your relationship with your creditors. Becoming debt free will return to you your agency and give you the full ability to be a follower of Christ.

The first step in managing your debt is changing your behavior. There are several strategies you can use to lower your debt, but if you hTave not made some basic changes in how you think about and interact with money, then you will never become debt free. The first thing you need to do is stop taking on new debt. If you are unable to pay off the debts your already have, then think about how much more difficult it will be to pay down those debts if your debt keeps increasing! The next thing you need to do is develop a budget and stick to it. This is key. If you have never used a budget before, then you may want to begin by keeping a detailed account of where you spend your money. This will help you evaluate where you can cut back. Related to this is distinguishing between needs and wants. For each expenditure, ask yourself if that item is truly necessary to your survival or if it is simply something you enjoy. There may be room for some “wants” within your budget, but those should be carefully considered, and their values should be weighed against their costs. Finally, as you develop your budget, learn to live within your means. In other words, don’t spend more than you make. It can be tempting to purchase the large home, fancy car, and latest gadget, but if you can’t afford to pay cash for consumer purchases, or can’t afford the mortgage or car payment, then you are better off downgrading and saving for when you can afford those purchases.

Once you have a different outlook on spending, it is time to work on managing the debt you already have. Depending on your level of debt and your income, you may need to seek out a professional organization that can put you on a Debt Management Plan (DMP). With a DMP, you and a credit counselor determine the total amount that you can put toward all of your unsecured debt each month, and then this amount is deposited into one account. Your credit counselor negotiates lower monthly payments with your creditors, and then uses the money in the account to pay each loan. DMPs are a great resource for those who need them, but they usually come with some fees, and may even have negative credit ramifications.

Before you rush off to your nearest Christian Debt Management service, consider a few other debt management techniques. One technique, popularized by money guru Dave Ramsey, is called the snowball technique. To put it to use, you make minimum payments on all of your loans, and then put any disposable income toward the loan with the lowest balance. You continue paying in this manner until that loan is completely paid off, and then you move on to the loan with the next lowest balance. Though this may seem counterintuitive, the idea is that by paying off one loan in a short amount of time, you build confidence and momentum by seeing that it is possible. Dave Ramsey also advocates starting an emergency savings fund of $1,000 before you begin paying off your debts. This emergency fund will keep you from incurring more debt if an emergency arises.

The other technique is probably more intuitive.  It involves the same idea of making minimum payments on all but one of your loans.  The difference is that you put all of your disposable income toward the loan with the highest balance or interest rate.  Though it may take longer to see a result than with the snowball technique, you will save yourself a significant amount in interest by using this method.  

Learning to manage your debt through changes in behavior and thinking, and by paying down your debt with one of the two techniques mentioned, frees you from your creditors and allows you to fully follow Christ once again.