Getting God's Army Out of Debt

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Session 4 – Avoiding Debt – Getting Out of Debt

(Rom 13:8) “Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law.”

(Pr 22:7) “The rich rule over the poor, and the borrower is servant to the lender.”

Debt keeps us tied down, unable to move as we choose, because we owe. We are shackled to the lenders and must, must, must make our payments. We legally incurred the debt. We legally need to pay it. We’re Christians – we must pay our debts.

When we take on Debt, we are obligating our future income to decisions we make, today. As we pay off Debt, we are using today’s resources to pay for yesterday’s forgotten choices. When we have debt, we are committing God to our requirements for the future, not surrendering our Future to His requirements.


Example of How Modern Debt Works.

Credit Cards are common, expected, and easy to get. Using credit cards properly is not common, not expected, and not easy. Monthly interest and minimum monthly payments are the problem.

When you have debt, you pay interest for the privilege of having the debt. Interest is calculated and owed, along with a portion of the principal, and is paid every month. Your credit card or mortgage or other credit arrangement makes it very clear that you must pay at least the minimum payment each and every month.

Let’s take a typical purchase as an example – some clothing – a dress.

Bought on sale for $30.00 – purchased using a credit card – one with a balance due.

Most credit cards calculate a minimum payment as a small percentage of the outstanding balance, usually 2 or 3%. For this purchase, let’s assume your credit card would increase your monthly payment by about a dollar. (Most would actually calculate a much smaller minimum of maybe 50 or 60 cents.) Most credit cards charge about 18% interest on the balance – some more, some less.

How is it paid off? Let’s do a Monthly Interest Calculation to find out.

Im = P x R / 12


§         Monthly Interest = $30.00 times .18 = $5.40 divided by 12 months, or 45¢.

§         Your first month’s payment includes 45¢ of interest. Since your payment is $1.00, only 55¢ goes to pay the purchase.

§         After the payment, your new Principal is now $30.00 minus the 55¢ principal portion of your payment is now $29.45.


The second month payment calculation uses the same formula.


§         Interest = $29.45 x .18 = $5.30 / 12 = 44¢ interest.

§         Principal = $1.00 - .44¢ = 56¢.

The total Principal paid for these two months is $1.11.

In 2 months wear of this dress, on sale, you’ve only paid $1.11 total for it with your minimum monthly payments. You’ve still got $28.89 left to go... How long will this take? It will take about 3½ years before the entire, original amount is paid off. This is long after the dress is worn out, seen out, grown out, or fashioned out.

Any and every purchase has this same problem when purchased by credit card and only minimum payments are made. It will take 3½ years to pay it off — without making any more purchases.

See Chart #1 that shows how a $30.00 charge and 2% minimum monthly payments amortizes to the end of its debt.

Rule # 1 — Quit DEBTING – (Quit Charging Purchases) — NOW.

Just quit. Every dollar you charge makes your payoff date that much farther in the future. You can’t get out of debt by continuing to incur debt. It’s like trying to win in Las Vegas… We all know that… “The House ALWAYS… Wins!”

You’ll find that most of the things you charge are just that — things. You probably don’t need them, at least not as much as you think you do.

Take your credit cards and cut them up!

Is that seems too cruel to you – cutting them up and watching them die? Here’s a more humane way. Put them in the oven. Turn it up to 350. Take a walk. When you get back, the cards have peacefully expired.

Put your credit cards in a drawer. Freeze them in a block of ice. Give them to your Mother, or send them to me! Hide them in the Safe Deposit Box. Make it very hard and embarrassing to use our credit cards.

Keep the shopping Channel off your favorite channels button. Don’t go to the Mall. Quit buying anything on credit. Now.


Rule # 2 — Get Out of Debt as Quickly as Possible.

Pay off those balances by paying more than the minimum payments whenever you can. You knew that you ARE allowed to pay more than the minimums, didn’t you? Better yet, plan which account to pay off, when, and how.

Pay off the balances on one account at a time. You should pay at least the minimum balances on all of your accounts, but the one you choose to pay off early, pay more than the minimum. Pay as much toward the outstanding balance as you can.

Example using the dress from before:

If you simply paid an additional $1.00 each month on the account, your balance would be paid off in just 18 months instead of the original 40. See the Chart #2.

That’s because the extra dollar is all applied to pay off the outstanding principal balance. When the interest is calculated next month, there is an extra dollar gone from the balance. The interest is less, and more money is applied to the principal next month.

You will need to watch that the credit card company doesn’t do you a favor and suspend your minimum payment in succeeding months. You need to keep on making those minimum-plus payments.

Which Account do you pay off first?

Ø      Pay at least the minimum payments on all your accounts every month.

Ø      Never make a late payment. Late Payment fees can be worse than interest.

Ø      Chose to pay off:

o       Highest interest.

o       Highest payment.

o       Highest balance.

o       Lowest balance.


My preference is the Lowest Balance. Here’s why.


Ø      The lowest balance generally has the smallest payment.

Ø      When you add any extra money to the payment, the principal goes down faster.

Ø      The balance is paid off quicker.

Ø      You will witness progress and success much sooner.

Ø      You will be able to celebrate a bit sooner.

Some say that you should pay the highest interest balance first. Others say to pay off the largest balance first. The fact is that once you set your sights on getting out of debt, it will happen quickly, and the net difference in extra interest will not be significant. You’re paying a high interest rate on your whole balance. Getting it paid off is the most important thing, not saving a few bucks in interest. You’ve already had your chance at saving money, but you missed that chance when you charged the purchase. You will likely be more successful trying to get discipline with your lowest balance.

What about Consolidation Loans or Credit Card Balance Transfers?

What, are you not paying attention? Consolidation loans are called Debt. You haven’t solved the fundamental reasons you got where you are, (you have a spending problem) so consolidations only put off the inevitable. Taking on debt is not the way to get out of debt. The same goes for swapping credit card accounts and transferring balances for short term lower interest. It is only an illusionary fix. You are still in debt. Most people who consolidate debts end up even further in debt in a few months or years.

Unless you solve your spending problems through discipline and stewardship, your debt problems will not go away.

Example of a Credit Card Balance Swap.

Look in your mailbox. You’ll find dozens of reduced-interest credit card offers. One recent example was a ZERO % for the first 4 months! This is a really good deal!

But the fine print says...

“0.0% is only good on transferred balances. New purchases are subject to a variable interest rate of 15.65%. Balances in default are subject to 20.65%.”

In fact, if you are in default on any of their accounts, you are charged the 20.65% rate. If you miss a payment, even by an hour, you are in default – and you can’t undo this rate change. Then, even the transferred balance gets charged 20.65%. Some bargain.

Some fine print even allows the rate to go up if the credit company THINKS you might miss some payments. So, they periodically check your credit file for any missed payments, with any creditor, and if they find one – Whoa! Your interest rate goes up!

These credit card companies are in the business of making money through your interest payments and late fees. They have some of the smartest and highest paid people in business figuring out how to maximize their return. You may think you can trick them by swapping from account to account. But, do you really think that you are the first person who ever thought of that? Do you really think they don’t know what you are doing? Do you really think you can outfox them at their own game? As we said earlier about gambling in Las Vegas, these companies are the House. The House ALWAYS wins. The only way you can beat them is to not play. Get out of debt – and FAST!

Get out of debt by paying off your lowest balance account first. Do it by making more than the minimum payments. Save and scrape a few extra bucks each month - $5, $10, $50 – and apply it all to the normal minimum payment. Do this every month. The extra money goes directly to pay down the principal. The next statement will have a smaller portion devoted to interest. The balance is paid way sooner than that 40 months or 19 years. You did it!! Celebrate a bit when it is zero. (Do NOT buy anything on credit!!!)

Once you have that first, lowest balance paid off, take its minimum payment, plus the additional money you’ve been able to gather together, and apply it all to the next lowest balance. This very much larger payment will accelerate that declining balance, and it will fall quickly. It’s time for another small celebration. You did it again!

Continue in this fashion, taking the total of your payments to old paid accounts, plus any extra cash, and pay to the next lowest account balance.

Keep going – your car payments, your student loans - even to your mortgage. Get out of debt. You can do it! It took you quite a while to get this far in debt. It will take some time to get out, but you can. It might take two or five or even seven years, but you can get out of debt.

You say, “John? What’s this about the mortgage? Isn’t it OK to have a mortgage? Won’t I lose one of the only tax deductions still available?”

Sure, you could keep your mortgage… But, your mortgage is still debt, and the same rules apply. Yes, you would lose some tax benefit. But if you are paying $10,000 a year in interest, your tax bill will only go down $2,500 or so. That’s a pretty expensive investment, isn’t it? Who are you paying that interest to? A bank. Are they interested in God’s Glory or your well-being? No.

So, if you want tax breaks, pay off your mortgage, take that $10,000 you’ve been giving to the bank, and give it to the church. You’ll advance God’s Kingdom, and still get the $2,500 tax deduction!!!

If you keep this payment process up, before you know it, all your accounts will be paid. There will not be any more monthly statements. Interest payments will cease. You are free.

Rule # 3 — Pay Cash for ALL Your Purchases.

Instead of charging, pay cash. Remember Rule #1. You can only get out of debt if you don’t use any debt.

If you are only paying minimums on your accounts, you are already paying for at least 3 ½ years’ or up to 42 years’ worth of purchases. You’ve made all the credit purchases you need to make for the next 3½ years. This is a hard lesson, but one that we all need to learn

So, since you quit charging, you must pay cash, or simply not buy. This brings you to some hard choices.

Now you have to set priorities in your buying.

·        Is food more important than these baubles?

·        Can I do without a Blockbuster rental?

·         Why am I paying for premium Cable TV?

·        What are all these new trashy novels doing on the shelf?

·        Do I really need to have all these clothes?

·        Is going to Fast Foods R Us how I’m going to get out of debt?

You have to be serious about getting out of debt. Debt is a lot like gambling at Las Vegas. The house always wins. You will never win the debt game. Just the lenders win.

You win by not playing. You don’t play by paying cash.

Begin to “save up” for purchases as you plan for them.

When you’ve saved up, you can shop wisely for your planned purchase. You can watch for sales. You might even find that you really don’t need it after all. If that’s what you find, don’t buy it. Move on to something else.

Buying a car is the hardest of these purchases. Even if you buy used cars, paying cash seems impossible. But it’s not. Financing a new or used car still takes 3 or more years to pay off. You still don’t own it. I know those who have had their cars wear out on them, and still owe thousands. Imagine paying for something you no longer own.

So, start saving for that next car. If you are financing now, get it paid off as quickly as possible like in Rule #2. Once you’ve paid it off, keep paying that that car payment into a savings account. Pay yourself instead of a lender. With an interest account, soon you’ll have enough cash to buy your next car, or at least make a large down payment. You’ll be able to get different concessions paying cash. You’ll be in control of the purchase. You’ll be out of debt.

Do the same for other major purchases, for vacations, for hobbies, for entertainment.

Save cash, and spend cash.

Now, this doesn’t have to be long green cash. You can use your checkbook. In fact, it should be your checkbook so you’ll be able to have a record of your expenditures. Writing checks is a skill, but easily mastered. Debit cards can serve the same purpose, but are harder to manage records. I prefer checkbooks.

Rule # 4 — Spend Less Than You Earn.

If you consistently apply this rule, you will always be debt free.

All of these rules are interconnected, and they all mean the same thing. Live within your means. Delay your gratification. Appreciate those purchases you do make. Make your purchases glorify God and advance His Kingdom.

If we had heeded Rule #4, we would not have to have Rule #2. If we had been faithful with Rule #3, Rule #1 would be needless warning.

But since we got to where we are somehow, all of these Rules apply. Ultimately, you will get out of debt. Over time, you will develop self-discipline in your finances. This will spill into other areas of your life. When you control your finances, you control your life.

Finding Extra Cash

There are two ways to get extra cash. Save on your expenses, or increase your income. Increasing your income is possible, but until you actually make changes in how you spend your income, that extra income will just disappear. Cutting your expenses is the fastest and longest lasting way to find extra cash.   

You will need to make some changes in how you live if you want to have some extra cash to end your debt. Use the list on Found Money to help you cut back on your Outgo. Use the Home Business Ideas List to increase your Income.

Change how you spend money. Find a few ways to earn a few extra bucks. Apply the extra to your debt, not your lifestyle. Get out of debt.

Once you are out of debt, keep your habits and discipline. Stay out of Debt. Stay in control of your spending. Honor God with your Life.

Your Action Plan.

  1. Know what you owe.

Use copies of the attached form, or use a notebook. Keep these listings. You will be able to see the difference each month. This will encourage you.

  1. Decide on the specific account to clear first. The choice is yours, but do choose.
  2. Find a few extra bucks and make that minimum-plus extra payment.

You are on the way. Keep on keeping on.


  1. Make your list of your Creditors.
  2. Choose which Account you’ll pay off first.
  3. Write down the current minimum payment for this account. Write down the Interest portion. Write down the Principal portion.
  4. Decide how much extra you will add to your next payment. Is it $10, $25, $100?
  5. Decide how you will cut back this month to get the extra principal.
  6. Make that extra payment.


Chart #1- Credit Card Purchase

Typical Credit Card Purchase of $30.00.

$1.00 Minimum Monthly Payment.

Interest Rate of 18%.


Month #


















































































































































































































Chart #2 - Credit Card Purchase – Paying More than Minimums


Typical Credit Card Purchase of $30.00.

$2.00 Monthly Payment (Minimum of $1.00 plus $1.00 extra.)

Interest Rate of 18%.


Month #





































































































Found Money


q       Take lunch

q       Make Sandwiches

q       Avoid fast food

q       Clip coupons

q       Make a grocery list and stick to it

q       Have a yard or garage sale

q       Sell some stuff on e-Bay

q       Walk somewhere instead of driving

q       Save your change

q       Buy Generic

q       Cancel extra phone charges

q       Cancel cable

q       Write a letter instead of phoning

q       Make do

q       Make do without

q       Swap services

q       Don’t buy books, use the library

q       Don’t buy music, listen to radio

q       Don’t rent videos, use library

q       Make gifts

q       Buy kids clothes at thrift shops

q       Buy your clothes at thrift shops

q       Adjust thermostat, and dress for comfort

q       Take shorter showers

q       Cancel magazine subscriptions

q       Cancel daily paper and watch or listen to news on TV or radio

q       Cut your kid’s hair yourself

q       Do your own manicures

q       Make your own gift wrap

q       Learn to cook, mend, sew

q       Learn to repair, build, make

q       Enroll in your company’s 401K

q       If  401K not available, start an IRA

q       Going out?  Get dessert instead of dinner.

q       Pet sit, plant sit, or baby sit

q       Use a clothes line instead of a clothes dryer

q       Turn off lights

q       Set hot water heater temperature down

q       Cell phone?  Buy cheapest plan and use only for emergencies.

q       Let your children play with you instead of a new toy.

q       Take an “at home” vacation.

q       Make your own coffee and carry a thermos instead buying at a coffee shop.

q       Don’t over or under withhold on your W-4’s.

q       Get a part time job.

q       Start your own part time service business.

q       Use leftovers

q       Don’t use the ATM

q       Change your own auto oil




Home Business Ideas


All of the following business ideas have little or no initial investment.  Clients can be located through net working, community or church bulletin boards, and flyers in your neighborhood.  If your goal is to make an additional $25 to $100 per month, all these can be done in very limited time.  If you choose a business that requires an investment in tools, supplies, equipment, or merchandise, be sure to keep very good records for tax purposes.  Charge for your time and any additional expenses.


Child Care

            One or two children week days

            Occasional nighttime sitting so other couples can go out

            After school care for a few children

            Breakfast and “off to school” care for neighbor kids                 

Bill Paying Service

Write checks, balance checkbook, and file paid bills for people or small businesses.

Shopping Service

            Grocery shopping

            Gift shopping


            Whole house cleaning for one or two families    

Specialized services such as oven cleaning, window washing, freezer defrosting, etc.

Yard Care

            Lawn mowing




            Yard debris clean up

Home Maintenance

            Painting interior or exterior


            Putting up/taking down screens or storm windows

            Cleaning gutters


            Children’s rooms

            Wall paper hanging


Occasional meals or specialties for people that don’t have resources to cook or bake for themselves.

Gift Baskets/ Gift-Wrapping

            Assemble gift baskets from client’s purchases.

            Wrap Christmas or birthday gifts.

Pet Or Plant Sitting

            Daytime companionship for a neighbor’s dog or cat.

            Vacation care for pets or plants

            Cleaning and watering indoor plants for houses or businesses


            Shopping, laundry, pick-up and delivery.          

Children’s Parties

Plan and/or provide services for children’s parties such as themes, decorations, invitations, games, food, favors, etc.


Create entire scrapbook or just scrapbook pages for new moms, brides, graduates, first birthdays, retirements, sport or dancing event, or any special occasion.

 Service Swapping Coordinator

Charge service credit or cash to members of co-op to handle bookkeeping, appointments, and maintain database for service swapping.




Questions? Call John or Sandi Larson at: 503-644-0502 for a private consultation.

(Or, contact John & Sandi Larson via email at:

Copyright 2001, 2002, Visions Business Development, Beaverton, Oregon - ALL RIGHTS RESERVED

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