Debt: How to Be Free of It

Mormon Tithing

Debt can make you a prisoner in your own life. Interest accruing from your debts never sleeps; it just keeps adding up. We have all faced debt in our lives, and it can be our enemy. Avoid debt as if it were a plague, except for those major purchases that are financially sound and designed to be paid off in an appropriate and systematic manner. At the same time, we should be reasonable and compassionate toward those who are indebted to us, and help them systematically move toward financial independence.

The Scriptures Speak of Where Our Focus Should Be

“Thou shalt not covet thy neighbour’s house, thou shalt not covet thy neighbour’s wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbour’s” (Exodus 20:17).

“Flee out of the midst of Babylon, and deliver every man his soul: be not cut off in her iniquity; for this is the time of the Lord’s vengeance; he will render unto her a recompence” (Jeremiah 51:6).

Let us maintain our focus on things of eternity rather than on things of a material nature. Let us be liberated from the clutches of Babylon.

“And forgive us our debts, as we forgive our debtors” (Matthew 6:12). We are all indebted to the Lord for every aspect of our vitality and wellness, spiritual as well as temporal. Let us serve Him in faith and honor by discharging our indebtedness to Him through repentance and by manifesting a broken heart and contrite spirit. Let us activate the atoning sacrifice of the Lord on our behalf, always remembering to forgive others and have compassion toward them.

Counsel on Debt and Preparedness

“Let us avoid debt as we would avoid a plague; where we are now in debt let us get out of debt; if not today, then tomorrow.

“Let us straitly and strictly live within our incomes, and save a little.

“Let every head of every household see to it that he has on hand enough food and clothing, and, where possible, fuel also, for at least a year ahead” (J. Reuben Clark, in Conference Report, Apr. 1937, p. 26).

“‘Think what you do when you run in debt; you give to another power over your liberty’ (Benjamin Franklin).

“True, times have changed since Franklin’s day, but the principles of truth and wisdom never change. Our inspired leaders have always urged us to get out of debt, live within our means, and pay as we go” (Ezra Taft Benson, “Pay Thy Debt, and Live,” Ensign, June 1987, 3).

“It is so easy to allow consumer debt to get out of hand. If you do not have the discipline to control the use of credit cards, it is better not to have them. A well-managed family does not pay interest: it earns it. The definition I received from a wise boss at one time in my early business career was ‘Thems that understands interest receives it, thems that don’t pays it’” (L. Tom Perry, “If Ye Are Prepared Ye Shall Not Fear,” Ensign, Nov. 1995, 35).

Here are three ideas to help us manage and eliminate debt:

1. Take care of first things first.

  • Instead of spending more money on the family, spend more time in the family. You can’t buy love; but you can give it away and create far more harmony, balance, peace, and happiness than money can buy.

2.  Budget according to solid principles.

  • Make and keep your budget, but make it realistic. Track your expenses and see the areas of expenditure that could be reduced.
  • Practice self-mastery. Live short of your means. So many of us find ways to live beyond our means, to spend it all, and even more than our income.
  • Accommodate needs but discipline wants. It is easy to tell the difference: if your survival depends on eating it, wearing it, or using it to get out of the weather, then it’s a genuine need.
  • Avoid debt in the first place, except for those major purchases such as a home, auto, education, or other significant items. Remember that you don’t have to buy a mansion and you don’t have to have an exotic car for transportation. Spending habits in the United States indicate that a great number of people spend a large percentage of their income on optional items that are not only not necessary but are even dangerous because they could put them in financial straits.
  • Don’t spend what you don’t have. Never obligate yourself for debt with money you have not earned. Never participate in a lifestyle that your earnings cannot support. It leads to destruction in all facets of life, especially your family life.
  • Beware of fixed debt that requires too great a percentage of your fixed income. If there is a job loss or decreased earnings, your capacity to handle your debt is curtailed or eliminated.
  • Quarantine your credit cards except when you must pay with a secured arrangement (such as for hotels or rental cars). Practice self-control. Learn to wait so that interest and especially credit card debt won’t destroy you. When you must spend, pay cash for everything you possibly can.
  • Shop around for the best interest rates on mortgages, autos, and credit cards.  Refinancing at lower interest rates sometimes is a prudent alternative.
  • Never cut the budget unwisely: always have sufficient insurance. Maintain your cars and equipment meticulously. Insulate your home. Eat a wholesome diet. Invest wisely. Speculate only on what you are willing to throw away.

3.  Become a financial leader.

  • Let the older children help contribute to family upkeep; that is a good way to train them in financial skills. Let them save for needed expenses; match their savings for those special items they want, such as sports equipment, travel excursions, etc.
  • Show personal leadership. Systematically eliminate your debts: Calculate how much extra per month you would have to pay in order to be debt-free within a reasonable time (5 or 10 years, say). For a typical family this may not be more than a few hundred dollars per month, including mortgages. Then come up with the redeeming amount through belt-tightening, careful budgeting, or a second income. Pay off the highest interest debts first. After it’s all paid off, keep investing the extra monthly amount in savings or wise investments. That’s it! Sometimes a temporary, second part-time job can reduce the debt as well as stress.
  • Teach the simple steps of money management. Organize your debt with affordable amounts, payment schedules, and pay-off dates. If overwhelmed with debt, visit a credit counselor for advice. When necessary, consolidate and make reduced payments. Never continue to increase debt through additional spending.
  • Start a savings account for each child or grandchild. Discuss it with them. Encourage them to contribute to it. Watch it grow as they grow.
  • Happiness is not to be found in exotic getaway locations, not in surpassing the Joneses, not in having more of this or that than you ever dreamed of. Happiness is found in family unity and harmony, peace of soul, and joy in living.

Remember that each of us has the challenge of dealing with debt and learning how to free ourselves from its insidious tentacles. Let us be frugal and wise. Let us organize well our financial lives and learn to live within our means. Life is far more enjoyable when we are debt-free rather than being in bondage to creditors. By managing our habits, planning wisely, and exerting self-discipline, we can become debt-free. Let us place our focus on spiritual matters and remove ourselves from the entanglements of materialism and unnecessary debt.

This article has been adapted from What We Need to Know and Do, by Ed J. Pinegar and Richard J. Allen.

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