June 15 - Progress

But Jesus looked at them and said, “With man this is impossible, but with God all things are possible” - Matthew 19:26

Last week we looked at the creation of an emergency fund – and you winced. You thought that as a Christian I should be simply asking you to trust in God and to pray.

You then had the idea that you couldn’t do this. I have news for you – by yourself it is possible. By God’s Grace all things are even more possible. I know this can be done because I have four friends who have done it. They have taken £90,000 in debts and are now saving money for the first time ever. More to my point, I have done it. Thank God I am no longer at the mercy of loan sharks if I have a sudden emergency. I can thank God that He helped me plan this first spiritual step. I’ve got my emergency fund.

So what is the second baby step – which you start as soon as you have the £500 or £1000 sorted?

The second step, a baby step, is to start demolishing your debts. Your method will be to use a debt snowball.

You have already become used to a monthly budget meeting. You know what you can afford from month to month. You have become used to buying what you need rather than buying what you are told to like by the advertisers. Your children have joined you in working through the budget and they are as excited as you are to enter this most exciting phase.

What you will be doing is writing down all of your debts in all of their glory. You will not write down the biggest first or the highest interest first. You will be writing down your debts starting with the smallest debt first.

This goes against all the usual advice. The usual way is to pay off the debt with the highest interest rate first because it is cheaper that way. The problem is that this can take a long time.

The advice is this, go for the quick hit. Knock off the smallest debt first. It is a quick fix. You feel good. Now you can throw everything at the next smallest debt. The process snowballs. The psychologists among you will say, “Of course, this really makes sense.” We are buoyed up by encouraging fixes.

My friend Girlie is a specialist in the ‘debt snowball principle’.  As one of the SmartStewards she adds the following advice:

1. Ask for God's wisdom

Whether you are single and are solely in charge of your own finance or married and are jointly responsible for your family's finance, the first step is to kneel down and ask for God's wisdom.

2. Identify the enemy!

For many years, Girlie writes, before we had our "lightbulb moment" my husband and I lived in denial. We knew we had debt problems but we had no idea how big our problem was. We didn’t want to know. Then we wrote everything down! What a revelation that was for both of us! It was the first time we knew what the pressure was that was weighing us both down. Honesty is very important in doing this step. Lay all your cards in front of you. You cannot solve a problem that you don't know exists – and that you can’t see. We wrote all our debts down..

Now I can give you some very personal advice. In last week’s post I mentioned my friend who had a serious debt problem that he couldn’t fix – his friends gathered around and worked for him and with him. We paid off his debt together. What I did not say then was that we had already written to all the people who owed him money and had negotiated lower interest rates. Indeed we had one debt written off. That simple step saved our friend a lot of money and made our work easier. The case was a special one, you may not have the fortune we had, but this can be tried – after prayer.