If your eyes are open at all, you certainly know that the world is presently walking an economic tightrope and praying that the wind doesn’t start blowing. The collapse in the housing market the past couple of years, the recent sky-rocketing price of oil, the wild gyrations in the stock market, combined with several major mortgage and investment companies filing for bankruptcy, all spell serious trouble. Add to this the fact that American consumers have run up more than $900 billion in outstanding (carried over from month to month) credit card debt, and one must wonder what lies ahead economically.
The leaders of government are concerned. Early in 2008, in a bipartisan effort, congressional Democrats and Republicans worked feverishly to hammer out an economic stimulus package in an attempt to keep the country from sliding into a recession. But things seem only to have gotten worse.
The recent $4 price of gasoline was double the price of less than two years ago—and it may be back to $4 by the time you read these words! At the same time, the stock values of major industries are trading at 50-year lows, and people are losing their jobs.
For many years we could rely on our bankers and financial professionals to help us avoid the pitfalls of excessive debt and bad investments. Now it seems that many financial institutions have dropped any of the moral standards they had in the past and are in fact trying to take advantage of their customers. Just a generation ago, the average family simply couldn’t get into the kind of financial hole that has become so familiar today. The reason was straightforward: a middle-class family couldn’t borrow very much money. High-limit, all-purpose credit cards didn’t exist for those with average means. There were no mortgages available for 125 percent of a home’s value and no offers in the daily mail for second and third home equity loans.
As a result, a family that wanted to borrow money had only a handful of options. Instead of running up debt anonymously, a prospective borrower was forced to meet a stern-looking banker face to face. Families were asked to produce past tax returns and pay stubs, credit references, and projected budgets that showed how they planned to repay the money.
Then in 1975, Congress passed the Equal Credit Opportunity Act which stipulated, among other things, that lenders could no longer ignore a wife’s income when judging whether a family earned enough to qualify for a mortgage. As a result, both families and banks started down the path of counting Mom’s income as an essential part of the monthly budget. This allowed families to qualify for a more expensive house and at the same time started the upward spiral of home prices.
A generation ago, it wasn’t possible to overload on a mortgage. Mortgage lenders didn’t allow clients to yield to that temptation. But today, the game is different. It has become routine for lenders to issue unmanageable mortgages. In the bank’s greed to draw more and more families into their interest-making machine, the down payment—once a critical device for screening potential borrowers—virtually disappeared. In fact, the subprime NINA loan (No Income—No Asset verification) became a fairly standard arrangement. Mortgage brokers— lending middlemen—made a killing (obscene incomes and bonuses) as the subprime mortgage bubble was growing.
An End-Time Scenario?
The Scriptures describe the condition of the world just before Christ’s second coming. Speaking of men who by greed, extortion, and fraud are amassing great riches (this would include the mortgage brokers, credit card companies, commodity brokers, and oil companies), the Bible says,“You have hoarded wealth in the last days. Look! The wages you failed to pay the workmen who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter. You have condemned and murdered innocent men, who were not opposing you” (James 5:3–6).
We know that financial stress in marriage is now the number one cause of divorce in America. If we really want to save the biblical family structure and prepare our families to face the end times, we must teach and practice debt elimination. We must forget about “keeping up with the Joneses.” After all, the “Joneses” may be on the very verge of bankruptcy or foreclosure. It’s very important that we do something while we can to get ourselves and our church families on a more secure footing financially. We must teach them to put God first, shun debt, help those less fortunate, and make it a priority to advance the cause of God. Let’s review some valuable steps that we should all take now.
What You Can Do
First, we must recognize that it’s a time for prudent living—a time for following the biblical principles of money management. Then we must discipline ourselves to put them into practice. Here are seven points that will relieve stress and move families toward financial freedom:
1. Get organized. Know the state of your personal finances. Complete a balance sheet by listing all of your assets in one column and total them up. Then list all of your liabilities (debts) in another column and total them up. For example, the current market value of your house should be on the asset side and the amount of your home mortgage on the liability side. Finally, subtract your liabilities from your assets. The result is your net worth. If the result is a negative figure, you should be very concerned.
2. Spend less than you earn—period. Determine to live within your income. The Bible says, “Godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs” (1 Timothy 6:6–10). If you are used to overspending, this will be a real discipline but a very necessary one in these times.
3. Save a little every pay period. The lack of a savings account is one of the major reasons people use credit cards for emergencies and end up paying large amounts of interest on emergency spending. Saving should be as regular as spending. I recommend a payroll deduction to a credit union savings account. Your savings account goal should be equivalent to three to six months of living expenses, and once that goal is met, you can shift that money to either saving for major purchases or for retirement. Remember that when you save or invest, you must be prudent and avoid risky ventures. And don’t put all of your assets in one basket—diversify.
4. Avoid debt like AIDS. Interest is one expense you can live without. Personal or family debt is the underlying reason for the current financial mess. For example, if families weren’t in debt and living right at the edge of their ability financially, then when gas prices spike, we would be upset but not desperate. If families saved, put 20 percent or more as a down payment on their homes, and only borrowed what they could afford to pay, we wouldn’t have a mortgage crisis. Debt and its resulting bankruptcy are the scourge of our society. If you are in serious debt, you must take drastic measures to get it under control. This means no more credit spending and setting up a plan to pay off your debts that you stick with until you are completely debt-free. In some cases, this may mean selling off assets such as extra cars, boats, lake lots, coin collections, etc. You must get this area of your financial life firmly under control, or your creditors will eat you alive.
5. Be a diligent worker. This means doing your best to please your employer or your customers. Ask God for wisdom to do your work efficiently so that you can continue to work when times are difficult. Be willing to work at whatever job is available that would not violate your conscience.
6. Be faithful to God. This means that even in trying times, you will maintain your tithes and offerings, because ultimately, we are all totally dependent on God for life now and in eternity. God has given us so many promises of financial success if we will remember Him first. Your family cannot afford to live without God’s promised wisdom and blessing.
7. Remember that this earth is not your final home. Someday, likely sooner than later, everything here will be burned up (see 2 Peter 3:10). Thus, Jesus’ advice to store up our treasures in heaven is still very pertinent (see Matthew 6:19, 20). Our management today will determine our eternal destiny tomorrow.
Finally, pray that God will give you wisdom to deal with your finances in a responsible way. Be wary of unscrupulous people who want to sell you a system of debt reduction or some miracle cure for your problems. Trust in God and He will direct your paths.