Most of us will have to incur some debt in our lifetime. Some even find themselves in a continuous debt cycle. Though not all debt is bad debt, we have been counseled for years by our leaders to minimize our debts and strive to become debt free.
Elder Joseph B. Wirthlin counseled, “Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our things own us. Some debt—such as for a modest home, expenses for education, perhaps for a needed first car—may be necessary. But never should we enter into financial bondage through consumer debt without carefully weighing the costs.”
President Heber J. Grant said, “From my earliest recollections, from the days of Brigham Young until now, I have listened to men standing at the pulpit…urging the people not to run into debt; and I believe that the great majority of all our troubles today is caused through the failure to carry out that counsel.”
Life is full of circumstances that lead us into unnecessary debt. Kids, school, job loss, illness, marriage, divorce, procrastination…the list goes on.
So, how can we begin to carry out our leaders’ counsel regarding debt?
Exercise faith in the principle of tithing and fast offerings. The Lord has promised blessings to those who make this sacrifice and obey the law of the tithe.
Define a “financial center” in your home. This is the place where you’ll process all of your financial transactions. It can be a desk area set a side or even just an expanding file and your laptop. Gather, store, and update account information for all of your bills in a secure place. Set up automatic electronic payments to avoid late fees and postage.
Involving close family members in your debt reduction goal may help you stay on track and reach your goal quicker. Consider this activity for family home evening: Together, make a debt reduction goal poster and hang it up in a family common area. Discuss the counsel given on debt and ask each family member to list one way they can help in achieving this goal and write it on the poster. As a family, pick a reasonable reward for accomplishing the goal. You may wish to include small incremental rewards to keep everyone motivated.
Using a spreadsheet, online budget forms, or a plain piece of paper, make a list of spending categories for your fixed, variable, and periodic expenses. Fill in approximate amounts as a guide to follow after calculating monthly disposable income (take home pay). See some free online forms here.
Needs and wants differ from person to person. Food, clothing, shelter, and transportation are immediate needs. While participating in a debt reduction plan, re-evaluate all of your expenses according to needs and wants in order to maximize the amount of money put toward debt payments each month.
Review your monthly expense sheet and pick at least three categories that qualify as “extras”. Example: You may feel that you “need” to get a manicure/pedicure in order to keep your sanity, but just think how significantly $50-75 saved per month can reduce your debt! Let’s say you have a credit card balance of $500. Instead of paying just the minimum amount owed, you can use that extra $50-75 each month to pay off your credit card bill in half the time you would have otherwise. A word of caution: be realistic with yourself and what you think you can handle eliminating/reducing each month. Too much restriction may cause you to get discouraged.
Look around the house to see if there is anything unused or unneeded that could be sold to help reduce/eliminate your debt. Some examples include furniture, old textbooks, an extra vehicle, recreational items, and clothing, etc.
Review all of your account statements and determine where your money will make the biggest contribution to your balance. For example, you may have two accounts with different interest rates. Putting more money toward the account with the higher interest rate will save you more money in the long run.
If possible, take on an additional part-time job and use the extra money specifically for debt repayment. Weigh the pros and cons to see if it will be significant enough to make a difference. If you have to hire a babysitter to go to a part-time job, it may not be worth your time depending on your pay rate and travel expenses and the cost of the babysitter.
It may be a good idea to contact your creditors, especially if you have a past due balance and are incurring late fees. They may have a program to help structure your payments in a way that will help you meet your obligations in a timely manner and may also offer to reduce your interest rates. However, they also might need to temporarily close your account. Be sure to get the details and feel comfortable with the terms before agreeing to any program offers.
There are many free and low-cost resources to assist you with debt management. To get started, review these resources and determine which tools fit your situation.
Once you make the decision to carry out the counsel to conquer your debt, work at a pace that is comfortable for you. As you see your overall debt decrease you’ll hopefully be motivated to find additional ways to reduce and eventually eliminate your debt.