How to Get Out of Debt 4
How to Get Out of Debt
Step 5. Stop Buying things on credit
A Christian in debt should also begin buying on a cash basis only. Often someone in debt, with an asset that can be converted into cash, will ask, "Would it be better to sell this asset and pay off the debts?" This is a possible option, but it would only be valid if a person first learned new spending habits; otherwise it only treats the symptom rather than the problem.
For example, I remember a couple who were in dire financial bondage from credit card debts. They owed over $20,000 and paid in excess of $4,000 a year in interest alone. In our planning, it seemed reasonable for them to sell their home and apply the money to their debts, which would have then been paid off. They did so, but less than a year later they were back in again with about $6,000 in credit card debts and no home this time.
What happened? They had treated a symptom rather than the problem. The problem was an attitude dealing with credit cards. I had their assurance that they would not use the credit cards; but without having worked out a plan to discontinue the use of those cards, they fell right back into the same trap again. As soon as they needed something and lacked cash to purchase it, out came the card. The principle to observe is this: If you are in debt from the misuse of credit, stop - totally stop - using it. One of the best things to do with credit cards when in debt is to cut them in two. Then mail the cards back to their respective companies and ask them to mail you no more. Include in your letter the plan for paying that credit card debt, and then commit yourself to buying solely on a cash basis.
Once good habits have been developed and the bondage from the misuse of credit cards has been broken, then evaluate the feasibility of converting assets to pay off the debts. In that way you won't simply be treating the symptom. Once someone has overextended his finances, it is necessary to sacrifice some of the wants and desires in life to get current; otherwise he will continue to borrow and only get deeper into bondage.