Snowball Your Way Out of Debt

by Mike Constantine

There are many ways to get out of debt. Some are helpful; some are actually harmful. One strategy that often fails is debt consolidation. In our opinion there is always a better way.

Debt consolidation looks so appealing, but there are some dangers. You will possibly end up paying a much higher rate for a much longer term, so it costs you dearly. Also, debt consolidation can backfire if you look at your new, low monthly payment and decide that you can afford to make some other purchases on credit. Then you repeat the cycle that got you into financial bondage in the first place.

Remember that there are companies out there who seem to be offering you help, but in reality they are just increasing your financial bondage and their profits.

A far better system is one that helps you develop discipline and contentment while giving you the satisfaction of seeing your debt load steadily decrease. That is the beauty of the Snowball. I must tell you that we do not know who first came up with this plan or the name for it, but whoever it is we thank them! Many people have been helped by it.

Here’s how the Snowball works:

Put all your credit cards away. Do not incur any more debt!
List all your creditors. Do not include your mortgage or house rental payment.
For each creditor, divide the amount owed by the minimum monthly payment. Here’s an example:

$1000 (amount of debt) divided by $50 (minimum payment) = 20

$2000 divided by $40 = 50

$500 divided by $50 = 10

Do that for each debt.

Now choose the debt with the lowest number. In the example above it would be the $500 debt since it will be paid in ten months.
Next, determine what amount from your regular income you can add to the $50 each month. Let’s say you can double it each month. Now you are paying $100 on a $500 note so you will pay it off in five months instead of ten! Continue paying the original minimum payment on all other cards.
That’s good, but now the real fun begins. Since you are already accustomed to paying $100 each month on that debt, and since it is now paid off, add that $100 to the next highest monthly number. (In our example you would increase the payment on the $1000 debt from $50 to $150.) By doing thatyou will pay it off in about seven months instead of twenty months!
Repeat the process with each debt, being careful to not incur any additional debt and you will be debt free in a much shorter time.
The last step, once you retire all debt, is to place the full amount of the payments into savings each month. Follow this plan and you will learn self-control, financial discipline, and faithfulness.

Does the snowball work in other cultures outside America? We wondered about that. Then we met a young man to whom we had given those principles about three years earlier. At the time he had just finished university, but still had many debts. He followed those principles and is, today, debt free and smiling!

The two keys to making this plan work are discipline and contentment. Both of those qualities will make you a stronger, much more stable person, and the debt monster will have to find another victim.

Defeating the Debt Monster

by Mike Constantine

If the debt monster has you locked up in his dungeon, you need to take some decisive steps toward liberty. The odd thing about this dungeon is that you actually have the keys to unlock every door between you and financial freedom. You just have to use them.

Look around you. Can you see the other prisoners in this debt dungeon? All of them have the keys, just like you do. The debt monster knows any of you can escape, but he is sure that the hopelessness you feel will keep you from taking a single step toward freedom.

First Key: Recognize why you are in financial bondage.

Don’t blame the economy. You must recognize that the real reason for your financial problems is your own unsound decisions. Times may be difficult, but many people survive difficult financial times because they follow the right principles and make wise resolutions.

You are probably locked up with your spouse, and perhaps only one of you made the decisions that led to this financial prison. If so, take responsibility for your actions. Once you have, work together to reach financial freedom. Marriages have died in this prison simply because the couple will not work together to achieve liberty.

Second Key: Do not borrow any more money from any person or any company.

This is a real step of faith shown by action. “What good is it, my brothers, if a man claims to have faith but has no deeds? Can such faith save him?” (James 2:14) Right actions must accompany faith, not just any actions. If you steadfastly decide not to borrow or buy anything on credit, God will honor your faith and provide honorable ways to meet your needs.

Credit card abuse got you into this mess, so you can only get out by not using any of your cards for any purpose, at least until you are debt free. That credit card could be as dangerous to your financial health as whiskey is to an alcoholic. Do not carry it with you.

It may be necessary to have a card for emergencies. If so, make it hard to get to it.

One couple placed their credit cards in a dish of water, then put the dish in the freezer! In essence theyfroze their own credit. They couldn’t use the cards until they thawed them out. That gave them time to think before they made a purchase. It’s a cold, hard solution, but it might just work.

Couples who have developed good financial discipline can safely use credit cards, if they pay the outstanding balance in full each month. A credit card is like a chainsaw: a useful tool in a skilled hand, but a dangerous weapon in the hand of an undisciplined person.

Third Key: Arrange to pay something to every creditor.

Contact any companies or banks whom you owe and ask them to be patient with you and to accept lesser payments. “Settle matters quickly with your adversary who is taking you to court. Do it while you are still with him on the way, or he may hand you over to the judge, and the judge may hand you over to the officer, and you may be thrown into prison.” (Matthew 5:25) You can also start using what someone called the snowball principle. For an explanation of the Snowball Principle, click here: The Snowball Principle

Contact any friends or family members you have borrowed from. If you have taken advantage of their generosity, you should ask their forgiveness and make restitution. If you cannot repay them right now ask for understanding, and make plans to repay them as soon as possible. If necessary, ask your pastor or theirs to mediate a settlement. By doing that you also establish some financial accountability.

Fourth Key: Find someone to oversee your journey to financial freedom.

It will help you. We sometimes need an outside party to keep us on track, especially if we have a history of undisciplined spending.

One other thought about accountability: you can fool anyone but God. Sure, you could ask someone to help you stay on track, but without a personal sense of accountability to God, you might still practice the same personal dishonesty that led to your present crisis.

Fifth Key: Avoid the temptation of looking for a quick fix.

Usually, God delivers us from financial bondage gradually. Of course God could provide all the money you need to get out of debt in a moment, but he usually doesn’t. Why? Because monetary miracles do not develop character, but faithful, patient progress does. The real gold comes from the development of our inner character, for when we are rich there, we are rich indeed!

In the United States we have lotteries, like the four-digit lotteries in some Asian countries. I recently heard that most people who hit the jackpot eventually lose it all. They strike it rich, but they don’t have the character and self-control to use it wisely. God wants to do more than release you from debt. He wants to form your character and teach you financial self-control so you do not repeat the mistake. “Dishonest money dwindles away, but he who gathers money little by little makes it grow.” (Proverbs 13:11)

Remember this: God wants you free from financial bondage, but he cannot deliver you unless you follow His path. If you do, you will see His blessing in all you do. If you don’t, the pit gets deeper. Seize the chance! Break the destructive pattern you have fallen into. Resist every voice that tells you it’s too late. Believe God, and prove it by the financial decisions you make. You will love the results.

Mastering Money

by Mike Constantine

Marriage counselors all agree that money problems are a chief source of marital stress. The following letter to John and Anne, a couple experiencing financial difficulties, gives some good, practical advice to couples about managing their finances. Without a doubt, money matters.

Dear John and Anne,

I hope you’ll take this letter in the spirit of love and compassion in which I send it. Ever since I came to know about your financial difficulties, I’ve been deeply concerned for you. When a friend complained you had borrowed money from him and had not repaid it, I knew the problem was really serious. I soon discovered that you were in debt to many people, sometimes borrowing from one to pay something to the others. That’s quite desperate, wouldn’t you agree?

I want to share some principles with you that will help you recover from your financial snare. Of course, you are not alone. Many, many people find themselves caught in the same net. Like a trapped animal they fight against their bonds, spending all their strength and more than all their money. There is a way out, but it comes by humbly applying God’s wisdom, not by frantically scheming.

There is a Cause

Financial distress has many causes. Each of them, like a strand of strong rope, binds you. The more strands, the more bondage. Let’s call them the shortages that lead to financial bondage.

Shortage of Work

If a person faithfully works at his job, he can expect a fair wage and promotion. Faithful work habits show our desire to please God and earn respect. John, do not be offended, but I believe you are trying to find a get-rich-quick scheme. Believe me. They’re not hard to find, but they rarely produce the results they promise. In the worst cases they are even deceptive and unethical. Beware of any job in which you have to lie or misrepresent your product or yourself. Find a good job, do a good job, and you’ll reap a good reward.

Shortage of Wisdom

Wisdom makes the difference between success and failure. The Bible tells us that a rich man can also be a fool if he allows what he owns to own him. Wise people manage their money, no matter how much or how little. They don’t allow their money to manage them. As Solomon said, a person who has money, but lacks wisdom, is the same as a person without money: “Of what use is money in the hand of a fool, since he has no desire to get wisdom?” (Proverbs 17:16)

Shortage of Faith

What, exactly, is faith? Faith means seeing God as your source, your provider. Many people talk faith, but do not live faith. We prove our faith in God by the decisions we make about money and possessions. Do we live for money? Do we have an Aladdin complex, hoping to make God our genie? He will gladly be our provider but he will never be our servant.

We also show our faith in God by submission to His will and authority. If we do not submit to Him, how can we hope to claim His promises? Show your faith in God, not just in your words, but in actions that please him, and he will bless you. A wise man once said, “Trust in the Lord and do good; dwell in the land and enjoy safe pasture.” (Psalms 37:3)

Shortage of Giving

Those who never give, never have enough, or never think they do. Those who do give to God and his work experience joyous freedom. When you consistently practice that kind of giving, you are free from a grasping, penny-pinching attitude.

I once talked with a man who works as a car sales agent. You know how changeable that job can be. He told me some of his financial difficulties and what happened when he and his wife started giving to God’s work. With a light in his eyes and excitement in his voice, he told me how God has blessed his family and their finances. He sold some of the most expensive vehicles in the dealership, almost without trying.

No one can promise you instant results. God chooses when and how to bless us. Still, you will see your financial situation improve if you honor God by giving to his work. Please remember: it isn’t the giving alone that pleases him. What pleases God is giving that comes from a sincere and thankful heart.

Work faithfully, live wisely, believe God, and give. You will see God bless you in all you do. I do not say that you will live lavishly, but you will have all you need and enough to share with others. And you will be free! No financial bondage. No sleepless nights. No scheming. God’s way is a restful way.

Think, Act, Pray

1. Which of the four shortages do you think is the most common reason for financial problems among Christians?

2. Why do you think most get-rich-schemes do not work as promised?

3. What are some ways a couple can gain financial wisdom?

4. Name some ways people show their faith in God about financial matters.

5. Do you know someone whose financial situation improved when they began giving? Why do you think that happened?

A good friend of ours had been foolish and gotten into serious debt. When he chose to get out of debt, he cut up his credit cards, began paying promptly, and did not incur more debt. But he would not give to God’s work. He said, “If I owe money to others, I cannot give anything to God. I will get out of debt, then I’ll begin to give.”

He worked hard, often 60 hours a week, just to pay his debts. After two years, he had paid off about one third of what he owed. Then an opportunity came to support a former classmate on a mission. He committed a significant amount each month to that mission organization. Almost immediately, he received a new job offer in a new field. He had much to learn, and it wasn’t easy, but he now worked a normal work week with twice the earnings. In less than a year, he was debt-free, and still is today.

1. Which of the shortages we mentioned could have caused our friend to get into debt?

2. What did giving to God’s work prove?

3. What did he do that made it possible for God to bless him financially?