2023-Q1-L05

2023-Q1-L05: Dealing With Debt

Read for This Week’s Study: Deut. 28:1, 2, 12; Matt. 6:24; 1 John 2:15; Prov. 22:7; Prov. 6:1-5; Deut. 15:1-5.

Memory Text: “The rich rules over the poor, and the borrower is servant to the lender” (Proverbs 22:7, NKJV).

One definition of debt is “living today on what you expect to earn in the future.” Today debt seems to be a way of life, but it should not be the norm for Christians. The Bible discourages debt. In the Scriptures there are at least 26 references to debt, and all are negative. It does not say that it is a sin to borrow money, but it does talk about the often-bad consequences of doing so. When considering financial obligations,

Paul counseled: “Render therefore to all their due: taxes to whom taxes are due, customs to whom customs, fear to whom fear, honor to whom honor. Owe no one anything except to love one another” (Rom. 13:7, 8, NKJV). In the Greek: Owe no one anything, no, not anything.

Yes, you can lend and borrow. This verse is not contradicting the other verses in the Bible that say people can lend when they have extra, or borrow when they have need.

Exodus 22:25-26: If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him. 26 If ever you take your neighbor's cloak in pledge, you shall return it to him before the sun goes down,

Deuteronomy 15:7-11: If among you, one of your brothers should become poor, in any of your towns within your land that the Lord your God is giving you, you shall not harden your heart or shut your hand against your poor brother, 8 but you shall open your hand to him and lend him sufficient for his need, whatever it may be. 9 Take care lest there be an unworthy thought in your heart and you say, ‘The seventh year, the year of release is near,’ and your eye look grudgingly[a] on your poor brother, and you give him nothing, and he cry to the Lord against you, and you be guilty of sin. 10 You shall give to him freely, and your heart shall not be grudging when you give to him, because for this the Lord your God will bless you in all your work and in all that you undertake. 11 For there will never cease to be poor in the land. Therefore I command you, ‘You shall open wide your hand to your brother, to the needy and to the poor, in your land.’

Deuteronomy 24:6: No one shall take a mill or an upper millstone in pledge, for that would be taking a life in pledge.

Nehemiah 5:3-5: There were also those who said, “We are mortgaging our fields, our vineyards, and our houses to get grain because of the famine.” 4 And there were those who said, “We have borrowed money for the king's tax on our fields and our vineyards. 5 Now our flesh is as the flesh of our brothers, our children are as their children. Yet we are forcing our sons and our daughters to be slaves, and some of our daughters have already been enslaved, but it is not in our power to help it, for other men have our fields and our vineyards.

Psalm 37:26: He is ever lending generously, and his children become a blessing.

Matthew 5:42: Give to the one who begs from you, and do not refuse the one who would borrow from you.

Lending is included, because IF it is a sin to borrow, THEN it would be a sin to cause another to sin by lending to him.

Notes

Budget. Minimally discussed on Friday: "Establish a budget. Make a simple budget by keeping a record of all your income and expenses/purchases over a period of three months."

Debt-focused. The lesson content was debt focused. The other side of the coin is wealth focused. This will be covered in Lesson 8, but which should give some pointers here.

SUNDAY. The Debt Problems

Scriptures

Deuteronomy 28:1–2 (ESV): 28 “And if you faithfully obey the voice of the LORD your God, being careful to do all his commandments that I command you today, the LORD your God will set you high above all the nations of the earth. 2 And all these blessings shall come upon you and overtake you, if you obey the voice of the LORD your God.

Deuteronomy 28:12 (ESV): 12 The LORD will open to you his good treasury, the heavens, to give the rain to your land in its season and to bless all the work of your hands. And you shall lend to many nations, but you shall not borrow.

1 Timothy 6:6–9 (ESV): 6 But godliness with contentment is great gain, 7 for we brought nothing into the world, and we cannot take anything out of the world. 8 But if we have food and clothing, with these we will be content. 9 But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction.

Three primary reasons that people get into financial difficulty.

The first is ignorance. Many people, even the educated, are financially illiterate. They were simply never exposed to the biblical or even secular principles of money management. There is hope, however! This lesson will provide a simple outline of these principles and how to apply them.

The second reason for financial difficulties is greed, or selfishness. In response to advertising and personal desire, people simply live beyond their means. They aren’t willing to live in, drive, or wear what they can really afford. Many of these same people also feel that they are just too poor to tithe. As a consequence, they live their lives without God’s promised wisdom and blessing (see Mal. 3:10, 11; Matt. 6:33). There’s hope for these people as well, but it requires a change of heart — and a spirit of contentment.

The third reason people find themselves in financial difficulty is personal misfortune. They may have experienced a serious illness without adequate health insurance. They may have been abandoned by a spendthrift marriage partner. A natural disaster may have wiped out their possessions. Or they may have been born and raised in abject poverty. There is hope for these people, too. Though their path is more difficult, their troubles can be overcome. Change may come in the support of Christian friends; the counsel and/or assistance of godly counselors; hard work coupled with a good education; and the blessing and providence of God.

Notes

Ignorance. Financial illiterate. Money management.

Greed and selfishness. Living beyond our means.

Personal misfortune. Health issues, poverty, etc.

MONDAY. Following Godly Counsel (?)

Scriptures

Matthew 6:24 (ESV): 24 “No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money.

1 John 2:15 (ESV): 15 Do not love the world or the things in the world. If anyone loves the world, the love of the Father is not in him.

Ecclesiastes 4:8 (ESV): 8 one person who has no other, either son or brother, yet there is no end to all his toil, and his eyes are never satisfied with riches, so that he never asks, “For whom am I toiling and depriving myself of pleasure?” This also is vanity and an unhappy business.

Psalm 50:14–15 (ESV): 14 Offer to God a sacrifice of thanksgiving, and perform your vows to the Most High, 15 and call upon me in the day of trouble; I will deliver you, and you shall glorify me.”

From the lesson: Though we all face it, and there is nothing wrong in and of itself in working hard to earn a good living or even being wealthy, none of us has to succumb to the trap of making idols out of money, wealth, and material possessions. We are promised divine power to stay faithful to what we know is right. This is important, because the temptation for wealth and material possessions has led to the ruin of many souls.

Notes

"the temptation for wealth and material possessions." Is this a true statement? What is wrong with this statement? It is not the temptation for wealth, but the "love" of wealth. We should desire and strive for wealth. There should be joy and pleasure in gaining wealth when done honestly. There should also be joy in the fruit of our labors.

Ecclesiastes 5:10-12: He who loves money will not be satisfied with money, nor he who loves wealth with his income; this also is vanity. 11 When goods increase, they increase who eat them, and what advantage has their owner but to see them with his eyes? 12 Sweet is the sleep of a laborer, whether he eats little or much, but the full stomach of the rich will not let him sleep.

Ecclesiastes 5:18-20: Behold, what I have seen to be good and fitting is to eat and drink and find enjoyment in all the toil with which one toils under the sun the few days of his life that God has given him, for this is his lot. 19 Everyone also to whom God has given wealth and possessions and power to enjoy them, and to accept his lot and rejoice in his toil—this is the gift of God. 20 For he will not much remember the days of his life because God keeps him occupied with joy in his heart.

Ecclesiastes 6:1-6: There is an evil that I have seen under the sun, and it lies heavy on mankind: 2 a man to whom God gives wealth, possessions, and honor, so that he lacks nothing of all that he desires, yet God does not give him power to enjoy them, but a stranger enjoys them. This is vanity; it is a grievous evil. 3 If a man fathers a hundred children and lives many years, so that the days of his years are many, but his soul is not satisfied with life's good things, and he also has no burial, I say that a stillborn child is better off than he. 4 For it comes in vanity and goes in darkness, and in darkness its name is covered. 5 Moreover, it has not seen the sun or known anything, yet it finds rest rather than he. 6 Even though he should live a thousand years twice over, yet enjoy no good—do not all go to the one place?

Key points: (1) Right focus: love God over love money and wealth. (2) Find enjoyment in one's toil; rejoice in his toil. (3) God gives power to enjoy wealth, possession, and honor. Or in summary words:

(1) Rejoice in the Lord always

(2) Rejoice in one's toil

(3) Rejoice in the fruit of one's toil.

TUESDAY. How to Get Out of Debt

Proverbs 22:7 (ESV): 7 The rich rules over the poor, and the borrower is the slave of the lender.

Step one is to declare a moratorium on additional debt: no more credit spending. If you don’t borrow money, you can’t get into debt. If you don’t borrow any more money, you can’t get further into debt.

Step two is to make a covenant with God that from this point on, as He blesses, you will pay off your debts as quickly as possible. When God blesses you financially, use the money to reduce debt — not to purchase more things. This step is probably the most crucial. When most folks receive unexpected money, they simply spend it. Don’t; instead, apply it to your debt-reduction plan.

Step three is the hands-on practical part. Make a list of all your debts, from the largest to the smallest, in descending order. For most families the home mortgage is at the top of the list, and a credit card or personal debt is at the bottom. Begin by making at least the minimum payment due on each of your debts on a monthly basis. Next, double up or increase your payments in any way you can on the debt on the bottom of the list. You’ll be happily surprised how quickly you can eliminate that smallest debt. Then use the money that you were paying on the bottom debt to add to the basic payment on the next debt as you work your way up the list. As you eliminate your smaller high-interest debts, you’ll free up a surprising amount of money to place on the next-higher debts.

WEDNESDAY. Surety and Get-Rich-Quick Schemes

Scriptures

Proverbs 6:1–5 (ESV): 6 My son, if you have put up security for your neighbor, have given your pledge for a stranger, 2 if you are snared in the words of your mouth, caught in the words of your mouth, 3 then do this, my son, and save yourself, for you have come into the hand of your neighbor: go, hasten, and plead urgently with your neighbor. 4 Give your eyes no sleep and your eyelids no slumber; 5 save yourself like a gazelle from the hand of the hunter, like a bird from the hand of the fowler.

Proverbs 17:18 (ESV): 18 One who lacks sense gives a pledge and puts up security in the presence of his neighbor.

Proverbs 22:26 (ESV): 26 Be not one of those who give pledges, who put up security for debts.

Proverbs 28:20 (ESV): 20 A faithful man will abound with blessings, but whoever hastens to be rich will not go unpunished.

1 Timothy 6:9–10 (ESV): 9 But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction. 10 For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs.

From the lesson: The Bible is very clear that God does not want His children to become responsible for the debt obligations of others. ... Get-rich-quick schemes are another financial trap

Notes

Co-sign. Guarantor, Surety, Security. Guarantee the debt. You are an accomplice to someone who is not creditworthy. That is, the other person is probably in debt or inclined to get into debt or will not take the full responsibility for the debt. 70% of the co-signers end up paying the loan.

Get-rich-quick schemes. Lottery. Stock market financial instruments of destruction: futures, options, leverage, etc.

Stock market. It is legitimate when you understand what you are doing. It is legitimate because it is a legal way to participate in a business. When you purchase a stock, you own part of the business. Or you can own commodities via commodity futures or stocks which follow commodity futures.

Stock market timing. Manage your own 401K. Invest only in one stock: the S&P 500 via SPY. Every week check the 50/200 day moving averages on the S&P 500. Go into stockcharts.com and type in SPY. In 2020, it gave a buy signal in July, then a sell signal in March of 2022. It has now given a buy signal at the end of January 2023.

Pyramid schemes.

THURSDAY. Term Limits and Borrowing Points

Deuteronomy 15:1–5 (ESV): 15 “At the end of every seven years you shall grant a release. 2 And this is the manner of the release: every creditor shall release what he has lent to his neighbor. He shall not exact it of his neighbor, his brother, because the LORD’s release has been proclaimed. 3 Of a foreigner you may exact it, but whatever of yours is with your brother your hand shall release. 4 But there will be no poor among you; for the LORD will bless you in the land that the LORD your God is giving you for an inheritance to possess— 5 if only you will strictly obey the voice of the LORD your God, being careful to do all this commandment that I command you today.

Notes

Speaks of home and student loans.

National Debt. Over $31.5T.

Student Debt. Over $1.7T

Credit Card. Over $1.2T

FRIDAY. Further Thought: The three-step process of debt elimination is actually found on one page of Ellen G. White’s writings. Emphasis has been added to highlight the points.

“Be determined never to incur another debt. Deny yourself a thousand things rather than run in debt. This has been the curse of your life, getting into debt. Avoid it as you would the smallpox.

Make a solemn covenant with God that by His blessing you will pay your debts and then owe no man anything if you live on porridge and bread. … Do not falter, be discouraged, or turn back. Deny your taste, deny the indulgence of appetite, save your pence and pay your debts.

Work them off as fast as possible. When you can stand forth a free man again, owing no man anything, you will have achieved a great victory.” — Counsels on Stewardship, p. 257.

If you need additional help to become debt-free, try these points:

Establish a budget. Make a simple budget by keeping a record of all your income and expenses/purchases over a period of three months. Many are surprised to learn how much money they spend on unnecessary items.

Destroy credit cards. Credit cards are one of the major causes of family indebtedness. They are so easy to use and so hard to pay off. If you find that you aren’t paying off the cards in total each month, or that you are using them to purchase items that you would not otherwise have bought, you should destroy your credit cards before they destroy you or your marriage or both.

Begin economic measures. Sometimes we aren’t aware of how much we could save on our monthly expenses just by being careful about some of the small things that we purchase. They quickly add up.

APPENDIX

Inflation Time Bomb

Savings and debt. Most people are not aware that 80% of the value of the dollar was destroyed by inflation between 1972 and 2007 (35 years) as measured by official government statistics. Unfortunately, the United States is in much worse shape right now than in 1972 and inflation has accelerated.

There are unspoken assumptions underlying savings and debt: (1) that the currency is stable, (2) that assets and debts each maintain their value, and (3) that a dollar is a dollar. The problem comes when these assumptions are incorrect. With powerful inflation, what a dollar is worth changes every year (and every month), and that turns our notions of savings and thrift upside down.

Trying to outrun inflation with traditional investments is a very difficult thing to do, and becomes near impossible for most people when we consider tax consequences. Unfortunately, government tax codes don't take inflation into account. If an asset appreciates in dollar terms but not in inflation-adjusted terms, the government doesn't care. You still pay taxes on the phantom "profit" you make when you sell the asset. The primary victims of inflation tend to be the older part of the population, and the primary beneficiaries are the younger people.

The Mind and Methods of a Rich Man

Public education. Is a colosal failure. When I got out of high school, I could hardly read my own diploma. I was practically illiterate. I spent about a year and a half totally absorbed in the dictionary to build up my vocabulary. That's how I broke out of this problem. Public education does not teach character development—i.e. the value of virtue. The reason it does not is because Prayer and the Bible have been taken out of the schools. What has been brought in is moral relativism and tolerance of the immoral. Public school teaching is designed to create a labor force, a 9 to 5 factory worker with a salary and benefits. Creativity and individuality are discouraged. Finance and entrepreneurship are not in the curriculum. Trade skills are generally not taught. What would it be like if every student going to college was required to go to a 1-2 trade school and learn a trade before entering college. The combining of the practical with the theoretical is absent.

When Credit = Capital. There is a legitimate and productive role for credit, when credit = capital. That is, when credit is used to finance the manufacture or acquisition of capital goods. My definition of capital goods is expansive: anything enabling the production of other capital (and consumption) goods and generates income for the producer(s). See To Our (Dis)Credit. Ultimately, savings resulting from income-producing capital is the best way to finance new capital.

The Seven (7) Old Rules of Money - Robert Kiyosaki

Go to school (to get a safe and secure job). You need more education that the school system provides. Schools provide very little if any financial education. Most people are in trouble financially.

Work hard to earn more money. Most people get a job as an employee or a specialist (i.e. doctor, lawyer, accountant, etc). Better to become an enterpreneur or an investor. Enterpreneurs and investors get tax breaks. Earned income is taxed at the highest rate (25-50%); portfolio income is taxed at 15-20%, passive income is taxed the least (as low as 0%). (401k is the worst investment vehicle. When you retire 401k is earned income.)

Save money. The dollar is devaluing at an alarming rate since 1971. Even if the banks give you 5% interest, you can't keep up with the U.S. Federal Reserve Bank (the FED) printing money. Since 1971 the U.S. dollar has lost 80% of its purchasing power.You need to hedge money--hedging using oil, gold, and silver, which is a bet against the U.S. dollar.

Buy a house. Your house is not an asset but a liability. Income (Income/Expense) and Balance Sheet (Asset/Liability). Does a house put money into your pocket or take money out of your pocket? For most people, a house takes money out of their pockets via a mortgage and maintenance and insurance expenses. If I have a rental house, then it's an asset (assuming the tenant continues to pay rent). Assets put money in your pocket; Liabilities take money from your pocket.

Get out of debt. There is both good and bad debt. Most people have too much bad debt. Good debt puts money in your pocket--i.e. debt that other people are paying for me. Over time, debtors (of good debt) are the winners because they continue to pay their debts with dollars that are worth less and less.

Invest for the long term (mutual funds). Need to know the difference between buy and sell. Buy a house (forever) and sell it every month (to the renter). You should be selling more than buying. Have something to sell every month. Keep your money moving. With mutual funds, you are risking 100% of your capital with someone else who takes no risk (i.e. no skin in the game) but takes a high percentage of the profit.

Diversify. Instead of diversification, "focus." Follow one course until your successful, and then keep doing it.

The Seven (7) New Rules of Money - Robert Kiyosaki

More financial education. Increase financial IQ. (Part 1/7) - Conventional Education vs Financial Literacy.

Aim for portfolio/passive income. (Part 2/7) - The Cashflow Quadrant. Three types of income: Earned (taxed at the highest rate), Portfolio (taxed 15-20%), Passive (taxed 0% in many cases).

Don't save money but "hedge". (Part 3/7) - Why Savers Are Losers in This Economy.

Know differences between assets vs liabilities. (Part 4/7) - Assets vs Liabilities. Assets put money in your pocket. Liabilities take money from your pocket.

Good debt vs bad debt. (Part 5/7) - Good Debt vs Bad Debt. Good debt puts money in your pocket. Debt for cash flow.

Have something to sell every month. (Part 6/7) - The Difference Between Buy, Sell, and Fool. Buy a house (forever) and sell it every month (to the renter). You should be selling more than buying. Have something to sell every month.

Follow one course until you're successful. (Part 7/7) - Focus! Diversification is a mistake.

The Four Asset Classes. (1) A business, (2) Real Estate (wisely using debt), (3) Stocks/Bonds (you have to know what you are buying), (4) Commodities (i.e. gold, silver, oil companies). Jobs are *not* assets--you cannot sell your job, and you can get fired!
Cashflow Quadrant. #2 (E)mployee (job - benefits and security), (S)elf-employed (you own a job; no work - no pay), (B)usiness-owner (can leave and business will continue), (I)nvestment-income (automatic paycheck).
Live Above Your Means. #6 Increase assets. Buy assets first, liabilities second.

Investing Isn't Risky. #8 Buy an asset with insurance.