If Americans had followed biblical financial principles, they could have lessened – or completely avoided – the worst recession in decades, two prominent Christian money-management specialists said.
“Debt may not be a sin, but it is certainly a curse,” said Randy Rowechamp of Crown Financial Ministries.
Dave Ramsey, author of “Total Money Makeover” and other money management books, agrees.
“There has been a common myth spread across America that debt is a tool and should be used to create prosperity, but God tells us something different,” Ramsey said. “According to Proverbs 22:7, ‘The rich rules over the poor, and the borrower is slave to the lender.’ God shows us his obvious disdain for debt.”
But, according to Federal Reserve estimates, household debt stands at 124 percent of after-tax annual income, down from a peak of 133 percent in 2007, but up sharply from the 60 percent prior to 1986. Greater debt and smaller incomes yield predictable results. Bank-loan defaults have increased steadily from 0.76 percent in 2006 to 3.77 percent currently.
Federal Reserve Chairman Ben Bernanke recently announced, “From a technical perspective, the recession is very likely over.”
But from a practical perspective, Bernanke conceded, economic recovery will be slow.
Christian finance involves more than financial recovery.
“In all economic times, Christians should be good stewards,” Rowechamp said. “The way we do that is to learn what God has to say about all of our financial resources.”
Unfortunately, churches have taught inadequate financial principles.
“Many churches focus only on giving when they teach congregations about honoring God with their finances,” Ramsey said. “But handling money and thinking about money in a godly way is much more than a tithe check,” he continued. “The Bible tells us that we are stewards of God’s resources. By definition, a steward is not an owner, but a manager – someone who takes care of the possessions of someone else. Handling your resources God’s way not only includes giving, but also budgeting, saving, sacrificing and making wise decisions with your money.”
Rowechamp agrees that churches have not taught money-management principles.
“One problem is that pastors were not taught about money management in seminary,” he said.
“And the second problem is that many pastors are, themselves, as much in debt as any other family.”
By engaging in common-sense biblical principles, even families with significant debt can become financially free.
“Financial freedom, for Christians, is when they can choose to quit working and pursue a Life they feel led to, or when they can choose to keep working and support ministries they feel passionate about,” he added.
Knowing versus doing
Just because Christians understand good money-management principles doesn’t necessarily mean they put them into practice, Ramsey observed.
“[Knowing] what to do isn’t the problem. Doing it is. Winning at money is 80 percent behavior and 20 percent head knowledge. Most of us know what to do, but we just don’t do it,” he said. “If you can control the person in the mirror, you can win with money. But some people are so immature that they are unwilling to delay pleasure for a greater result. If you will make the sacrifices now that most people aren’t willing to make, later on you will be able to live as those folks will never be able to live.”
To become financially independent, families first must total their indebtedness. Second, say the experts, they must establish a $1,000 emergency savings fund and use credit cards only if they can repay in the same month.
Next, families should begin paying off loans. According to Ramsey, the goal is changed behavior. People should repay smaller loans first, regardless of the interest rates, because success reinforces good behavior.
Ramsey cautions against debt consolidation.
“Debt consolidation is nothing more than a con because you think you’ve done something about the debt problem, but all you’ve done is move it,” he said. “A friend of mine who works for a debt consolidation firm estimates that 78 percent of the time, after someone consolidates his credit-card debt, the debt grows back. This happens because the debt is still there, as are the habits that caused it. You can’t borrow your way out of debt.”
As they get rid of debt, families should save more, Ramsey suggested. Then, they should pay off their mortgages early.
When the collector comes calling
Families whose debts have been submitted to collectors should secure a financial adviser.
“You should set your payment priorities, not let collectors set it,” Ramsey said. “It is their job to make you angry or scared, and they do that job well. They know that if they can get you all worked up that you will act on that emotion and do something stupid like pay them instead of buying groceries. Take care of necessities first – food, clothing, shelter, utilities and transportation. After these, figure out how much you can pay on each of your debts.
“Tell the collectors you are going to send them payments of what you can each pay period. If they say that’s not good enough, tell them that is all you can give them right now. Trust me, they will cash the check for that amount.”
That church budgets have suffered during the recession comes as no surprise.
“The disturbing thing is, when you look at the statistics, the spending inside the church is no different than outside the church,” Rowechamp said. “There is a difference between God’s economy and man’s economy. People who spend more than they make are focusing on worldly things. When the church is hurting financially, it is not a good role model to the community.”
Ramsey suggests, “Debt … prevents our churches from realizing their full potential and maximizing their impact. It is important for the church to lead by example and learn how to successfully manage church finances so that they can build their church debt-free. This will encourage church members to learn how to live a debt-free life so that they give like never before and help the church grow.”
Ramsey and Rowechamp agreed that when churches teach biblical stewardship and engage in the money management principles they teach, congregations, families and communities will reap positive rewards.