Getting out of debt is easy - but first...

It is not pleasant to find yourself snowed under by hostile creditors, threatening you from all sides. When you were buying the item, they were so pleasant and helpful. Now you have only missed one payment — so what's the big deal?

I live in South Africa where the national sport is buying on credit. To attempt to curb excess spending our Reserve Bank yesterday pushed up their interest (REPO) rate by a further half percent, and banks responded by setting the prime lending rate at 13.5%. That means that anyone buying a house, of, for example Rand 300,000 (a cheap house) would pay R3,622 per month — totalling repayments of R869,309, which is R569,309 in interest — nearly double the purchase price.

Credit is expensive. So, should be avoided at any cost. Because credit may be less expensive in your country, does not make it a good idea.

Why did you buy the items that have overloaded you with a debt burden?

My theory is that we get into debt because we break the first and last commandments, which are:

• I am GOD, your God, ... No other gods, only me. 
• Don't set your heart on anything ... (Exodus 20:2,3,17 The Message)

We worship money instead of God, and we have a warning in scripture that it is impossible to worship God and money (mammon) (Matthew 6:24). We worship money because it will enable us to buy the things we covet - desire with our hearts. Another warning is: "Lust for money brings trouble and nothing but trouble. Going down that path, some lose their footing in the faith completely and live to regret it bitterly ever after." (1 Timothy 6:10 The Message)

The consequence is that we remain in a state of poverty.  Povery is an addiction. Until we recognise the addiction and deal with it we can never get out of debt successfully. We recognise the poverty addiction when we see an advertisement or a review of the latest, bestest whatever, and we want it, we crave it, no matter what it costs. Be aware of the reaction, and resist it – like an alcoholic resisting taking the first drink! Until out of debt do not take on any further burdens.

In Mitch Albom's delightful book, tuesdays with Morrie, Morrie gives some sound advice:

Once you recognise your urge to break the commandments, you can cope with your addiction. But, like an alcoholic, you cannot afford to succumb to temptation. Fortunately, unlike an alcoholic, this is not a permanent state. You will be able to buy things you need – not want – once you have got out from under the debt burden.

Getting out of debt is hard work, taking discipline. You need to draw up a budget, listing all your commitments (debt and living expenses). If your expenditure is higher than your income, you need to:

• assess what you can do without (or postpone). After that, if you are still short:
• approach your creditors, explain that you are committed to settling your debt and ask for their help. For example, can they freeze interest on the debt and lower the repayment amount. Communicatin is essential. Do not keep them in the dark or you are guaranteed to be hounded by them.
• keep to your plan, and get rid of the debt burden.
• if you have long-term debt (such as a mortgage bond), as you free up funds by clearing other debt apply the extra funds to this debt, and you will be amazed how much more quickly you can settle it, and the amount you save in interest.

Having done that you are then free to create wealth, by embarking on an investment program. I am not going to go into the mechanics of that here. I have dealt with them in depth in my book Wealth be my Friend (which is available from Amazon.com). If you want to know more also look at my web site: www.qei-growth.co.za

May God be with you as you fight the poverty addiction, and get out of debt.

Geoffrey George Paxton

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