Many struggle with financial difficulties, spurred on by credit card debt and rising oil prices. However, there is a way to combat these problems.
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The nations of the West possess more developed resources and national wealth than at any other time in history. Ironically, most have experienced at least one difficult time making ends meet.
Financial pressures seem to bear down upon us, robbing us of peace of mind. But should this be?
Though not every detail and cause of every financial burden can be addressed in just one article, we can focus on two major concerns. One is a financial trend that has been around for decades. The other is looming on the immediate horizon—a national concern that all homeowners and families will need to address in 2006.
There is reason to believe that millions may be forced to “tighten their belts” financially. Millions are living far beyond their means! Most do not save anything from their earnings. Is it possible that your personal debt bubble will burst?
Two generations ago, it was common practice to spend only what one had left over after all obligations were met, including a weekly savings deposit. Most people practiced the habit of using cash instead of any form of credit.
But today, millions of consumers in the Western world have no doubt spent above and beyond their means this past Christmas and New Years’ season. The temptation to use one’s credit card is highest then. Many put off the thought of how they will pay off the debt.
The Christmas shopping season is, of course, an economic boom time for the retail, restaurant and hotel industries. During the months of September through January, consumer spending escalates. Prior to these months, many consumers live beyond their means. When heading into the holiday season, these same people cannot bear the thought of missing out or appearing to be broke, as they feel that buying gifts is more important than having their finances in order.
The common solution? Most of this spending is done on credit—pull out the credit card or home equity checkbook, and let out a big sigh of relief. It is estimated that nearly half of U.S. households carry an average of two to three credit cards, with a combined balance of approximately $10,000. Often, credit card debt incurred during this time can take months—sometimes years!—to pay off.
With all this debt, many make New Year’s resolutions to stop spending so much money.
It can be exciting to receive a letter or greeting card from someone special, or to receive the proverbial “check in the mail.” However, a trip to the mailbox usually results in being bombarded by many forms of junk mail.
But beware. Within this massive amount of junk mail lies a subtle assault, one that can bring you and your family financial instability. This incursion comes in the form of credit card offers from banking institutions, on average three to four times per week. They are packaged as though free money is being given away. Sometimes, they are packaged with hard-sell pitches such as “You have been approved for up to $15,000!” This leaves the unsuspecting recipient with a false sense of sudden financial power.
Others target those who have already fallen victim to the pitfalls that undisciplined credit card use can bring. They sometimes arrive with pre-printed promotional offers of 0% to 5% balance transfers, reward programs, etc.
These offers can be used wisely by the disciplined card user; but for the undisciplined, it can lead to a short-lived feeling of financial freedom—only to be trapped in a vicious cycle of debt accumulation.
Is all credit card use wrong?
No. Credit cards can be a good tool for the individual who understands how to live within his means. But where does one start?
The first step is to be honest with yourself and determine why and how you would use a credit card.
In the 21st century, it seems natural for everyone to own a credit card. For many, there is a real need to use credit cards. For instance, some people travel often. Having a credit card on hand is almost a necessity for hotel stays and car rentals. Also, many use their credit cards for the convenience of Internet shopping, online auctions, etc.
But for those who lack financial discipline, having credit cards can be the beginning of being enslaved to that same convenience—leading to high interest rates and mounting debt.
Many use their credit cards to purchase lunch at McDonalds! Is it wise to pay interest on a quick lunch? Remember this principle: All debt incurred on credit cards can turn into a mortgage on your future paychecks. Wise King Solomon was inspired to write, “…the borrower is servant to the lender” (Prov. 22:7). How true!
One must use common sense when borrowing. Carefully consider why you would need a card. If you cannot find a solid reason for needing one, then why not make all business transactions by cash, debit card or personal check? This will leave you with the best opportunity to stay out of financial enslavement and will give you personal power over your financial future. Getting into the habit of using cash more often is wise.
If you find yourself already in credit card debt, stop charging! You may need to find a source of additional income. Working hard (Ecc. 9:10) and applying the “cash only” principle is a sure way out of debt.
The next step is to find the right card and apply wisdom in your transactions. Here are some important basic points:
• Look for a credit card with a fixed interest rate rather than a variable rate. A fixed rate is secure, while a variable rate will rise as short term interest rates rise.
• Seek out low interest rates with minimal fees.
• Look for offers with the longest grace periods and cards that have no annual fees.
• Be careful with 0% to 2.9% offers that hook you in, and then kick in a high interest rate after the 6- to 12-month offer. Interest rates of 18% to 24% are common under such offers. The average interest rate is currently around 13% according to www.bankrate.com.
• Avoid paying off credit cards with more credit cards.
• Read the fine print before signing up.
(To compare credit card offers, you may find it helpful to visit certain non-profit websites.)
You might ask, “What about reward programs such as airline miles, free gasoline and cash back offers?” These can be a good deal only if the card user disciplines himself to pay off the full balance monthly. Paying off your monthly balance is the only way to use a credit card wisely, especially with cards that offer rewards. Try to pay off your card before the interest rate kicks in.
For example, those who use a 1% cash back offer and systematically pay off their monthly balance can be 1% ahead financially on every transaction, as long as the above mentioned principles are adhered to.
The simplest way to arrive at financial strength is to develop a disciplined habit of living within your means. Simple, common-sense spending habits, over time, can put you on the right track.
The long-term effects of the recent hurricane season will have an economic impact on millions. And with ever-increasing personal debt, many are beginning to sense some “bumps in the road” in their financial future.
Patricia Clark, spokesperson for the Citizens Utility Board, a consumer watchdog group, said, “It’s going to be a horrible winter for consumers.” She added, “We are advising people who call us to get on the budget plan and minimize the impact” (Chicago Sun-Times).
Peoples Energy has forecasted that natural gas bills will increase anywhere from 39% to 69% for 2006! According to the utility company, this will occur because last summer was hotter than normal throughout the nation, creating greater demand for electricity produced from natural gas, and production is struggling to keep up. This—combined with the unknown long-term effects of Hurricane Katrina on natural gas production in the Gulf of Mexico—creates concern in the market and leads to increased prices.
White House officials said that what occurred in the Gulf coast areas caused shortages, which may not recover for many months ahead. According to an Associated Press report, Interior Secretary Gail Norton said that 58% of Gulf oil production was shut down, as was 38% of the region’s natural gas production.
Recent headlines and reports indicate that 2006 may be the year that many American households will be forced to revise their budgets.
One way to combat the problem of skyrocketing natural gas prices is to weatherize your home. This can be done in a variety of ways. Many utility companies recommend the following:
• Caulk and seal around plumbing pipes, frames of windows and doors.
• Consider getting a tune-up for your furnace.
• Close fireplace flues when not in use.
• Lower your thermostat temperature—each degree can save up to 3% on heating costs!
• If you can afford it, purchase thermal pane replacement windows. This can save you up to 30% of your energy bills.
Most are unaware of a great financial law that has to do with one’s income. Many think to themselves, “What I earn is my personal business. I have the freedom to do whatever I want with it—after all, it’s mine!”
But is the money you earn really yours? Don’t be too sure.
The fact is, everything that is produced and all that money can buy comes from this planet. We had nothing to do with creating the earth. God created that! All we provide is our physical energy and thoughts to work and extract the resources from a planet that God created. Even the energy and thought processes that we utilize come from the Creator. Not only did He create all physical matter, force and energy, but He also created the human mind. God supplies the energy used in thinking, planning, designing, etc.
God claims ownership over all! Notice: “The earth is the Lord’s, and the fullness thereof; the world, and they that dwell therein” (Psa. 24:1)—“Whatsoever is under the whole heaven is Mine” (Job 41:11)—“The silver…and gold is Mine, says the Lord of hosts” (Hag. 2:8).
Your income belongs to God—it is His to do with as He pleases. But God does not need our money. He wants to share the great resources He has created, and teach us His way of give.
Although God holds claim to everything, He has provided for us a system that yields abundant blessings. All that He requires is that we put aside 10% of our income and invest it with Him. By doing this, God becomes our financial partner. God allows us to use the 90%, blessing it so that it will go even farther than the 100%.
God asks, “Will a man rob God? Yet you have robbed Me. But you say, wherein have we robbed You?” He answers, “In tithes and offerings. You are cursed with a curse: for you have robbed Me, even this whole nation” (Mal. 3:8-9).
But God offers us an opportunity to receive great blessings: “Bring you all the tithes into the store house, that there may be meat in My house, and prove Me now herewith, says the Lord of hosts, if I will not open up for you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it” (vs. 10).
This is God’s promise—and it is the way to ultimately prosper and get out of debt.
In Matthew 6, Christ explained that human beings need not be overburdened with life’s ever-increasing pressures and worries (vs. 25-32) as long as they focus their lives on this: “But seek you first the kingdom of God and His righteousness; and all these things [food, clothing, shelter and other necessities] shall be added unto you” (vs. 33).
The way to truly eliminate financial worries is to make God our personal financial partner and advisor for 2006—and for the rest of our lives!