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Tips For Getting Out Of Debt

by | Sun, May 1 2022

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Pay off Your Debts
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How does our culture impact our Biblical position on debt? Would you like to be debt free? If you’re going to build on your wealth, debt is something you need to be in control of. Yet for most of us, paying off our debts is a lifelong dream.

Alex Cook from Wealth With Purpose, says that back in 1991 when we had our first real recession, there was only a 50% debt to income ratio. Now we’re carrying four times that amount. Alex recently joined us on 20Twenty to give some advice on how we can get our debt back under control.

“The Bible gives us some warning messages about debt,” says Alex. “I think it’s something we should take heed of. One of my favourites is from Proverbs 22, where it says the rich rule over the poor, and the borrower is slave to the lender.”

Many Australians may end up as slaves to the banking system as interest rates rise. That’s what the Bible is warning us against. If you have accumulated a lot of debt, now is the time to make a definitive plan to get out of it.

Alex also believes that most parents are aware that their children will find it impossible to get into the housing market without some assistance. But it becomes an issue of circumstance. If your child were to default on a home loan, what impact would that have on you?

“Could you come up with the cash to fund the difference?” Alex says. “Would you be forced to sell your own house? I don’t think you ever want to put yourself in a position where your house would be forcibly sold from under you.”

House prices in Australia are enormously overvalued by any historical measure, and as interest rates rise, house prices will go up. Having debt on your own home is one thing. It’s all the other debt we take on around the periphery that becomes an issue. Much of that can be avoided.

“I generally discourage borrowing money for things that have a depreciating nature,” says Alex. “The only good form of debt is an asset likely to appreciate. You want to get rid of the highest interest rate loans first. If you have spare money in your budget, pay it against your home loan.”

If you are considering an investment property, Alex recommends doing the numbers and having as big a deposit as you can. You want the property to be neutral or cash flow positive as soon as possible. Negative gearing is just a way of losing money tax effectively. So exercise caution.

Alex has created a free e-book called ‘The Debt Destroyer’, to help specifically with this issue. It outlines a process for getting out of debt and helps you think it through biblically.

“It helps you to pray about it and put action steps in place,” says Alex. “I believe that God wants us all to be financially free. He doesn’t mind us having debt, but He doesn’t want us to be enslaved to the world’s economic system.”

“That’s the key message,” says Alex. “Don’t let your debt enslave you.”

Listen to the full interview here:

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