Personal Debt: Managing Your Finances

The current situation

Recent domestic and world financial difficulties have served to highlight the very real problem of Personal Debt in the United Kingdom. Once, marital infidelity was thought to be the major factor for marital breakdowns. But this is no longer true and the greatest threat to marital stability has for some years been the inability of families to handle or even discuss their own financial problems.

Statistics are available to show the average amount owed by each household and by each adult in the country. Although these show an alarming rate of increase, they rarely do anything to change people’s habits. The ‘wake-up’ call that there is a serious problem comes only when a crisis arises as, when the bank refuses to honour a cheque or some other form of credit is refused. It is very tempting to follow current social habits because people are led to believe that this is the way that life needs to be lived – and to do otherwise might bring on them the accusation of being ‘Luddites’.

Leaving aside the need for business finance, there are a number of areas of private life that could not be contemplated without the use of borrowed money. The two most common are the house mortgage followed by a credit agreement for car purchase. However, quite quickly that short list can grow to embrace all types of consumer purchases using extended credit arranged through retailers of those consumer goods.

The challenge for the Christian

How does the Christian face up to the challenge of the ‘must have it now’ lifestyle of this generation? How is it possible to resist the dangers that easy finance can lead us into? The hard lessons in the banking world of late should impress on everyone the need to look more closely at their own system of handling personal finances. I offer no apology for using a simple approach which was used effectively some years ago in speaking to schools and Christian youth groups because the basic elements are still relevant today.

The big issues

There are three major issues to do with personal finances:

1 Budgeting

How many of us live in the world of guesswork when it comes to our personal finances? Some, with high salaries may feel that their income is such that they don’t have to monitor things too closely. But it is quite clear that the majority live, hoping for the best, but knowing that in the background ’there is always the credit card’. The younger generation used to rely on that good standby – ‘there’s always Dad’,- but even many of the older generation have now become addicted to the credit card system.

The purposeof a budget is to show us, among other things:

  • If we are living within our means.
  • Where our money goes – how we spend it.
  • How to be in control and make regular improvements in handling our finances.

The useof a budget will demonstrate:

a) by making it on paper – we are setting out our intentions

This is a major hurdle. After all who wants sit down to draw up a schedule of weekly or monthly commitments when there are far more exciting things to do? But this basic exercise should prove if we are serious about living within our means.

b) by making it work – we are realizing our intentions

Our own financial safety zone will not have been reached until the budget is put into practice with regular checks to measure its success. Along the way there will always be the testing times when 'needs’as against ‘wants’will have to be prioritized. If we are serious about this exercise then we shall have to be honest with ourselves in, not only identifying where the money goes but, more importantly, in examining the reasons why we spend our money in the way we do:

  • is it peer pressure – keeping in the fashion?
  • are we so vulnerable to media advertising that we have no willpower to resist?
  • are we habitual shoppers; does every Saturday have to be a ’shop till you drop’ experience?
  • any other reasons?

2 Saving

The older generation prided itself in its ability to save because it was motivated in that way, but current surveys show that this country has one of the poorest records for saving of recent years. A person really has to have a motive, driving them to save on a regular basis and this may have been undermined by the air of uncertainty around us today.

There are:
a) Good motives

People set aside funds for the education of children, for family holidays or changing the car and a host of other reasonable and prudent reasons.

b) Poor motives

The farmer in Luke chapter 12 verses 16 to 21 could at least be commended for planning ahead. His downfall was that he excluded God and probably his less fortunate neighbours from his scheme. The sheer acquisition of money can lead even the most stable Christian to place reliance on wealth and not on God, which can eventually bring with it the danger of power, pride and plain greed, as Paul reminds us in 1 Timothy chapter 6 verses 9 to 10.

3 Borrowing

The injunction in Romans chapter 13 verse 8, leave no debt outstanding’, if applied literally would bring our commercial world to a grinding halt very quickly. In the ordinary day to day affairs of commercial concerns, businesses rely on borrowed money to bridge the gap between what the business owes (usually short term debts) and what it is owed by its customers (usually longer term). Every soundly run business relies on a business plan which includes such things as a cash flow forecast.

But we are dealing more with personal debt in this article and for that purpose the exhortation is suitably expressed as – ‘leave no debt outstanding’ – i.e., never be in a position that you cannot repay what you owe from your current level of earnings.

As outlined at the beginning of this article, most households borrow long term to buy a house and it is generally accepted nowadays that most people are far more aware of the cost of house mortgages than ever before.

The second in line as far as borrowing is concerned is usually the car, and payment is normally made on a short term finance agreement – hire purchase. However, when it comes to smaller items, it is often the accumulation of credit agreements granted by retailers for consumer goods that can throw the household budget completely off course. It is with the financing of these smaller items that we need to question and show that we are prepared to approach borrowing in a disciplined manner.

We have already mentioned the difference between ‘needs’ and ‘wants’ and the need to ask ourselves what makes us spend our money in the way we do. The disciplined approach would ask:

  • Is it so pressing that I cannot wait until I have saved for it?
  • Is it really necessary or is it a passing fad?
  • What if my circumstances suddenly changed – could I still afford to pay for it?

The use of Store and Credit cards

Although people may be aware of the cost of their mortgage and the rate of interest being charged they are often quite ignorant of the finer details of other borrowings to which they have committed themselves. Just how many people are able to tell what rate of interest is being charged on their car purchase or Bank Personal Loan? And what about the credit card or the store card – how many ever question the rate of interest and what the term APR means? These cards can be a real liability.

There are some obvious and positive features attached to the credit card. These can range from the ease of paying bills when travelling abroad and for paying for goods ordered over the internet, and, no doubt, others.

Sensible use is the key to the use of the credit card and so we are faced with another question – ‘At what point does the card turn from being a convenient feature for paying for goods into yet another layer of permanent revolving credit?’

Are we so desperate to buy goods that we are willing to pay interest rates of 16.9% on a credit card debt or 18.9% on our favourite store card or even to face a massive 27.9% if we have a bad credit record or are hoping to consolidate our debts? When we stop to think about it, as a nation we need to ask – ‘How on earth did we get so badly out of touch with financial reality?’

A large proportion of the population today have grown up in a credit ‘free for all’ environment. But, as has been witnessed recently with the so called ‘credit crunch’ that philosophy cannot be sustained forever. Statistics reveal that literally hundreds of people are declared bankrupt each working day – many as a result of complete inability in handling their domestic finances. And without wishing to be too pessimistic, there are likely to be more problems in the immediate future relating to increasing house mortgage repayments.

So, what if things go wrong – what can we do and where can we go for advice?

We do not have the space to deal with these matters in this article. However, I can unreservedly recommend two Christian based organisations, both of which produce excellent budgeting material and inexpensive booklets with special items for students through to the whole spectrum of household finance. They are also a mine of information on where to obtain help from other accredited national organisations.

Credit Action, 2 Ridgmount Street,
London WC1E 7AA
Telephone 0207 436 9937 or

Stewardship, Oakwood House,
Oakwood Hill Industrial Estate,
Loughton, Essex IG10 3TZ
Telephone 08452 262627.

EDITOR‘S NOTE: It is impossible for one article, such as this, to address every individual situation debt may involve. Debt is a very sensitive issue and, today, circumstances such as redundancy, long-term illness, or serious changes in circumstances, may well force some into it. These issues are not addressed here, nor are any pastoral matters that could be discussed. Please accept these ‘limitations’ as regretful, but we are at least trying to provide some guidance in a very complicated issue faced by many.


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