Pay off your mortgage. Realize that, despite tax breaks for mortgage interest, you’ll save much more money if you pay off your mortgage as soon as possible. Choose a shorter mortgage (such as a 15-year loan) over a longer mortgage (like a 30-year loan) if you can afford the higher monthly payments, because it will save you a huge amount of interest in the long run. Whenever you pay your monthly mortgage bill, send in an extra amount toward principal. Know that consistently prepaying your mortgage, even in small amounts, will add up to significant savings. Consider refinancing if you can pay for the refinancing costs within two to three years with the money you save each month from the lower interest rate. Try to put down at least 20 percent before taking on a mortgage, so you can avoid expensive mortgage insurance.
Don’t put your family at risk to start a business. When raising capital to start your own business, limit your potential loss to the cash you invest and the asset itself. Never jeopardize your personal assets as collateral to start a business. Then pay your loan off as quickly as possible to stabilize your business.
Beware of home equity loan scams. Know that scams abound in the home equity loan business. Only consider a home equity loan if you truly need one, and then avoid companies who advertise through spam e-mails and TV infomercials. Always check out a lender with the Better Business Bureau. Get personal recommendations from people you know and trust.
Never cosign a loan for someone else. Understand that cosigning a loan legally obligates you to pay back the full amount of the loan yourself if the person you cosigned for does not. If a friend or family member needs help to buy something, consider giving some money toward the goal, but never cosign a loan.
Avoid high-interest rate loans. Stay away from loans through finance companies, payday loans, pawnshop loans, auto title loans, and tax-refund loans.
Deal fairly with the Internal Revenue Service. Be sure to file your tax return on time – even if you can’t afford to pay the taxes right away – to avoid costly IRS penalties and interest. Work with IRS agents to come up with a realistic tax payment plan.
Don’t borrow from your retirement plan. Leave the money in your 401(k), 403(b) or other retirement plan to grow and provide for your future needs rather than borrowing against it and incurring significant fees.
Avoid bankruptcy if at all possible. Make every effort to avoid bankruptcy, which will hinder your ability to obtain credit (and push up your interest rates when you do) for a full 10 years. Remember that bankruptcy isn’t fair to your creditors; it defrauds them. If you do have to file for bankruptcy, hire the best attorney you can find. After bankruptcy, even though you’re no longer legally obligated to pay your creditors back, try to do so eventually anyway to be spiritually responsible.
Teach your children to avoid debt. Model the kind of lifestyle you want your kids to choose when they’re grown. Teach them financial principles from the Bible, and give them practical opportunities to apply those principles as they manage their own money.
Don’t give up! Whenever the road to financial freedom becomes bumpy, persevere and pray for God’s help. Know that, eventually, you can achieve your goal of a debt-free life.
Adapted from Free and Clear: God’s Road Map to Debt-Free Living, copyright 2006 by Howard Dayton. Published by Moody Publishers, Chicago, Ill., www.moodypublishers.com.
Howard Dayton is CEO of Crown Financial Ministries (www.Crown.org) and host of the nationally syndicated radio program Money Matters. He, along with Larry Burkett (1939-2003), combined ministries in the year 2000 to form Crown Financial Ministries. Howard’s books and small-group financial studies have been used by thousands of churches and individuals. He is a former businessman and real estate developer. Howard and his wife, Bev, have been married for more than 30 years. They reside in Gainesville, Ga., and have two married children.
