8 ways to tackle debt and find financial freedom

As the glittering lights of the festive season dim, a sobering reality sets in for many households: the arrival of substantial bills that follow the Christmas period. January, often dubbed the “financial battleground”, becomes a time of reckoning for those grappling with mounting debts and the consequences of holiday overspending.

Debt charities expect someone to contact them about debt every four seconds this month. These are not merely financial problems, but signs of a silent epidemic which wreaks havoc on people’s lives.

The debt crisis often remains hidden behind closed doors, masked by societal pressure to maintain appearances. Average household financial debt has risen by nine per cent, with the biggest areas of increases being credit and store cards, hire purchases and overdrafts.

The burden of personal debt also affects individuals differently across socioeconomic strata. If you have a poor credit score, the cost of borrowing money is higher, making it harder for struggling households to become debt-free.

A culture of temptation

The world seems deliberately designed to entice individuals to spend beyond their means. The ever-present temptation to acquire the latest gadgets, fashion and experiences is fueled by marketing strategies and advertising that exploit psychological vulnerabilities. A recent survey of 21,000 people across 13 countries showed that 87 per cent made a purchase after seeing a product advertised on Instagram.

This raises a critical question: Do we inhabit a society that actively encourages individuals to fall into the debt trap, perhaps without even realising it?

The ease of accessing high-interest payday loans and credit cards further exacerbates this. Financial institutions often capitalise on vulnerable individuals, pushing them toward quick but perilous financial solutions. The result is a society teetering on the edge of a debt precipice, with individuals navigating a minefield of financial decisions fraught with long-term consequences.

A different path

Amid the challenges, what does the Christian response look like?

Across the UK, a multitude of churches provide resources such as job clubs, debt counselling and financial guidance. These initiatives aim not only to alleviate immediate financial burdens but also to empower individuals to make informed and responsible financial decisions. By creating a supportive community and fostering financial literacy, churches endeavor to break the cycle of debt and provide hope.

As Christians grapple with the complexities of personal finance, the foundational principle remains clear – ultimately, spending does not fill the void in our hearts. The pursuit of material possessions and financial success often leads to dissatisfaction, leaving individuals yearning for something more.

The Christian perspective emphasises that true fulfillment is found in a relationship with Christ. As believers, we are called to prioritise spiritual wealth over material riches, recognising that lasting contentment comes from a life of faith. In a world that constantly urges us to seek fulfillment through consumerism, the Christian response is a call to transcend the superficial and embrace a deeper, more meaningful source of contentment.

A guide to financial redemption

The Bible offers guidance for believers facing the challenges of debt and financial uncertainty. Scriptures such as Proverbs 22:7 caution against the pitfalls of debt, emphasising the importance of living within our means. Passages like Matthew 6:19-21 highlight the transient nature of material wealth, urging believers to invest in eternal treasures rather than temporary possessions.

Financial principles rooted in biblical teaching include stewardship, generosity and the importance of planning. By aligning financial decisions with biblical wisdom, we can all navigate the turbulent waters of debt with confidence and purpose.

The debt crisis often remains hidden behind closed doors, masked by societal pressure to maintain appearances

We’re told in Proverbs 16:3 to commit our work to the Lord, and our plans will be established. Praying about our desire to become debt-free is a good starting point. Then we need to take practical steps to address the debt:

Step 1: Stop spending

Stop accumulating more debt by using cash or debit cards only. Psychologists say that using cash makes us spend less due to the ‘denomination effect’, a cognitive bias which says that people are less likely to spend currency in larger denominations.

Step 2: Face the reality

Create a list of creditors and assess the total amount owed. Spilt your debts into priority and non-priority debt. Priority debts are those with potentially severe consequences if not paid eg legal action, loss of assets or disruption of services (such as mortgage, rent, council tax, utilities, phone, internet, TV license, court fines etc). Non-priority debt includes credit and store cards, catalogue debts and unsecured loans, such as payday loans, overdrafts, student loans etc. Pay off priority debt first.

Step 3: Create a budget 

Developing a realistic budget is the cornerstone of any effective debt repayment strategy. Take time to detail all your income sources, expenses and debt repayments. Prioritise essential expenses and identify areas where you can cut back to allocate more funds towards debt repayment.

Step 4: Negotiate with creditors

Discuss your situation openly and honestly with creditors. Many are willing to negotiate reduced interest rates or flexible repayment plans if they see your commitment to resolving debt. Establishing communication can pave the way for a more manageable repayment process.

As believers, we are called to prioritise spiritual wealth over material riches

Step 5: Seek professional advice

Financial advisors and debt counsellors possess the expertise to provide tailored guidance and debt management plans based on your specific circumstances. Their insights can be instrumental in developing a strategic plan for debt repayment, offering a roadmap to debt freedom. Debt charities to consider include Christians Against Poverty (CAP), Citizens Advice and Step Change.

Step 6: Establish an emergency fund

Having a financial safety net provides a buffer and reduces the likelihood of accumulating additional debt during challenging times. When you are able, aim to save an amount (perhaps £1,000 to start with) and then gradually increase this over time as you prioritise paying off expensive priority debts.

Step 7: Get an accountability partner

An accountability partner is someone you can share your debt-free goals with and who will encourage you and keep you accountable. This could be a friend, family member or someone from your local church. Check in with them regularly to share progress and discuss any struggles.

Step 8: Cultivate financial discipline

Cultivate financial discipline by adhering to your budget. Resist the urge to make impulsive purchases and commit to a lifestyle that aligns with responsible money management.

By acknowledging the toxic financial environment and seeking a Christ-centered approach to personal finance, we can find true financial redemption this New Year.

The path to financial freedom may be challenging, but armed with biblical wisdom, a supportive community and practical strategies, believers can emerge from the depths of debt into a future marked by financial stability, purpose and fulfillment. As you steward your finances, remember to stay positive, practical and prayerful.