Biblical Finance 101: Red Flags 2

Last time I introduced the concept of Red Flags to pending financial bondage. These are instances, sometimes very insignificant, that indicate one is heading down the wrong path. For instance, if one has many outstanding sources of credit, financial bondage is probably around the corner. A consolidation in these instances is usually not a solution; it only postpones the inevitable and treats the effect, not the cause.

The usual reason for many outstanding credit sources is that one lacks financial capacity (FC) - the ability to carry debt. Creditors base the amount of a loan on one's capacity to pay back. Millionaires have tremendous FC. They can borrow lots of money because they have the financial resources to pay back. The poor do not have any FC. If one is poor, there are no financial resources to pay back a debt.

Those that have sufficient FC don't have many outstanding credit sources because each source has adequate limits to satisfy credit needs. Many times, those that have "minimal" FC lack sufficient income to support their standard of living, therefore, credit is used to make up the difference. Since FC is minimal, each credit source has minimal limits. Are you one who fills out every credit application that comes in the mail? That is a good indicator. Several years ago I met a young lady who had acquired over forty credit cards and her debt was over $20,000. She was living on the local military base, had very little living expenses and the minimum payments were infringing upon her food budget. This is an extreme case, but the scenario is very common.

For many, there is a compulsion to have more credit. It serves as a mental safety net and becomes the basis for their financial security. Christians caught in this situation have a very serious problem at the core of their belief system and understanding of scripture. They also have a buy now, pay later mentality - a trap that always leads to financial bondage. For these, financial counseling is a must.

Gary Ellis, MBA, CFP
Association Stewardship Director