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Faith and Finances—Managing Debt
By: Phil Lenahan
There’s a link between our faith journey and how we handle money. This link begins with exploring what really matters in life.
Money touches so many aspects of life—family relationships, our work and, most importantly, our faith. Are your financial goals determined by the culture, with an emphasis on having? Or are they based on the principles of Scripture and the Catholic faith, which emphasize being?
I remember my dad sharing stories of the Great Depression. He spoke of families pulling together and setting spending priorities—because if they didn’t, they wouldn’t have enough to cover their basic needs. Now we’re taught by the consumer culture to buy all that we want (and more) when we want it, without concern for how we’ll pay for it. If we don’t have the money today...well, that’s what credit cards and home-equity loans are for, right?
Some view credit as a tool for getting rich. Others see it as incompatible with biblical teaching. It has become a financial drug that creates dependencies for millions of Americans. No doubt, the misuse of debt played a major role in the current economic crisis. How are Americans managing their debt? Here are a few statistics:
• 70% of households that use credit cards don’t pay the balance in full every month.
• The average household carries a credit-card balance of $8,000.
• 76% of undergraduates have credit cards; the average undergrad has $2,200 in credit-card debt.
• A record 1.5 million homes were in foreclosure during the first half of 2009.
Does Catholic teaching provide insight when it comes to the use of debt? People are often surprised to find that Scripture, the Catechism of the Catholic Church, and writings of the Church Fathers and saints have much to say about what our attitude toward money should be, and how we should act with the resources we have.
In the Bible alone, there are hundreds of references to money. Here are two that urge borrowers to be cautious:
• “The borrower is the slave of the lender” (Proverbs 22:7).
• “How long will you load yourselves with goods taken in pledge? Will not your own creditors suddenly rise, and those who make you tremble wake up?” (Habakkuk 2:6-7).
Many people failed to show adequate caution during the recent housing boom. They and society at large are paying heavily for that mistake.
Borrowing money is serious. The borrower makes a promise to the lender, and Church teaching is clear about the importance of keeping promises: “Promises must be kept and contracts strictly observed to the extent that the commitments made in them are morally just” (Catechism of the Catholic Church, #2410).
Productive and unproductive debt
It can make sense to borrow when debt is used prudently to purchase appreciating assets—assets that increase in value. That’s known as “productive” debt. Whether debt is productive also depends on the level of risk involved.
For debt to be used productively, there need to be “guardrails” that limit the ability to borrow excessively. This is true for individuals and for businesses. As recently seen, even so-called “productive” debt can create economic chaos. My grandfather and his brothers started a number of businesses during the Depression. They developed the following toast: “Here’s to good luck, good health, happiness, prosperity and liquidity!” That gives me a chuckle, but it’s true: Borrowers must have sufficient financial cushion to manage debt during economic downturns.
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Some types of debt are always unproductive. Unproductive debt is used to purchase depreciating assets—assets that decline in value. The most common example is purchases on credit cards that aren’t paid off each month. When is the last time you purchased an appreciating asset with your credit card?
There are nuances when considering whether debt is productive, but Americans would do well to eliminate their unproductive debt and develop a more cautious attitude even when using productive debt.
Eliminating unproductive debt
Straightforward steps can be taken to eliminate unproductive debt as rapidly as possible, but just because they’re straightforward doesn’t mean they’re easy. They require squarely facing your situation, and that takes courage. But the freedom that comes with being debt-free is worth the sacrifice.
Once you’ve committed to becoming debt-free, you need to assess your current financial position. That means preparing a financial plan. There’s a saying that when you fail to plan, you’re planning to fail. Jesus speaks of this in one of his parables: “For which of you, intending to build a tower, does not first sit down and estimate the cost, to see whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it will begin to ridicule him, saying, ‘This fellow began to build and was not able to finish’” (Luke 14:28-30).
Your financial plan should include a balance sheet, summary of debts and annual budget. It should also include strategies for debt repayment and savings.
Accelerating repayment of debt
Many people with unproductive debt pay the minimum balance required. This strategy will keep you in debt forever. Instead, I recommend an aggressive approach that will eliminate unproductive debts in short order. This requires changing behavior. Spending habits need to change, and a temporary second job may be necessary. But by increasing the amount of money allocated to debt repayment, you can be debt-free in a fraction of the time.
The financial priorities we set have ramifications for our faith and our families. Becoming truly financially free is first and foremost a function of fulfilling our call as stewards of God’s providence. To that end, we need to grow in our understanding of God’s principles for managing money and apply those principles in our daily lives. It’s time we move forward on the journey to true financial freedom: freedom from debt, learning to be generous, and knowing how to set godly priorities such as saving for the important things in life.
Permission to Publish received for this article, “Faith and Finances—Managing Debt,” by Phil Lenahan, from Rev. Joseph R. Binzer, Vicar General, Archdiocese of Cincinnati, 10-19-2009.
By: Frank Frost
When I think about money and its relationship to what really matters in life, the 2002 film In America comes to mind. Here is a story that turns on the characters’ struggle to live within a limited income while it celebrates dignity and love of family in the face of poverty and debt. In America is told from the point of view of 11-year-old Christy (Sarah Bolger). She and her younger sister, Ariel (Emma Bolger), and their parents are Irish immigrants who arrive in New York with an overflowing sense of optimism and excitement about being in the land of opportunity.
■ How do your spending habits reflect what you value?
■ Do your financial goals focus more on having or on being?
■ What behavior or habit might you need to alter in order for your financial decisions to better reflect your faith?
But money dilemmas permeate their lives. The only affordable place they can find to live is a dangerous run-down tenement known for its drug dealers. How to pay the rent? Sell the car. This family will not be defeated by debt or lack of money. The mother, Sarah (Samantha Morton), formerly a teacher, finds a minimum-wage job in an ice cream store (called “Heaven”). The father, Johnny (Paddy Considine), auditions for elusive acting jobs and drives a cab at night to afford a Catholic school for his kids. Resulting money tensions threaten to spin the family apart, but never do.
A bigger threat is the unseen presence of a brother/son who has died young and whose absence leaves a hole filled with unresolved grief and guilt. But it is a new troubled pregnancy that causes the greatest emotional crisis, complicated by mounting hospital debt. Although that debt is resolved rather magically by a newfound friend who dies of AIDS, it is the unwavering priority given to family love and human dignity that keeps the role of money in its proper place and makes this a powerful story.
Next time you watch In America, ASK YOURSELF:
By: Joan McKamey
“The folks we’re giving loans to, they have daily life issues that we probably don’t understand. We try to stand in their shoes, look to see where we can help,” says Charlie Cullen about the micro-loan program recently started by the Belleville Council of the Society of St. Vincent de Paul.
■ What are Johnny and Sarah’s core values?
■ Recall scenes in which money plays a key role. What do these tell us about what drives the characters?
■ Do Johnny and Sarah let finances erode their self-esteem or generosity? How do money and/or debt affect my relationship with God and others?
Charlie and his wife, Sandy, have been active members of Blessed Sacra-ment Parish in Belleville, Illinois, for 30 years. Charlie got involved with St. Vincent de Paul about 12 years ago and quickly moved into leadership roles. He runs his property insurance appraisal business from home and says, “I have a lot of flex time during my days which blends in well for volunteerism.” Sandy, recently retired from teaching special education, now serves on the Society’s advisory board and helps with fund-raising ideas and efforts.
“Our parish borders East St. Louis, an area of abject poverty, so we get a lot of calls for help. We go out and interview people, pray with them, look at their finances, see what they need. So many of them have taken out title and payday loans. These are predatory as far as we’re concerned. The usury rates are exorbitantly high,” Charlie tells Every Day Catholic.
“There’s a branch of the Catholic and Community Credit Union up the street from our church. We called them and met with their president, Kenneth Bossung, in early 2009. We proposed low-interest micro-loans to the working poor for extraordinary needs. Mr. Bossung was very receptive to our idea.
“The St. Vincent de Paul is the guarantor for the loans. We put money on account and qualify the applicants. St. Vincent de Paul and the Credit Union offer financial counseling, mentoring and encouragement to our loan recipients. Receiving a loan improves their credit rating and their citizenship too.
“They can use the loan to pay off a payday or title loan, put down as a security deposit on an apartment in a safer area, get their brakes fixed so they can get to work. The loans are made for extraordinary needs up to $300, and the interest rate won’t exceed 4%,” explains Charlie.
Sandy works on fund-raising efforts to support this and other programs the Society offers. Charlie says, “When the loan program was getting off the ground, a lot of loan applications were for school supplies and clothes. Sandy took this need and ran with it this past summer.” She got involved in raising funds to help these families so that they wouldn’t need to take out loans. Charlie says, “We helped 47 kids. Sandy was out for two weeks shopping.
“You’re supposed to go out and extend yourself, to see the face of Jesus Christ in everyone you meet, everyone you work with. I like St. Paul’s words that we’re to ‘use the world as though you use it not’ (see 1 Corinthians 7:31). It tells us to not attach ourselves to material things.”
Interested in helping with this initiative or learning more? Go to http://www.svdpsouthil.org.
By: Jeanne Hunt
Cynthia’s come up short again. There just isn’t enough to make it to Jeff’s payday. One paycheck isn’t stretching far enough these days. Perhaps getting a part-time job could make up the difference. God promises to supply their need, yet each month they lose ground.
Young families experience the financial crisis with particular intensity. There’s little room for waiting out the recession when your grocery bill keeps rising, children need medical care and the car needs repairs. Faith in God’s providence is tested. What can a family do to keep the faith and pay the bills?
Simply stated, we must live within our means. Doing without requires discipline and resolve. We need to ask ourselves what is more valuable to us: peace of mind or the latest things. Being content with what we have is a valuable grace.
The next skill is to use cash instead of plastic and to use it with prayerful discernment. When we’re actually handing the cashier bills and coins instead of a credit or debit card, we get the meaning of the transaction.
Perhaps the most essential discipline in faith-filled finances is to pray for God’s providence. We need to ask for what we need. We can’t presume that God will help fill the bank account, lead us to a higher-paying job or give us roof-repair funds without our asking. God wants us to name our daily bread.
Finally, we need to discern what God is asking of us to restore financial order in our lives. It may mean a change in our well-intentioned agenda, a shift in priorities or even a radical decision to sell belongings in order to get out of debt. Learning to listen and seek advice from a financial expert may bring God’s voice into our dilemma.
Jeff and Cynthia hear, “...deliver us from all anxiety...” at Sunday Mass. Jeff reflects that God has delivered them from their financial anxiety, and their daily bread keeps coming. Cynthia now works part-time at a fabric store in the evenings. Jeff visited a parish friend who runs a financial counseling business.
The credit and debit cards were cut up at a family prayer time. Cynthia and Jeff are committed to living simply within their budget. And something else has changed at home: The tension and worry are fading as God partners with them in keeping an honest tally of what they can spend. God was just waiting to be asked.
By: Jeanne Hunt
(for praying alone or with others)
Preparation: Place a bowl filled with stones and pennies, a loaf of bread, a Bible and a candle on a prayer table.
“Seek Ye First” (or similar hymn)
Dear Father God, Jesus taught us to pray invoking your name. Today we come to you with anxious hearts. We need to make a withdrawal from your divine bank. Our daily bread is needed. We dare to beg your help.
“Ask, and it will be given you; search, and you will find; knock, and the door will be opened for you.”
LEADER: For enough money to meet our needs, we humbly beg…
ALL: Give us our daily bread.
LEADER: For employment for those who need work, we humbly beg…
ALL: Give us our daily bread.
LEADER: For the grace to find our way free of debt, we humbly beg…
ALL: Give us our daily bread.
LEADER: For enough trust to surrender our futures to your providence, we humbly beg…
ALL: Give us our daily bread.
Think about the greatest source of financial worry in your life. Turn that anxiety over to God at this moment. (Pause) Now come forward and take a penny. The penny says: “In God we trust.” Put this penny in your wallet or checkbook as a reminder that you desire to turn your bank account over to God. As we take pennies instead of stones, we pledge to avoid those things that keep us from honoring our budgets.
Let us pray together the Our Father….