Many people tend to look for quick and easy solutions to get out of debt.  People typically want debt to go away as quickly and subtly as it appeared.  But as many of you know, getting into debt isn’t all that hard.  Getting out of debt is much more difficult and takes some work.

Today I’m going to explore two common debt situations and some thoughts for overcoming them.

I need a reliable car.  I’m going to apply for a five year loan so I can afford the payments.

Often people accumulate auto debt through the purchase of a new or even a used car.  I think this is probably one of the quickest ways to get into debt.  In fact, everyone knows you can end up with a sizeable loan simply by spending an afternoon at the dealership.  Have you ever signed the papers and felt the anxiety set in as you completed the process?  Then you wondered if it was really the right decision.

Needing a reliable car is a valid reason to start looking, but it may just not be a good enough reason to go into debt.  Too often we are quick to solve the problem ourselves without turning to God to provide for our needs.  Personally, I’ve been there and unfortunately it has extended the time required for our family to become debt free.

Consider this approach

Try to slow down the process.  Are there other modes of transportation you can use until finding a reliable car?  Could you take public transportation or even work from home?  Perhaps you could borrow a car from a friend at church?  The idea is to brainstorm every possible option that will keep you from having to make a quick decision and end up with a loan!

Most importantly, turn to God to provide to provide for your needs.

You can be sure that God will take care of everything you need, his generosity exceeding even yours in the glory that pours from Jesus (Philippians 4:19, The Message).

That’s a powerful scripture to remember.  God will take care of everything!  I love that God can take care of our situations and needs in ways exceeding our expectations and in unforseeable ways.  Just remember it might not be in the exact way you have planned.

It’s a good money making opportunity.  I’m going to borrow the money required to get started from my retirement account.

If you have entrepreneurial spirit, you know the feeling you get when a new opportunity is presented.  Your mind begins working.  Could this really be possible?  I’d certainly like to look at this a little closer!  Oh, it requires an initial investment?  But the return on this investment seems highly likely and the rate of that return looks to be pretty quick.

Perhaps you’re not entrepreneurially inclined, but the thought of making some extra money after investing a little money may sometimes become quite enticing.  In either situation, there is a danger in borrowing money to fund investments.  More dangerous is borrowing from retirement accounts to fund investments.

Why is it so common to cross over into savings marked for other purposes and use the money for something else?  Borrowing against retirement, is running up debt because it must be repaid.  You’ll also end up paying a penalty or fee for the loan and it’s considered taxable income (see your tax advisor for more information).

What’s your motivation for the opportunity?  Seek some Biblical guidance.

When such investment opportunities are presented, we must consider the reason we are engaged in opportunity and know that borrowing from money marked for retirement is never a good idea.  Don’t let the idea of making money lead you to unwise decisions.  Invest in such opportunities with money saved for doing so and avoid the pursuit of money as your primary focus.

For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs. (1 Timothy 6:10).

How have you avoided these common debt situations?  Are there other common debt situations you’ve done well to avoid?  Let us know about them in the comments.

This is an article I originally published at ChristianPF.

I understand It’s a plan to accelerate the economic recovery, reduce inefficient cars on the road, and provide incentive to buy efficient cars.  In case you don’t know about it, the plan pays consumers $3500 or $4500 vouchers for trading in their car (clunker) for a new car.

Does the clunker qualify?

• Must have been manufactured less than 25 years before the date you trade it in
• Must have a combined city/highway fuel economy of 18 miles per gallon or less
• Must be drivable



• Must have been owned and insured for the past year

How much is the voucher?

• New car must be at least 4 miles per gallon (MPG) more efficient than the clunker.  If the MPG difference is between 4 and 10, the government rebate is $3500
• If the difference is more than 10 MPG, the rebate is $4,500

What the media is saying about Cash for Clunkers

Some media, is saying the program is helpful while some say it will do little good to stimulate the economy.

WFAA TV in Dallas -

Finally, a federal bailout that can really help the average guy — at least the motorist who is driving an aging gas guzzler.

An article in Business week (July 13 & 20 issue), ”Cash For Clunkers Looks Like a Lemon”, has a different take.

Most cars on the road get more than 18 mpg so they won’t qualify.

If a customer can sell the old car for more than what the government will pay, there’s no reason to take advantage of the bill.

There are plenty of old cars that do qualify.  But many are 10 years old or more, says Edmunds.com CEO Jeremby Anwyl.  People driving cars that ancient often buy used, and even with a $4500 discount, they probably won’t want to take on new car payments during a time of economic hardship.

My thoughts on the Cash for Clunkers law

While some may be excited about the possibility of this new law stimulating the economy through new car sales as well as putting money in their pocket, I’m not seeing much benefit.

1.  If you read the Business Week article you’ll find their are limited funds available, at least until November 1 when the law is reviewed again, to really make a sizeable impact on new car sales.

2.  I’m in the live debt free camp, so our family is working to eliminate car payments now and avoid them forever into the future.  I’m sure there are many who will qualify and be enticed to claim their $3500 – $4500.   My concern is that this law will motivate some to take on new car debt and in some cases take on more car than they can afford.

Should you cash in on your clunker?

Giving this some thought and considering what I’ve learned about avoiding debt, I would look to work through the below decisions before signing up.

1.  If the car is still reliable and safe, I would continue to drive it and enjoy not having a car payment (assuming it’s paid off).

2.  If the car isn’t reliable or safe, or I can’t get more for it than what the government will pay, the ideal situation (in my opinion) would be to take the voucher, add cash savings and purchase another car without financing.

However, it’s not uncommon to not have car cash savings.  But if you want to remain car payment free, I would look to find a reliable clunker with my new found cash until I could save enough money to upgrade.

What do you think about the law?  Is it good for the average guy, or not?

Other Resources

• Government program offers cash for clunkers
• Cash for clunkers FAQ
• Car Allowance Rebate System