7 Steps Out of Debt

Over the last two weeks, we’ve laid the spiritual and practical foundation for your journey out of debt. We began with Step 1 – Pray for Wisdom and Strength, recognizing that lasting financial change starts with surrender and divine guidance. Then came Step 2 – Stop Using Credit Cards, cutting off the source of new debt so your efforts to get out of the hole aren’t undone by continued borrowing. In Step 3 – Establish a Realistic Budget, you gave your money purpose—assigning every dollar a job. Step 4 – List Your Assets reminded you that you're not starting from zero. God has already placed resources in your hands, and clarity around what you own brings encouragement and strategy.

Now, we move to Step 5 – List Every Debt: See It, Face It, Conquer It.
This step requires courage, because it asks you to confront the very numbers you may have been avoiding. But it also marks a turning point. When you name your debts, you strip them of their power to control you. Fear thrives in the unknown—freedom begins with truth. And when you know what you owe, you can begin to build a plan that leads to breakthrough.

💡 This Week’s Focus: Face the Facts, Find Your Power

Debt can feel overwhelming—not just because of how much we owe, but because of how long we’ve gone without really looking at the full picture. Step 5 invites you to do something bold and freeing: list every single debt you owe. Credit cards, student loans, medical bills, car notes, IRS debt, past-due utilities—write them all down. Not to shame yourself, but to empower yourself.

What we avoid ends up controlling us. But what we confront, we can change.

This is also the step where the true cost of debt becomes clear—especially with credit cards.
If you owe $5,000 at 18% interest and only make the minimum payment, you’ll pay more than $2,300 in interest and stay in debt for 5+ years. A $10,000 balance at 24% interest? That can cost over $6,000 in interest and take nearly a decade to pay off.

That’s not just math—it’s a warning. Debt isn’t just a financial burden; it’s a mental and spiritual weight. It creates stress, steals your peace, and keeps you in a constant state of worry.

But the good news?
Listing your debts is the first act of taking authority over them.
You’re no longer in the dark. You’re stepping into the light. And God can work with that.

Just like you counted the cost of what you own last week, now it’s time to count the cost of what you owe—and take the first step toward paying it down, one decision at a time.

📖 Verse of the Week
John 8:32 (ESV): “And you will know the truth, and the truth will set you free.”

Bringing your debt into the light may feel uncomfortable, but truth is where freedom begins. When you face the numbers with honesty, you open the door to clarity, peace, and real progress.

Step 5: List Every Debt — See It, Face It, Conquer It

This is the step many people skip—and yet it’s one of the most important. If you’ve ever said, “I don’t even want to know how much I owe,” you’re not alone. But avoiding the truth doesn’t make it go away. In fact, it gives debt more power than it deserves.

The only way to break its grip is to bring it into the light.

This week, you’re going to sit down and list every single debt you owe—completely and honestly. This is not about shame. This is about ownership and clarity. Because you can’t create a payoff plan until you know exactly what you’re dealing with.

Your list should include any financial obligation you owe to someone else, such as:

• Credit cards

• Personal loans

• Auto loans

• Student loans

• Medical bills

• IRS or state tax debt

• Past-due utility bills

• Paycheck advance loans or title loans

• Store credit cards (e.g., Target, Macy’s, Home Depot)

• Accounts in collections

• Loans from family or friends

Here’s what your debt list should include: the name of the creditor, the payoff amount, the minimum monthly payment, the interest rate, and the due date. Keep it simple and all in one place so you can see the full picture at a glance.

Sample Debt List

Seeing the Total: Don’t Panic—This Is a Turning Point

If you just totaled everything and your heart sank a little—you’re not alone. It can be shocking to see the full number for the first time. But let me gently remind you: this is not a reason to feel shame—this is a reason to feel empowered.

Why? Because now you know. Now you have something to work with. The unknown is always scarier than the truth, but when you see the full picture, you can finally begin to build a real plan. You can make progress with purpose. You are no longer in the dark—and that’s a win.

The Cost of Waiting: How Compound Interest Works Against You

Now that you’ve seen the total, here’s what you need to know: interest never sleeps—especially when it’s compounded.

Compound interest means you’re not just being charged interest on the money you borrowed—you’re also being charged interest on the interest. Day after day, month after month, it adds up. And the longer you carry the balance, the more your debt grows—even if you’re making payments.

Let’s break it down with a real example.
(Assuming no new charges are added—just trying to pay it off.)

Example: A $5,000 Credit Card Balance at 18% Interest

• Starting Balance: $5,000

• Interest Rate: 18% APR → about 0.0493% per day

• Monthly Payment: $125 minimum

Now watch how interest adds up—daily:

• Day 1: $5,000.00 × 0.0493% = $2.4658 in interest
  New Balance: $5,002.4658

• Day 2: $5,002.4658 × 0.0493% = $2.4670 in interest
  New Balance: $5,004.9328

• Day 3: $5,004.9328 × 0.0493% = $2.4682 in interest
  New Balance: $5,007.4010

• Day 4: $5,007.4010 × 0.0493% = $2.4694 in interest
  New Balance: $5,009.8704

It may not seem like much—just a couple of dollars a day—but here’s the key:
Each day’s interest is added to the balance, and the next day’s interest is calculated on the new total—including the interest from the day before.

That’s interest on interest in real time.

Over 30 days, those small daily charges add up to about $75 in interest—before you’ve even made your next payment. So when you send in $125:

• $75 goes to interest

• Only $50 goes to your actual debt

• Your balance barely moves—down to $4,950

And the cycle starts again the very next day.

Notice what’s happening?
You’re faithfully making payments—but most of your money is being absorbed by interest. The balance is shrinking slowly because you’re being charged interest on yesterday’s unpaid interest—every single day. Even though your credit card statement shows one monthly charge, that total was built one day at a time, from a balance that quietly grows until you stop it.

If you only make minimum payments:

• It will take over 5 years to pay off

• You’ll pay more than $2,300 in interest

• That’s nearly half your original balance—money you never even spent!

Now imagine if your balance was $10,000 at 24% interest, paying $250/month:

• That could stretch to nearly 10 years

• You’d pay over $6,000 in interest

That’s money you could be using to save, give, invest, or build a better future.
Instead, it’s going to a lender—and that’s exactly how the system is designed.

Proverbs 22:7 (ESV) reminds us:
“The rich rules over the poor, and the borrower is the slave of the lender.”

Compound interest is the chain that keeps you there—unless you break the cycle.

But here’s the good news: once you start paying off your balances aggressively—especially the high-interest ones—compound interest can no longer work against you. And in the future, it can even work for you as you build wealth through saving and investing.

The key is to act now. Don’t let debt grow silently in the background.
Start where you are, and let each payment be a declaration:
“I will no longer let debt rob me of peace, purpose, or potential.”

🎯 Weekly Challenge: List Every Debt — Fully and Honestly

This week, take the bold step of writing down every single debt you owe. Don’t skip anything—face it head-on.

• Create a list with the lender name, balance, interest rate, and minimum payment

• Add it all up to get your total debt balance

• Pray over your list and surrender it to God—ask for the strength, discipline, and strategy to break free

This may be uncomfortable—but it’s also powerful. Bringing debt into the light is how you take away its power.

💬 Reflection Questions

• What emotions do I feel as I look at my total debt for the first time?

• Have I avoided listing my debts out of fear or shame?

• What would it mean to take ownership of every debt—without judgment, just clarity?

• How might God use this step to start something new in my financial journey?

📢 What’s Coming Next

Next week, we’ll dive into Step 6: Build Your Debt Payoff Plan.
This is where real momentum begins—and you’ll learn how to turn your list into action.

🔁 New here or missed a few? You can read all the previous newsletters right here: financebyfaith.beehiiv.com

Blessings and financial peace to you!