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Muslim’s Guide to Debt and Money Management

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I would like to kick off a series of posts in the upcoming days (or weeks) regarding the issue of Muslims being in debt. I have found that this is an issue that afflicts many Muslims, including the seemingly wealthy, and is something that is not adequately addressed. This is due most likely, to a lack of knowledge on the issue, as well as a lack of awareness of the problem itself.

It’s my hope that this series of posts will make Muslim more aware of how to handle money/finances, and fulfill two main purposes: 1) To help Muslims currently in debt to get out, and 2) to warn Muslims from getting on the path to debt in the first place. If you don’t think it applies to you, think again. Have you ever met anyone that planned on being in debt (aside from maybe a house or car)?

I also hope that in the end this can serve as a forum for Muslims to anonymously share their stories about debt, good or bad, so that we can draw benefit from it. I believe part of the reason this issue is not discussed openly is due to the reprehensibility of the sin of interest, and people are therefore too ashamed to even open the door. What this leads to though, is people dealing with riba/debts, and no foreseeable strategy to break free from the cycle.

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The outline of the posts coming is as follows,

  • I. Debt Perception
    • A) Consumer culture’s view of debt
    • B) Islamic View of Debt
  • II. Americans in Debt
    • A) Average debt of a household
    • B) Bankruptcy
    • C) Who benefits from all this debt?
  • III. Why Are Muslims in Debt?
    • A) Lack of education on money
    • B) Material gains (House, car, consumer debts)
    • C) The credit building myth
  • IV. Debt Freedom
    • A) Importance of Being debt free
      • 1) Secular
      • 2) Religious
    • B) Debt Programs
      • 1) Financial counseling
      • 2) Debt consolidation
    • C) Snowball strategy
    • D) Avoiding credit card interest
    • E) Budget your money
  • V. Halal Alternatives?
    • A) Credit cards
    • B) Car buying
    • C) house buying
  • VI. Wealth Building
    • A) Savings
    • B) Investing
    • C) Retirement
    • D) Education for Kids

Keep supporting MuslimMatters for the sake of Allah

Alhamdulillah, we're at over 850 supporters. Help us get to 900 supporters this month. All it takes is a small gift from a reader like you to keep us going, for just $2 / month.

The Prophet (SAW) has taught us the best of deeds are those that done consistently, even if they are small. Click here to support MuslimMatters with a monthly donation of $2 per month. Set it and collect blessings from Allah (swt) for the khayr you're supporting without thinking about it.

Omar Usman is a founding member of MuslimMatters and Qalam Institute. He teaches Islamic seminars across the US including Khateeb Workshop and Fiqh of Social Media. He has served in varying administrative capacities for multiple national and local Islamic organizations. You can follow his work at ibnabeeomar.com.

40 Comments

40 Comments

  1. iMuslim

    January 5, 2008 at 11:18 AM

    Looks good, masha’Allah. I am so scared of being in debt. The idea of a huge mortgage (even a halal one) is terrifying. I wouldn’t be able to sleep soundly! :(

  2. Abu Bakr

    January 5, 2008 at 12:51 PM

    >>This is due most likely, to a lack of knowledge on the issue, as well as a lack of awareness of the problem itself.<<

    Good point. Before our discussions, I didn’t realize how widespread this problem was, even amongst practicing and seemingly well-off Muslims

    • Muhammad Zaini

      November 18, 2016 at 9:37 PM

      Contact me through Whatsapp at +60193895865

  3. aarij

    January 5, 2008 at 2:44 PM

    Very nice. Looking forward to it as this is one of the things that really interest me. In sha Allah, I hope to contribute as to how students can graduate debt-free.

  4. Fahad

    January 5, 2008 at 3:10 PM

    my story: it started with charging my suit for my friends wedding on my amex and that was 4 years ago, and now I stand near $25k in debt. People don’t realize that horror that comes with it. I have had to work full time all throughout my college, which effected my social life and education. Big events come in life but the biggest at the moments would be when i pay this debt off. Right now 90% of my pay goes to my debt but I do nothing but make a slight dent in it. The darn credit card companies charge me over $200 in interest so it’s hard to get anywhere with my debt. Mashallah I just graduated and found a job and if all goes to plan and allah’s help, I will be debt free by the end of this year inshallah.

    My recommendation to any brother or sister who wants to charge up that little something on the card just this one time and you will pay it off later. DON”T DO IT!!! later may never come. Remember: you don’t control you next breath.

    • Muhammad Zaini

      November 18, 2016 at 9:38 PM

      Do contact me through Whatsapp at +60193895865

  5. inexplicabletimelessness

    January 5, 2008 at 4:41 PM

    “In sha Allah, I hope to contribute as to how students can graduate debt-free.”

    Good point. I am interested in learning about halal alternatives to finance a college education, besides interest based loans.

  6. ibnabeeomar

    January 5, 2008 at 5:19 PM

    inshallah college education will come in the final part under wealth building :)

    sorry for the suspense :)

  7. ibnabeeomar

    January 5, 2008 at 5:20 PM

    fahad-jazakallahu khayr for sharing that, inshallah it will serve as something that can prevent people from doing the same, and inshallah may Allah(swt) give you the ability to pay it off quickly, it sounds like you are on the right track with it.

  8. 1/2AWiseMan

    January 5, 2008 at 5:48 PM

    I really don’t understand how so many ppl can spend mindlessly using a credit card. I just can’t get the concept of spending money i don’t have, or guarantee to be able to pay off. Craziness!

    I worked at a collections agency for simple HBC credit cards, not even major and there were literally thousands on people in debt with HBC. Imagine VISA and Mastercard.

    May Allah protect us.

  9. Saladdin

    January 5, 2008 at 6:28 PM

    our story is slightly different.

    Alhamdulillah my folks paid off their mortgate but kept it running for ’emergencies’

    However, my father has a serious gambling habit! Now the stories you read about gamblers wrecking their lives, its all true. I thank Allah for keeping me on the straight path, i could have very easily went down that same path & wasted my teen years away.

    Like all bad events we learn from it, i learned quickly how debt, compounded interest raises your debt exponentially!

    Alhamdullilah, today we’r all ‘liquid’ and more importantly, in Allah’s path, unfortunately our father still gambles but this time we learnt better – no finances on his name, no overdraft facilities, we cant physically stop him from using cash but all other forms of debt accumulating are limited.

    In short (my apologies if i’v strayed) – Sisters (yes i’m a guy) please keep some form of independance in your life, dont give signing-power in EVERYTHING to your husband, no matter what. finances is a very touch subject but it has to be addressed and everyone needs to know where they stand.

    Thanks for listening:)
    I’d prefer to remain anonymous but if the editors ever want more info from a ‘gamblers side effects’ story, feel free to add in comments who i should contact.

  10. restingtraveller

    January 5, 2008 at 6:49 PM

    yea subhanAllah it’s really scary. I just opened my first bank account maybe 2 months ago, and they sent me a visa with a $1600 credit line…I just stared at it, got the sciccors and cut it up.

    My dad is in quite a lot of debt and just seeing the stress he goes through, it’s taught me a lot and inshaAllah it’s something I hope to never go near..even halal loans. I just think of the story of the sahaba who died as a shaheed but could not enter Jannah because of his debt…now THAT is scary. may Allah ta’ala protect us from dying with debts. ameen

    Also about riba..the ayaat in surah al-baqarah made me cry and cry. How can any muslim deal with it! Being at war with Allah and His Messenger is beyond horrifying. la huwla wa la quwwata ila billah. may Allah protect us from ever going near riba. ameen

    inshaAllah really looking forward to this series!

    A suggestion/comment: is there any other way of having this ‘ open discussion forum’ without 200 comments to read through? MuslimMatters web forum, anyone?

  11. inexplicabletimelessness

    January 5, 2008 at 7:33 PM

    as salamu alaikum

    “A suggestion/comment: is there any other way of having this ‘ open discussion forum’ without 200 comments to read through? MuslimMatters web forum, anyone? ”

    Hmm that’s not a bad idea, but I think I like the blog idea better overall. With forums, people have to register and be users usually, you need moderators, and it’s overall a lot more complicated. Having a simple exchange of ideas and discussing issues through a blog makes it a lot more accessible to the average person.

    I think because some really important topics do end up being series, there inshaAllah won’t be the problem of having to scroll down the entire page because half the comments will be for one post and half for the other.

    Allah knows best

  12. KashifN

    January 5, 2008 at 8:59 PM

    When i was young i learnt a du’a which i’ve recited frequently in my salaah:

    “Allaahumma inni a’oodhi bika min al-ma’tham wa’l-maghram (O Allaah, I seek refuge with You from sin and heavy debt)

    Alhumdulilah i’ve never been in debt (except for about £500 a couple of times).

    There is someone in my family who is constantly in debt and i dont know what he is going through, but i do know that when one person is in severe debt it adversely affects the closest family members, causing worry and stress for them too.

  13. AnonyMouse

    January 6, 2008 at 1:59 PM

    I’ve never realized how serious debt is, probably because my dad is very careful with credit cards (if you have one, ALWAYS pay on time! If you don’t think you can, don’t get one!), and also just because how money is treated in our family.

    I’ve always felt a bit wary about money – it’s nice to have, and nice to spend on things I like, BUT since I personally have no source of income, I know that once it runs out, it runs out. The key is to spending it wisely, and never ever assuming that you have more (or will have more) than you have at this very moment!

    Looking forward to the series, as it’ll be interesting to learn about.

  14. Umer Suleman

    January 6, 2008 at 7:49 PM

    Asalam alaykum All,

    Alh’d I think its a really good to have a topic on practical steps that improve our daily lives. I too am a victim of the Credit Card cycle that started at University.

    I’ve found the following website quite useful if you live in the UK

    http://www.moneysavingexpert.com

    ws

  15. aarij

    January 7, 2008 at 1:34 AM

    out of curiosity, is this based on Sh. Muhamamd AlShareef’s [h] stuff on money management?

    he did a conf. call on this a while ago, and he seems to have a liking for this topic (he might’ve covered it in DiscoverU seminars…I haven’t taken one so far).

  16. ibnabeeomar

    January 7, 2008 at 10:58 AM

    no it’s not.. some of that material may be incorporated, however you will see this is going to be different.

  17. sunnah786

    January 7, 2008 at 5:50 PM

    When is the first post in the series going to take place? The suspense is too much. =)

  18. Kamran

    January 7, 2008 at 5:56 PM

    if you get a chance, make sure you watch the documentary, “Maxed Out”. I just happened to watch it few days ago. Shows you how CC companies really work and esp. target the college goers and those that have filed for bankruptcy.

    wassalam

  19. ibnabeeomar

    January 7, 2008 at 6:20 PM

    it should be up within a day or 2 :)

    and kamran – jazakallahu khayr, that movie actually served as quite an inspiration for me in writing this :)

  20. Angie

    January 7, 2008 at 8:30 PM

    I’ve always thought that there should be a halal alternative for students – besides interest based loans – but for some reason this issue is never addressed.

  21. inexplicabletimelessness

    January 7, 2008 at 10:26 PM

    ” I’ve always thought that there should be a halal alternative for students – besides interest based loans – but for some reason this issue is never addressed. ”

    Yes it is a very pressing issue in the muslim community which needs to be addressed.

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  24. tammy

    January 14, 2008 at 8:49 PM

    i am 20 thousand in debt for a business that failed. it is hard keeping my head above water. at times i just want to give up. i work but my little pay is not enough to make a dent very fast. so your prayers will help.
    thanks

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  29. AAMIR KHAN

    February 20, 2008 at 3:29 AM

    For Muslims who have mortgages there are ways to pay off 30 year mortgages in as little as 8- 12 years without refinancing or bi weekly methods; and without tying your monies and paying down floating the bank’s money by leveraging the banks money. Australians in general pay off their homes 10 years earlier than Americans and pay 150K less in interest per home on average. There is an 18 minute flash presentation on mmavip.net for those who are interested.

  30. nasir khan

    March 18, 2008 at 10:13 AM

    A.O.A I am resident in uk and due to some ill planning carried out business & went into heavy debt now I am badly stuck and I am not finding ways to get rid of the situation

    any help or method will be welcomed from muslim brothers.

    • Samir

      June 25, 2014 at 12:32 PM

      Can we revise the article as it was written in 2008 ?

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