S3 Eliminate High-Cost Liabilities · Lesson 1 of 4

Lesson 1 — Naming Every Liability and Its True Cost

Build a complete, accurate inventory of every church liability and calculate its true all-in annual cost.

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Seven Principles curriculum version 1.0 — author-review draft pending Leland Rubin's approval prior to publication. · Leland's Seven Stewardship Principles methodology, content, exercises and deliverables are created by Leland Rubin and remain in author-review draft pending his approval.

Where this lesson sits

Curriculum version 1.0 · Author Review

Module purpose: Build a complete inventory of every liability and its true annual cost, rank payoff priority using a documented method, pursue refinancing where responsible, adopt safeguards against new high-cost debt, and offer households a product-neutral, debt-free education pathway.

Official outcome: High-Cost Liability Elimination Plan

This lesson produces: Complete Liability Inventory with true annual cost calculated for every debt

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Learn

Participant study reading — approximately 75 minutes of learning and shared work.

Learning objective: Build a complete, accurate inventory of every church liability and calculate its true all-in annual cost.

Recommended participants: Pastor, treasurer, finance committee, and one or two board members

Estimated teaching time: 75 minutes

Success indicators

• Every church liability, including smaller notes and vendor financing, is listed with balance, rate and term
• True annual cost, including fees, required insurance and any variable-rate exposure, has been calculated for each liability
• Leadership can state total church debt and total annual interest and fee cost without checking with only one person
• A named owner has been assigned to verify each liability entry against the original loan documents

Materials and evidence you will use

• All current loan and financing agreements
• Most recent statement for each liability
• Church financial dashboard export showing scheduled debt payments
• Total outstanding balance and total true annual cost calculated
• At least one previously untracked liability identified or confirmed absent

What you should be able to produce

• Every church liability, including smaller notes and vendor financing, is listed with balance, rate and term
• True annual cost, including fees, required insurance and any variable-rate exposure, has been calculated for each liability
• Leadership can state total church debt and total annual interest and fee cost without checking with only one person
• A named owner has been assigned to verify each liability entry against the original loan documents

Foundational ministry principle

Proverbs 22:7

7 The rich ruleth over the poor, and the borrower is servant to the lender.

King James Version (KJV) · Public domain

This proverb names the plain reality that borrowing creates a form of ongoing obligation to the lender, which frames why a complete and honest accounting of every liability matters before any payoff strategy can be built.

As draft framing for author review, the facilitator might suggest that naming every liability honestly today is the first step toward freeing the church from that servitude, not an exercise in shame about past borrowing decisions.

Understand the concept

Your work in this lesson focuses on this outcome: Build a complete, accurate inventory of every church liability and calculate its true all-in annual cost.

A church cannot eliminate debt it has not fully named; today's inventory turns scattered, half-remembered obligations into one honest, verified list with a true total cost.

Why it matters for your church

Small, scattered liabilities can collectively cost more in true annual terms than the single large mortgage everyone already tracks closely.

A church that cannot state its total debt and total annual carrying cost cannot make an informed decision about any new financing request.

Undisclosed personal guarantees put individual leaders at risk in ways the church's own books never reveal.

Examine the evidence

Use All current loan and financing agreements, Most recent statement for each liability, and Church financial dashboard export showing scheduled debt payments to compare your church's present practice with its stated intentions. Look for documented patterns, missing information, and differences between what people assume and what the evidence supports.

Your completed work should be supported by Total outstanding balance and total true annual cost calculated, and At least one previously untracked liability identified or confirmed absent. Record uncertainty honestly so your team knows what still needs to be verified.

Prepare for the shared exercise

Build a single, verified list of every church liability with its true all-in annual cost as the baseline for the rest of the module. The Complete Liability Inventory produces the Complete Liability Inventory with true annual cost calculated for every debt, which contributes to the principle's principal deliverable.

Before working with your team, consider this reflection: What liability, once its true annual cost was calculated today, looked more urgent than I expected before this session?

Key terms

True annual cost: The stated interest rate on a liability plus any required fees, insurance premiums and variable-rate exposure, expressed as a single annual cost figure.
Vendor financing: A payment plan extended by a supplier or contractor for equipment or services, often carrying a high effective rate once fees are included, and easy to overlook as debt.
Personal guarantee: A commitment by an individual leader to personally repay a church debt if the church itself fails to do so, which creates individual risk separate from the church's own balance sheet.

What this means for a church

• Small, scattered liabilities can collectively cost more in true annual terms than the single large mortgage everyone already tracks closely
• A church that cannot state its total debt and total annual carrying cost cannot make an informed decision about any new financing request
• Undisclosed personal guarantees put individual leaders at risk in ways the church's own books never reveal

Common failure patterns

• Tracking only the mortgage and a single line of credit while vendor financing and equipment leases go unrecorded
• Using a headline interest rate instead of true annual cost, which hides the real burden of fees and required insurance
• Letting one person's memory serve as the church's liability record instead of verifying against original documents

Ministry case

The Equipment Lease No One Remembered

A midsize congregation, referred to here as an illustrative and explicitly synthetic example, believed its only debt was a building mortgage. When the finance committee built a complete inventory for the first time, they discovered a sound-system financing agreement from three years earlier, still being paid monthly through accounts payable, carrying an effective true annual cost well above the mortgage rate once a service fee and a required equipment-insurance rider were included.

No one had acted in bad faith; the agreement had simply been coded as a recurring vendor bill rather than debt, so it never appeared on any list leadership reviewed. Once named, the committee prioritized it for early payoff in the very next lesson, since a small balance at a high true cost freed up more ministry dollars per payment than expected.

Lesson takeaway

A church cannot eliminate debt it has not fully named; today's inventory turns scattered, half-remembered obligations into one honest, verified list with a true total cost.

Discuss

Guided discussion for the leadership table.

With every liability named and its true cost calculated, let's turn to deciding which ones to attack first and why.

Which liability on our list surprised us most once its true annual cost, not just its balance, was calculated?
Where did we find a liability that was not previously tracked in one central place?
What would ministry look like with the total annual cost calculated today redirected toward mission instead?
Who needs to be trained to keep this inventory current going forward, so it does not go stale again?

Discussion notes

Practice

Applied exercise — produces the Complete Liability Inventory with true annual cost calculated for every debt.

Complete Liability Inventory

Build a single, verified list of every church liability with its true all-in annual cost as the baseline for the rest of the module.

Estimated time: 40 minutes

Participants: Pastor, treasurer, finance committee, and one or two board members

Artifact produced: Complete Liability Inventory with true annual cost calculated for every debt

Required inputs

• All current loan, lease and vendor financing agreements
• Most recent statement for each liability
• Financial dashboard export showing scheduled debt payments

Instructions

List every church liability, including smaller notes, leases and vendor financing arrangements.
Record balance, stated rate, term and maturity or renewal date for each.
Calculate true annual cost for each liability, including fees and required insurance.
Note any collateral securing each liability and any personal guarantee attached to it.
Assign a named owner to verify each entry against the original loan document.
Total the outstanding balance and total true annual cost across all liabilities.
Record the two totals in plain language at the top of the worksheet. Complete it online

Complete it online

Complete Liability Inventory

Church name: ______________________
Date of review: ______________________
Facilitator: ______________________

Liability	Balance	Stated rate	True annual cost	Collateral / guarantee	Maturity date	Verifying owner

Your response — Complete Liability Inventory with true annual cost calculated for every debt

Worked example

A fully completed sample using a fictional church. This is illustrative teaching material, not any church's actual data.

Riverside Fellowship (illustrative example — not actual church data)

Riverside Fellowship is a fictional congregation of about 300 attendees used here to illustrate a completed liability inventory.

Liability	Balance	Stated rate	True annual cost	Collateral / guarantee	Maturity date	Verifying owner
Building mortgage	$410,000	5.25%	5.4%	Church building	2036 renewal	Treasurer, Janet K.
Sound-system vendor financing	$8,200	9.9%	13.1%	None; equipment lease	Next year	Finance chair, Omar T.
Church credit card revolving balance	$4,600	22.9%	24.6%	None	Open-ended	Treasurer, Janet K.

How this leadership team reasoned

• Riverside's team assumed the mortgage was the only meaningful liability until the vendor financing agreement, previously coded as a monthly vendor bill, was uncovered during the inventory walk.
• Once true annual cost was calculated including the servicing fee and required equipment-insurance rider, the small sound-system balance was revealed to carry a far higher true cost than the mortgage despite its small size.

Decisions recorded

• Omar T. was assigned to obtain the original vendor financing agreement to confirm the fee structure before the next lesson.
• The board agreed the revolving credit card balance should never again be allowed to carry a balance month to month, pending the safeguards discussed in Lesson 3.

Completed artifact extract — Complete Liability Inventory with true annual cost calculated for every debt

Total outstanding liabilities: $422,800. Total true annual cost: approximately $24,400. Two of three liabilities carry a true annual cost above ten percent despite representing a small share of total balance.

Illustrative exercise score: 18 of 20. Riverside's team built a complete, verified list and calculated true annual cost carefully for every entry, though the vendor financing fee structure still needed final confirmation from the original document.

BAG Index complement

Household financial-literacy layer that complements this stewardship principle.

BAG Index complement

Credit reports and credit scores

A short complement introducing the BAG Index credit reports and credit scores module, giving households a practical framework for reading their own credit report and understanding what drives a credit score, which supports this lesson's work of naming every liability a household or the church carries at its true, current cost.

Teaching points

• A credit report is a factual record of borrowing history maintained by consumer reporting agencies, and it is different from a credit score, which is a number calculated from that report
• The largest factors in most credit scoring models are payment history and the amount owed relative to available credit, so late payments and high balances carry the most weight
• Every household is entitled to review their own credit reports regularly at no cost, and reviewing them is the only reliable way to catch errors or unfamiliar accounts early
• A single missed payment can affect a score for years, which is why understanding this connection before a liability becomes delinquent matters more than reacting after the fact
• Disputing an error on a credit report is a household's own right and does not require paying any company to do it on their behalf

Household practice step: Each household completing the BAG Index credit reports module pulls its own current credit reports, reviews them line by line for accuracy, and lists any unfamiliar or incorrect entries to dispute directly with the reporting agency.

Supports this principle: This complement gives households the exact literacy needed to complete an honest, true-cost liability inventory, since an accurate credit report often reveals accounts, balances or missed payments a household had not fully accounted for before this lesson's exercise.

This module explains how credit reporting works in general terms only; it does not recommend, rank or endorse any credit monitoring service, credit repair company or lender, and any household disputing a report error or facing a credit-related legal question should consult a qualified, licensed professional.

Score

Transparent 20-point exercise rubric: four criteria rated 0 to 5 with observable anchors.

Criterion	0 — not evident	3 — acceptable	5 — exemplary	Sample
Completeness (0–5)	Only one or two major liabilities were listed, missing smaller notes or vendor financing entirely.	All major liabilities were listed but smaller vendor financing or leases were missed.	Every liability, including small notes and vendor financing, is listed with balance, rate and maturity date.	5
Use of evidence (0–5)	Balances and rates were estimated from memory without checking any loan document or statement.	Some entries were verified against documents, others were estimated.	Every entry was checked against the original loan document or most recent statement before being finalized.	4
Alignment to the module purpose (0–5)	The inventory treated debt as a bookkeeping exercise disconnected from the module's payoff goal.	The inventory was complete but did not connect any finding to future payoff or renegotiation decisions.	The inventory explicitly named which liabilities looked like early opportunities for the prioritization work ahead.	4
Actionability and ownership (0–5)	No owners were assigned to verify any entry.	Owners were assigned but without a clear verification deadline.	Every liability has a specific named owner and a clear verification task before the next lesson.	4
Worked sample total				17 / 20

Completeness: Riverside's team uncovered and listed the previously untracked vendor financing agreement alongside all major debts.
Use of evidence: Most entries were verified, though the vendor financing fee structure still awaited final document confirmation.
Alignment to the module purpose: The team flagged the sound-system loan and the credit card as likely early targets, feeding directly into Lesson 2.
Actionability and ownership: Every liability has a named verifying owner, though one verification task lacked a specific date.

Lesson-exercise scores (20 points each) demonstrate learning and artifact quality. They do not automatically overwrite the official Seven Principles assessment, which remains a separate 100-point rating of five dimensions for each principle.

Submit evidence

What must be submitted for this lesson to count as complete.

Submit

• Completed Complete Liability Inventory worksheet with every liability, true annual cost and verifying owner recorded

Attach this evidence

Total outstanding balance and total true annual cost calculated
At least one previously untracked liability identified or confirmed absent

File upload is not implemented in this prototype. Ticking a box records that the church can produce the document; it does not store a file.

Contribute to official outcome

How this lesson builds the High-Cost Liability Elimination Plan.

Artifact produced: Complete Liability Inventory with true annual cost calculated for every debt

Feeds the opening inventory section and total-cost baseline of the High-Cost Liability Elimination Plan.

Open the module deliverable assembly

Participant reflection and notes

What liability, once its true annual cost was calculated today, looked more urgent than I expected before this session?

S2 Lesson 4 Back to S3 Eliminate High-Cost Liabilities S3 Lesson 2