S3 Eliminate High-Cost Liabilities · Lesson 2 of 4

Lesson 2 — Prioritizing Payoff: Rate, Risk and Ministry Impact

Rank every liability for payoff priority using a documented method combining rate, risk and ministry impact.

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S3 Lesson 1 Back to S3 Eliminate High-Cost Liabilities S3 Lesson 3

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: Payoff Priority Ranking using rate, risk and ministry-impact scoring

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Learn

Participant study reading — approximately 90 minutes of learning and shared work.

Learning objective: Rank every liability for payoff priority using a documented method combining rate, risk and ministry impact.

Recommended participants: Pastor, treasurer, finance committee, and a board representative

Estimated teaching time: 90 minutes

Success indicators

• Every liability from the inventory has been scored on rate, risk and ministry impact using a consistent method
• A single ranked payoff order exists that leadership agrees reflects the church's true priorities
• Leadership can explain, in one sentence, why the top-ranked liability was ranked above the others
• A plan exists for directing any extra available cash toward the top-ranked liability without neglecting minimum payments elsewhere

Materials and evidence you will use

• Completed Complete Liability Inventory from Lesson 1
• Current-year budget showing available cash beyond minimum debt payments
• A specific extra-cash source identified for the top-ranked liability
• A named owner assigned to track progress

What you should be able to produce

• Every liability from the inventory has been scored on rate, risk and ministry impact using a consistent method
• A single ranked payoff order exists that leadership agrees reflects the church's true priorities
• Leadership can explain, in one sentence, why the top-ranked liability was ranked above the others
• A plan exists for directing any extra available cash toward the top-ranked liability without neglecting minimum payments elsewhere

Foundational ministry principle

Luke 14:28

28 For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?

King James Version (KJV) · Public domain

This passage frames careful counting before action, which connects directly to building a deliberate, calculated payoff order rather than attacking debt in whatever sequence feels most urgent emotionally.

As draft framing for author review, the facilitator might suggest that ranking liabilities by rate, risk and ministry impact before acting is exactly this kind of counting the cost applied to debt elimination.

Understand the concept

Your work in this lesson focuses on this outcome: Rank every liability for payoff priority using a documented method combining rate, risk and ministry impact.

A payoff order built on rate, risk and ministry impact together, rather than on whichever balance feels most urgent, focuses extra payments where they do the most good.

Why it matters for your church

Splitting extra payments thinly across many liabilities delays full payoff on all of them rather than eliminating any single one quickly.

Ignoring a variable-rate liability's rate ceiling can leave a church exposed to a payment shock it never planned for.

A written, shared ranking prevents well-intentioned staff from redirecting extra funds to a different liability without coordination.

Examine the evidence

Use Completed Complete Liability Inventory from Lesson 1, and Current-year budget showing available cash beyond minimum 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 A specific extra-cash source identified for the top-ranked liability, and A named owner assigned to track progress. Record uncertainty honestly so your team knows what still needs to be verified.

Prepare for the shared exercise

Rank every liability for payoff priority using a documented method and direct extra payments accordingly. The Payoff Priority Ranking produces the Payoff Priority Ranking using rate, risk and ministry-impact scoring, which contributes to the principle's principal deliverable.

Before working with your team, consider this reflection: What ministry could our top-ranked liability's payment fund once it is fully eliminated, and how does naming that change my urgency about paying it off?

Key terms

Payoff priority ranking: A documented method for ordering which liability receives extra payments first, based on true cost, risk and ministry impact rather than instinct alone.
Rate ceiling: The maximum interest rate a variable-rate liability could reach under its contract, used to score risk even when the current rate feels manageable.
Ministry impact score: A judgment-based score estimating what a specific liability payment, if eliminated, could instead fund in ministry.

What this means for a church

• Splitting extra payments thinly across many liabilities delays full payoff on all of them rather than eliminating any single one quickly
• Ignoring a variable-rate liability's rate ceiling can leave a church exposed to a payment shock it never planned for
• A written, shared ranking prevents well-intentioned staff from redirecting extra funds to a different liability without coordination

Common failure patterns

• Prioritizing the liability with the loudest monthly payment rather than the one with the highest true cost or risk
• Scoring ministry impact so vaguely that every liability seems equally important, which produces no real ranking at all
• Failing to recalculate the ranking after a liability is paid off, so extra payments drift without a clear next target

Ministry case

The Loan Everyone Assumed Was Fine

A fictional, explicitly synthetic congregation used here for illustration had assumed its building mortgage was the obvious top priority simply because it was the largest balance. When the finance committee scored true cost, risk and ministry impact separately, they found the mortgage carried a fixed, moderate rate with no near-term renewal risk, while a smaller equipment loan carried a variable rate approaching its contractual ceiling and was secured by equipment essential to weekly children's ministry programming.

Redirecting extra payments to the smaller, riskier equipment loan first eliminated it within four months, removed the variable-rate exposure entirely, and freed a modest but meaningful monthly amount that the ministry team redirected immediately to program supplies, illustrating exactly the kind of reasoning a documented ranking method is designed to surface.

Lesson takeaway

A payoff order built on rate, risk and ministry impact together, rather than on whichever balance feels most urgent, focuses extra payments where they do the most good.

Discuss

Guided discussion for the leadership table.

With a ranked payoff order in hand, let's look at whether any of these liabilities can be made cheaper or safer through refinancing or renegotiation before we simply pay them down as they stand.

Which liability ranked higher or lower than our initial instinct suggested, and why?
Where did true cost and risk pull in different directions, and how did we resolve that tension?
What concrete ministry alternative did we identify for the payment on our top-ranked liability?
What specific source of extra cash will we direct to the top-ranked liability in the next thirty days?

Discussion notes

Practice

Applied exercise — produces the Payoff Priority Ranking using rate, risk and ministry-impact scoring.

Payoff Priority Ranking

Rank every liability for payoff priority using a documented method and direct extra payments accordingly.

Estimated time: 50 minutes

Participants: Pastor, treasurer, finance committee, and a board representative

Artifact produced: Payoff Priority Ranking using rate, risk and ministry-impact scoring

Required inputs

• Completed Complete Liability Inventory from Lesson 1
• Current-year budget showing available cash beyond minimum payments

Instructions

List every liability from the Lesson 1 inventory on the ranking worksheet. Complete it online
Score each liability on true annual cost using the Lesson 1 figures.
Score each liability on risk, including collateral, guarantees and rate-ceiling exposure.
Score each liability on ministry impact using a concrete alternative use of the freed-up payment.
Combine the three scores into a discussed, agreed final ranked order.
Identify a specific source of extra cash to direct to the top-ranked liability.
Assign a named owner to track and report progress on the top-ranked liability.

Complete it online

Payoff Priority Ranking

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

Liability	True cost score	Risk score	Ministry impact score	Final rank	Rationale

Your response — Payoff Priority Ranking using rate, risk and ministry-impact scoring

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)

Continuing the Lesson 1 inventory, Riverside Fellowship's finance committee ranks its three identified liabilities for payoff priority.

Liability	True cost score	Risk score	Ministry impact score	Final rank	Rationale
Church credit card revolving balance	5	4	3	1	Highest true cost and easiest to fully eliminate within one quarter
Sound-system vendor financing	4	3	4	2	High true cost and directly tied to weekly worship ministry equipment
Building mortgage	2	2	2	3	Lowest true cost, fixed rate, no near-term renewal risk

How this leadership team reasoned

• Riverside's team recognized the credit card, despite its small balance, carried the highest true cost and could realistically be eliminated within a single quarter with modest extra payments.
• The mortgage, while the largest balance, scored lowest across all three factors given its fixed rate and distant renewal date, confirming it should remain on minimum payments for now.

Decisions recorded

• The board approved directing an unbudgeted gift of $3,000 entirely to the credit card balance in the current month.
• Janet K. was assigned to report the credit card balance at every finance meeting until it reaches zero, at which point the ranking will be recalculated.

Completed artifact extract — Payoff Priority Ranking using rate, risk and ministry-impact scoring

Final payoff order: credit card first, sound-system financing second, mortgage held at minimum payments. Extra cash source identified: $3,000 unbudgeted gift applied immediately to the credit card balance.

Illustrative exercise score: 19 of 20. Riverside's team scored all three liabilities on all three factors with clear written rationale and identified a specific, immediate source of extra cash, leaving only minor room to formalize the recalculation trigger in writing.

BAG Index complement

Household financial-literacy layer that complements this stewardship principle.

BAG Index complement

Credit utilization and the true cost of revolving balances

A short complement introducing the BAG Index credit utilization module, which explains how carrying a revolving balance compounds cost over time, directly extending this lesson's ranking of liabilities by their true annual cost.

Teaching points

• Credit utilization is the percentage of available revolving credit currently in use, and it is one of the most heavily weighted factors in most credit scoring models
• Interest on a revolving balance compounds against whatever is left unpaid each cycle, so paying only a minimum payment can extend payoff time by years and multiply the total cost
• Keeping utilization low on revolving accounts, even ones being actively paid down, generally supports a stronger credit profile than closing the account entirely
• A household carrying revolving balances across several accounts is often paying several different rates at once, which is exactly the kind of true-cost comparison this lesson's ranking exercise is designed to surface
• Requesting a lower rate directly from a current lender is a legitimate, no-cost first step many households never try before assuming refinancing or a new product is the only option

Household practice step: Each household completing the BAG Index credit utilization module calculates the true annual cost of every revolving balance it carries and compares that figure directly against the ranked liability list this lesson produces.

Supports this principle: This complement gives households the specific vocabulary and math behind why revolving, high-utilization debt so often ranks as the costliest liability in this lesson's exercise, reinforcing the church-wide priority of eliminating it first.

This module teaches general credit-utilization mechanics only; it does not recommend any specific card issuer, balance-transfer product or lender, and households considering refinancing or consolidation should consult a qualified, licensed financial or credit 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)	Fewer than half the liabilities from the inventory were scored on any factor.	All liabilities were scored but one of the three factors was skipped for some entries.	Every liability was scored on all three factors with a final rank and written rationale.	5
Use of evidence (0–5)	Scores were assigned without reference to the Lesson 1 inventory figures.	True cost scores referenced the inventory, but risk and ministry impact scores were general impressions.	All three scores are explicitly tied to inventory figures, documented risk factors, or a concrete ministry alternative.	5
Alignment to the module purpose (0–5)	The ranking ignored ministry impact entirely and ranked purely on balance size.	The ranking considered cost and risk but treated ministry impact as an afterthought.	The ranking gave ministry impact genuine weight alongside cost and risk, consistent with the module's stewardship purpose.	4
Actionability and ownership (0–5)	No extra-cash source or tracking owner was identified for any liability.	A general intention to prioritize was stated but no specific cash source or owner was named.	A specific extra-cash source and a named tracking owner were identified for the top-ranked liability.	5
Worked sample total				19 / 20

Completeness: Riverside scored all three liabilities on all three factors with a rationale recorded for each.
Use of evidence: Each score cites the specific inventory figure, collateral detail or ministry alternative behind it.
Alignment to the module purpose: Ministry impact meaningfully shifted the sound-system loan's rank, though the scoring language could be sharper.
Actionability and ownership: Riverside identified a specific $3,000 source and named an owner to track progress to zero balance.

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 Payoff Priority Ranking worksheet with all three scores, final rank and rationale for every liability

Attach this evidence

A specific extra-cash source identified for the top-ranked liability
A named owner assigned to track progress

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: Payoff Priority Ranking using rate, risk and ministry-impact scoring

Becomes the prioritization section of the High-Cost Liability Elimination Plan and directs extra payments going forward.

Open the module deliverable assembly

Participant reflection and notes

What ministry could our top-ranked liability's payment fund once it is fully eliminated, and how does naming that change my urgency about paying it off?

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