The Trials of Allah are Near
Often due to our complacency, we tend to think of Allah's Punishment as a far away place, or we have high hopes that Allah forgives us for our sins before he takes us to task for them. After all, two of His most popular names are Ar-Rahman and Ar-Rahim (The Most Merciful and The Especially Merciful) but He is also known by the names Al-Halim and Al-Ghafur (The Forebearing [ie. the One who delays punishment] and The Forgiving). In the supplication taught by our Prophet, we also ask for protection from the trials of Hell, the grave, life and death, and the Dajjal - most of which seem distant.
But refer to the following hadith:
Narrated by Sa'id Al-Khudri and Abu Hurairah:
"No fatigue, nor disease, nor sorrow, nor sadness, nor hurt, nor distress befalls a Muslim, even if it were the prick he receives from a thorn, but Allah expiates some of his sins for that."
Sahih Bukhari 5461, 5462
Whatever of pain we feel, be it physical or emotional, is a punishment from Allah to remove our sins. Perhaps He punishes us in this world so that He will not punish us (a greater punishment) in the next. And that is to say, as we are the ones who committed the sin in the first place, we are the ones who are (indirectly) harming ourselves! Allah's punishment does not necessarily have to be in the distant future. Realise that we experience it in our daily lives.
People think that the sins they commit will simply be forgiven by Allah, and that they can live their lives without facing any repercussions. But Allah is The Most Just. While yes, He is The Most Forgiving, the one who sins and the one who refrains from it are not the same. Perhaps they may both end up at the same destination, ie. Heaven (because the sinner was forgiven), but that is not to say they both had the same experiences in life. While the one who refrained may have an easier time in this world or the next, the one who sinned may have passed through some hardship first (as a way for Allah to forgive them). Habitual sinners may feel that they are able to enjoy in their base pleasures and repent later, when they are 'ready'. While Muslims who turn over a new leaf (or even non-Muslims who convert to Islam) may have been forgiven completely, we know not of their inner anguish as they struggle against their old habits.
"And whatever strikes you of disaster - it is for what your hands have earned; but He pardons much."
Translation of the Qur'an, Ash-Shuraa: 30
Some 'punishments' are not even from Allah per se, they are a direct result of our actions. To give the most simplistic of examples, we cannot say that Allah is forgiving our sins from the pain we feel if we slap ourselves on the face. Do not expect much of Allah's reward for undergoing such hardships, when He has instructed us to stay away from such foolish acts (ie. whatever that is haram) in the first place!
If your next question is: can Allah forgive without punishing? The answer is yes, of course! He forgives of His creation as He wills. He is The Most Wise. We do not question how He treats His creation. But then why does He punish in order to forgive? Well, there may be a few explanations to that. Firstly, He may punish us in order for us to realise our own mistakes, so that we repent from it and bring ourselves closer to Allah. As people of faith, the first thing we should do is to reflect on our spirituality whenever something is not right in our lives. And for us to reflect may indeed be the intent of Allah as He is calling us back to Him. Does that mean that Allah loves to punish us? No of course not. He is The Most Loving. A mother dislikes punishing her child, but sometimes it is necessary to teach a lesson. And Allah's love is greater than that of a mother to her child. Anyway, Allah gives us countless blessings in life, and the number of His blessings are massively greater than His punishments. Blessings are also a way for us to turn back to him, but do we show gratitude for all of them? If we don't, then how can we question if Allah wants to punish us instead?
Secondly, His punishment serves as a deterrence for us to commit the same sin again.
Thirdly, He may punish us out of His Justice. At the end of the day, He wants us all to enter Paradise, even the sinners. But to be fair to those who refrained from sin, He punishes the sinners who may have sought pleasure in their transgressions.
Fourthly, it may be a form of spiritual cleansing before being able to enjoy the purity in Paradise.
And lastly, Allah is unlimited in His knowledge. Much goodness have came out of 'badness' in this world. In the grander scheme of things, the struggles we face today may result in benefits tomorrow. But these are things that we will never be able to fully comprehend, and Allah knows best.
Note that not all hardships are for the expiation of sins. Some are meant to test us, if we have the character and iman to be able to 'pass' (by enduring the hardship with patience, to accept Allah's decree, to turn back to Him, etc.) His tests. Either way, whether a hardship is for expiation of sins or as a test for us, Allah wants us to turn back to Him, and He wants to increase our rank in Jannah. And this is all from His love for us.
Finally, I must add that living a life of ease and luxury does not mean that we are sinless. To live life without hardship is the greatest of calamities! It is not even possible that a human is sinless, or could ever repay Allah in gratitude. On the other hand, for Allah not call a person back to him means that He has left them to enjoy their life in the dunya, whilst He may have prepared for them a terrible end in the akhirah...
May Allah forgive us and protect from His punishments, amin.
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