One of the needs that every Christian has is to understand the difference between our position with God and the practice of our faith. This idea applies to several areas - positional and practical holiness; and positional and practical righteousness. Holiness is the distinctiveness of the Christian whereby God has set us apart from sin and then set us apart for Himself. Righteousness is the declaration of the fact that, in Christ, we are right with God, and then we live out this righteousness through the moral obedience that follows that declaration. Other words that we would use here are justification (righteousness) and sanctification (holiness).
Within those 2 ideas, we as Christians must understand 2 things.
1. Positional Holiness and Righteousness. At the moment that you trusted in Christ as your Savior, God declared that you are Holy (1 Peter 1:13-16) and Righteous (2 Corinthians 5:21). I offer a clarification between the two because holiness describes our distinctiveness as believers, while righteousness is holiness put into action. We are declared holy and righteous by God because He imputes (places in us) these qualities and changes us. It is literally where God takes His character and places it within us - with two parts of His character being holy and righteous.
2. Practical Holiness and Righteousness. As a result what God has done for us in Christ, we must now live out these ideas. He has declared that we are Holy and Righteous. It is now imperative that we, as believers, live and act like it. We don't try to become holy or righteous; we already are. Therefore be what you are. Holy means that a Christian must be distinctive. We must live like ones who have been set apart for God (Romans 12:1-2). Thus, it negates the whole idea of trying to be like the world. We should not be characterized by the world's identity. We should be distinctively like Christ.
We should also then live our lives morally in ways that show that we have been made right with God. Living out a righteous life is not self-righteousness. It is not arrogance or pride. It is a morality that reflects in our obedience to Scripture. One of the mistakes that Christians are making today is trying to figure out how closely we can get to the dividing fence of the world and not step too far over. The argument that many try to make is this one: If Scripture doesn't strictly prohibit something, then it is okay for a Christian to do it.
Holiness and Righteousness, however, teach us that the issue is not trying to figure out where moral compromise is acceptable. These qualities teach us that we always ask the question, "How does this behavior, attitude, lifestyle choice, or reaction help me to be more like Christ?" That's Practical Holiness and Righteousness. We want to live our lives in such a distinctiveness that people see the righteousness of Christ in us.
So go out and live your faith every day. God has declared that you are holy and righteous. You don't have to do anything to achieve this status. It is yours because of who you are in Christ. Therefore, don't look for compromises. Discover ways that you can show the world that Jesus has changed your life, and live out this life every moment of every day.