The answer to the question is “both.”
Positionally speaking, God justified us the moment we trusted Jesus Christ for our salvation (Romans 5:1-2; Titus 3:4-7). The words “justified” and “justification” speak of our positional righteousness before God while still in the sinning state. Think of the word “justified” as meaning “just-if-I’d” never sinned. This state of righteousness is how God views each of us once we have trusted His Son by faith for redemption (Romans 3:22).
Practically speaking, we are still being made holy and righteous as the Holy Spirit transforms us into Jesus’ image. Every day, we sin through our words, actions, attitudes, motives, and thoughts—but we are not always acutely aware of it. Therefore, the Holy Spirit deals with our obvious, known sins first by convicting us and leading us to repentance. After that, He reveals and addresses other sinful areas that we had not recognized previously. This refining process continues throughout our lifetime until God takes us to heaven.
A helpful analogy of this process can be compared to a weight-loss journey. When people become born-again, they are obese with sin. Over time, as the Holy Spirit conforms them into Jesus’ image and likeness, many lose “20-40 pounds” of sin. Some believers shed between “40-50 pounds” of sin while others drop a staggering “100 pounds!” However, some precious believers still struggle to lose their first five pounds for various reasons. Regardless, every believer is a work in progress heading toward the same Christlike goal.
We see this refining process evidenced in the apostle Paul’s life as he described Himself at various stages of it. For example, in Paul’s earlier walk with Jesus, he referred to himself as “the least of the apostles” (1 Corinthians 15:9). Later, when imprisoned for his faith, Paul called himself “less than the least of all saints” (Ephesians 3:8). Toward the end of his life, he humbly declared himself “the chief of sinners” (1 Timothy 1:15).
Paul’s descriptions of himself do not depict a progression of sin in his life, but an acute awareness of his sinfulness compared to his holy Savior, which signifies spiritual maturity. His declarations also portray his recognized need for God’s continued grace and forgiveness throughout his Christian life. For these reasons, Paul could say in Romans 7:22-25(a), “For I joyfully agree with the law of God in the inner person, but I see a different law in the parts of my body waging war against the law of my mind and making me a prisoner of the law of sin, the law which is in my body’s parts. Wretched man that I am! Who will set me free from the body of this death? Thanks be to God through Jesus Christ our Lord!”
