Sanctified or Not? (Stop the Double Talk!)

If we’re already sanctified, then why does 1 Thessalonians 4 say God’s will is our sanctification? How do we interpret all the New Testament passages that say God will punish those who practice sinful behavior? Does that punishment apply to Christians who struggle with sin? If not, why not? What does it mean to “be alert” or “be ready” for Christ’s return?