Cure the Debt Plague
Debt is one of the plagues of our day. It is rare to talk to someone who doesn't have debt. Borrowing money for wise and good purposes can be helpful and lead to greater wealth. But that is not usually what borrowing money is used for by the average American.
What do people do when they can't afford something? Put it on a credit card. This is true for most people for things they want, as well as emergencies. It's hard too, because sometimes people are just wanting to build their credit, and then next thing they know they are drowning.
Debt becomes stressful and frustrating and even debilitating. Even when you work hard to make it go away, it seems to come back and even grow.
There's a psychological reason for that. What you focus on is what has importance in your life. So if you are always thinking about debt, and working on debt, you might get to the point where you wouldn't know what you would do without it! So... you get more. In the book Geometry of Success, by Clay Stevens, it says that the subconscious mind cannot compute negative articles, so saying "I don't want debt" comes out as "I want debt" subconsciously!
Another reason why it is so hard to get out of a debt, is interest. Interest adds money to what you already owe. There's this little trick called the rule of 72 that lets you know how long it takes for a debt to double. You take 72, divided by the interest rate, and then you know the number of years till your debt doubles. For example: if I have a credit card that is charging me 10% interest, then that debt will double in 7.2 years (72/10 = 7.2). If I have a card charging me 18% interest, then my debt will double in 4 years. If it is 24% interest, my debt will DOUBLE in 3 years.
So let's say you use a credit card to buy a $10 meal at McDonalds. You use that credit card for other things as well, and the debt on it just goes up and up. You make minimal payments each month back to the credit card. Well let's say it takes you 3 years to finish paying off that card. If you are being charged 24% interest, that hamburger cost you not $10, but $20!
But most people realize debt is not fun, even if they don't realize how bad they are getting burnt by it. The problem most people have is fixing the issue once they are buried alive.
So how do you turn around this viscous cycle? I one time talked to a man who has all grown up children, and is now getting close to retirement. He wants to start investing money so he has something during his retirement years. But he told me he needs to get out of debt first. I asked him how long he has been working on that. He said basically his whole life. I asked if he has had any improvement from when he first started working to get out of debt. He said no, because things always come up that are unexpected- little emergencies like a popped tire, a trip to the dentist, etc. Sometimes he has to get new cards to pay for the first cards and it's just a never ending cycle.
Here's the secret to turning the cycle around: make an Emergency Fund. Take $25 each paycheck, and put it away in it's own account. Just do it. Then, when emergencies come up, you take from this fund instead of putting it on a credit card.
I know it sounds counterproductive- shouldn't all extra money go towards paying off debts? Why start saving when you have debts? But that thinking is what keeps people IN debt. I talk to millennials who's parents tell them to get out of debt before starting investments or savings. So I ask them, are your parents well off or in debt? The answer is always that their parents are struggling worse than they are. Getting out of debt before starting to save is a poor mentality and will keep you in debt. It's just the way it is.
You've got to change the way you think if you want changes in your life.
You've got to set aside $25 twice a month to start building up an emergency fund, even as you are making payments towards your debts. Cry and whine about it if you must, but until you start doing it you won't break the debt cycle. You've got to do this consistently. You have to keep adding to it- even if you have to use the money every once in a while for an emergency. You've got to keep adding to it until you have saved up enough money to pay all bills and expenses for 3-6 months (like for if you lost your job or something). Then if you have to pull money out of it, you go right back to adding to it again.
Doing this will help your brain focus on saving instead of debt, and you will be amazed with how fast your life starts changing around. This concept has freed people, who are now thriving in their lives. Start off your 2018 right by getting out of debt - treating yourself to an emergency fund!
What do people do when they can't afford something? Put it on a credit card. This is true for most people for things they want, as well as emergencies. It's hard too, because sometimes people are just wanting to build their credit, and then next thing they know they are drowning.
Debt becomes stressful and frustrating and even debilitating. Even when you work hard to make it go away, it seems to come back and even grow.
There's a psychological reason for that. What you focus on is what has importance in your life. So if you are always thinking about debt, and working on debt, you might get to the point where you wouldn't know what you would do without it! So... you get more. In the book Geometry of Success, by Clay Stevens, it says that the subconscious mind cannot compute negative articles, so saying "I don't want debt" comes out as "I want debt" subconsciously!
Another reason why it is so hard to get out of a debt, is interest. Interest adds money to what you already owe. There's this little trick called the rule of 72 that lets you know how long it takes for a debt to double. You take 72, divided by the interest rate, and then you know the number of years till your debt doubles. For example: if I have a credit card that is charging me 10% interest, then that debt will double in 7.2 years (72/10 = 7.2). If I have a card charging me 18% interest, then my debt will double in 4 years. If it is 24% interest, my debt will DOUBLE in 3 years.
So let's say you use a credit card to buy a $10 meal at McDonalds. You use that credit card for other things as well, and the debt on it just goes up and up. You make minimal payments each month back to the credit card. Well let's say it takes you 3 years to finish paying off that card. If you are being charged 24% interest, that hamburger cost you not $10, but $20!
But most people realize debt is not fun, even if they don't realize how bad they are getting burnt by it. The problem most people have is fixing the issue once they are buried alive.
So how do you turn around this viscous cycle? I one time talked to a man who has all grown up children, and is now getting close to retirement. He wants to start investing money so he has something during his retirement years. But he told me he needs to get out of debt first. I asked him how long he has been working on that. He said basically his whole life. I asked if he has had any improvement from when he first started working to get out of debt. He said no, because things always come up that are unexpected- little emergencies like a popped tire, a trip to the dentist, etc. Sometimes he has to get new cards to pay for the first cards and it's just a never ending cycle.
Here's the secret to turning the cycle around: make an Emergency Fund. Take $25 each paycheck, and put it away in it's own account. Just do it. Then, when emergencies come up, you take from this fund instead of putting it on a credit card.
I know it sounds counterproductive- shouldn't all extra money go towards paying off debts? Why start saving when you have debts? But that thinking is what keeps people IN debt. I talk to millennials who's parents tell them to get out of debt before starting investments or savings. So I ask them, are your parents well off or in debt? The answer is always that their parents are struggling worse than they are. Getting out of debt before starting to save is a poor mentality and will keep you in debt. It's just the way it is.
You've got to change the way you think if you want changes in your life.
You've got to set aside $25 twice a month to start building up an emergency fund, even as you are making payments towards your debts. Cry and whine about it if you must, but until you start doing it you won't break the debt cycle. You've got to do this consistently. You have to keep adding to it- even if you have to use the money every once in a while for an emergency. You've got to keep adding to it until you have saved up enough money to pay all bills and expenses for 3-6 months (like for if you lost your job or something). Then if you have to pull money out of it, you go right back to adding to it again.
Doing this will help your brain focus on saving instead of debt, and you will be amazed with how fast your life starts changing around. This concept has freed people, who are now thriving in their lives. Start off your 2018 right by getting out of debt - treating yourself to an emergency fund!
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