Be Brave Not Safe

One of the most distracting things in life is debt.

It is SO easy to get into. We are constantly fed the marketing pitches via all media outlets to buy, experience, taste…To make matters worse, as soon as we turn 18 we are courted by companies making available credit cards when we don’t yet know how to discipline ourselves with this (seemingly) “free money” and/or the freedom (ability to buy/do/experience) it brings. It is anything but free (or freeing)!

“A man in debt is so far a slave.” ~ Ralph Waldo Emerson

I’ve experienced this first hand by digging myself into a ditch (huge credit card debt, owning hot sports cars worth less than what was owed, etc.). More importantly, though, I followed a process (took years) to dig myself out.

Following are some simple steps that can be taken (starting right now) to eradicate (destroy completely ; put an end to) debt.

The first and most important step is to plug the leak in the boat, by committing to taking on no more debt. This may require cutting up the credit card(s) and/or locking (one) away to be used ONLY in an ABSOLUTE emergency situation (i.e., the car has broken down and needs to be fixed to get to work).

The next steps include:

1. Take inventory of the debt. Create a list of each outstanding loan/debt account, including the outstanding balance, annual percentage rate (APR) and monthly payment.
2. Determine the total debt payment being made each month (across all accounts).
3. Focus on knocking down the debt. It starts by prioritizing which account to pay off first, second, etc. There are a couple of approaches to consider here, depending on what will be the most rewarding to each individual. To achieve some quick / “psychological” wins, kill (pay off) the account(s) with the lowest balance first. This will eliminate the “number” of payments made each month. To achieve “financial” wins, kill (pay off) the account(s) with the highest APR first, as these are the accounts that cause the loudest sucking sound on net worth. Regardless of the chosen approach, make the minimum required payment on each account and apply any excess cash to the top priority account. As an account is closed out, take the monthly payment amount that was previously being paid on this account and apply it to an “increased” monthly payment on the next account on the prioritized kill list. Continue to rinse and repeat this process never reducing the total monthly payment amount towards debt, just allocating the payments per the prioritized kill list.
4. When extra cash comes in (i.e., tax refund, pay raise) apply it to the account which is currently at the top of the “kill list.”

This process takes time (potentially years, depending on how deep the hole is). The result, however, is HUGELY freeing.

There is no better time to start the process than now. In fact, just beginning the process starts to remove the distraction of debt as we are now “doing something about it” vs. letting it grow or fester.

For additional insight and methods for eradicating debt and otherwise improving on the financial front, check out the following book.

I wish you the best in your quest to eradicate (destroy completely ; put an end to) debt.