Episode 23: The Wealth On Any Income Book – Step 5: How to Get Out of Debt Easily and Forever – Transcript
Hi Folks, Welcome to the Wealth On Any Income podcast. This is where we talk about money tips, techniques, attitudes, information and provide inspiration. I’m your host, Rennie Gabriel.
In the previous episodes I spoke about your five-year financial goal; how to work with other people to achieve your goals and the difference between good debt and bad debt, and how good debt can support you to create wealth.
Today, I will start reading the third section of the Wealth On Any Income book. This section is where I cover the tools, tips and techniques that will lead to you having Complete Financial Choice® in your life. We’ll start with how to get out of consumer debt forever.
As I read, I could stumble over some words. I am not a professional voice over actor so please forgive me if that happens.
----------------------------
In the introduction to my book, I said you would be provided with tools to make powerful new decisions. With these tools, you can make choices about who will be getting your money and determine if you’re getting the level of pleasure you’re paying for. Again, don’t be concerned by the term “tools.” Generally, tools are the forms and concepts provided which will allow you to create Complete Financial Choice®. If you don’t like the word tools, substitute the word “keys,” or anything else you’re comfortable with.
If you wanted to open a locked door, you would use a key. If you wanted to prepare a gourmet meal you would need cooking tools, also called utensils, like a knife, spatula, grater, pot, pan and so on. If you wanted to repair an automobile you would need tools like a wrench, screwdriver and pliers. You wouldn’t expect to build a house with your bare hands, would you? These forms and concepts are the tools that will allow you to build your financial house and attain Complete Financial Choice®. This house will shelter you from fear, anxiety or concerns about your economic circumstances.
You will not need any financial background to complete these forms. I’ve attempted to make them as simple as possible. If you do have a financial background you will see the value in this simple approach. The wealthiest people in the world use tools similar to these. They use them to measure how they’re winning in the game of life, to see if they’re on track toward their goals, or to determine if they’re getting the value for what they paid. If these tools make sense for the wealthiest people in the world to use, don’t you think they would be of value to you, too?
In the next several steps, you’ll see how to get out of consumer debt, how to build an investment portfolio, and you will learn how live within your income. If you use The Financial Coach Spending Plan Register as I suggest, which is Tool #5, you can live within your income in 90 days. I guarantee it!
How to Get Out of Debt Painlessly
You could be at one of four levels. I could be reading this book to you and you have no issues with credit card debt. This would be level one of four levels. At the first level either you have no credit card, or if you charge something on a credit card, when the bill arrives you pay off the balance in full each month. I’m not going to be dealing with that here. If that’s your situation, you don’t have a problem with credit card debt. There may be a problem with shopping, but not debt.
At level two, you may have some debt you’re carrying, and some extra money you could apply to get rid of the debt. The third level is where there is no extra money beyond the minimum payments required. And the fourth level is where you don’t even have the money to make the minimum payments.
I’ll be explaining the best way to get rid of the debt. Best does not mean easiest or cheapest. Best means a method that is part of a new habit, attitude and skill—a skill that will prevent debt from coming back again.
Let’s first look at level three. Let’s say you don’t have any extra money; you can just make your minimum payments. You may want to consider a consolidation loan, or look around to transfer balances to a low interest credit card, or call your current creditors and ask them to reduce your interest rates.
Please hear again the last suggestion I made. If you purchased my book, that suggestion alone can pay for it 100 times over. It could save you thousands of dollars: Call your current creditors and ask them to reduce your interest rate. That’s all there is to it. I had one client do this and he got a 10% interest reduction (from 23% to 13%) and he wasn’t even making his payments on time. Over the course of paying off his card he saved $5,000 in interest. He did it with just one phone call. Are you willing to make a phone call if it might save you hundreds or thousands of dollars?
I suggest you don’t reduce your payments just because they’ve reduced the interest rates. Keep the same level of payments and you’ll be able to get rid of the debt sooner.
What if you’re at level four and you can’t even make the minimum payments? I suggest the book by Jerrold Mundis called How to Get Out of Debt, Stay Out of Debt, and Live Prosperously. It will tell you how to ‘declare a moratorium’ for a month or two so you can get your financial life in order. During this moratorium you do not pay any of your creditors. However, you do contact them to let them know you are working on your finances, intend to pay them back in full, will not be paying them for the next one or two, and will then get back to them with a repayment schedule, which you will do.
While it may be obvious, I’m going to warn you anyway: Regardless of whether you’re at level 2, 3 or 4 DO NOT ADD ANY NEW DEBT WHILE PAYING OFF YOUR CURRENT OR OLD DEBT. If you use all the tools from this book and “pay yourself first,” you won’t have to incur any new debt. I will go into great depth on this later.
Tool #1 - The Debt Elimination Form
The first tool in the Appendix is the Debt Elimination Form and shows you how to get out of debt, without pain. If you don’t have a paper copy of my book, you can receive any form for free just by sending an email to Rennie@WealthOnAnyIncome.com and requesting it.
If you are at level two with your debts, where you have some extra money to pay them down, let’s say you’ve got an extra $100 per month and let’s say you have 10 cards. Would it make sense to send an extra $10 to each creditor? Not really. What I’m going to suggest is you take the extra $100 and you send it all to one creditor. And, the one you pick is the one that has the lowest balance. It may, or may not, have the highest interest, it doesn’t matter. These are usually department store cards. The lowest balance is the most important criteria.
Based on a chart in the book you would see a $461 balance on a MasterCard at the top. I’ve put it at the top of the list even though the other cards have a higher interest. Again, the lowest balance is the most important criteria. If I add $100 to my minimum payment of $20, this balance will be wiped out in about 4 months.
Can you recall having owed money in the past and paying it off in full? How did that feel? Didn’t it feel great that you didn’t have to pay on that debt anymore? Well, that’s how this system works. It’s about the excitement that comes from seeing results from the actions you take. It’s about the good feelings you have when you see your debts vanish.
The power of this program comes from the emotional or psychological benefits first, and the economic benefits second. You develop muscles to handle money differently. You make the decisions that, one small step at a time, will lead you to Complete Financial Choice®.
Applying all the extra money to one creditor is how this tool works. You pick the one with the lowest balance and get rid of that first. You quickly eliminated a creditor from your list. This is what I’m asking you to look for when you fill out the Debt Elimination Form in the Appendix. You then just work your way down the list. But since I’m reading this to you, there is no Appendix, so you need to send an email to me to request any forms. Just send an email to Rennie@WealthOnAnyIncome.com.
With the first balance gone, you then add the minimum payment you just saved, plus the extra $100 to the next debt or credit card on the list. From the example in the book this would be a department store. Based on an $80 minimum payment, you would add $120 to it for a total of $200. That’s the $80 minimum payment, plus the $100 extra payment, plus the $20 you pick up from the first debt you no longer have to pay. In about 8 more months, instead of an additional 16 months, this debt will be paid off. Next, add $200 to the third debt in the example that has the $80 Visa card minimum, and pay $280 per month.
If you follow this example, you’ll see all the debts get paid off in 17 months instead of 29 months—a full year of payments wiped out, and over $440 of interest saved. This is without transferring the balance to a lower rate card or even getting a rate reduction from the current creditors. This is without even getting a consolidation loan.
Warning
It’s time for another warning: When it comes to paying off debt the quick and easy way, it invariably returns. I’ve experienced this, and so has every single person I’ve ever met with. When someone borrows against the equity in their home, or refinances it, receives an inheritance, tax refund, wins the lottery, gets a gift from parents or others, declares bankruptcy or gets a consolidation loan to deal with what they owe, they have learned no new skills to pay off debt and it always comes back. Well maybe only 99% of the time; I’ve not met everyone in the world who has done this.
Creating financial independence, creating Complete Financial Choice®, creating financial freedom comes from the skills of handling money powerfully. This is what this book is about. Those quick and easy maneuvers do not produce the necessary skills. They only teach people to use a similar behavior to get themselves out of debt the next time it happens. And the assets that can provide the income so you can choose to work, instead of having to work, never get created.
----------------------------
Here’s your opportunity to grow: Send an email to me and request all the forms I talk about in this, and the next several episodes. Send your request to Rennie@WealthOnAnyIncome.com.
In the next episode we’ll continue in the third section of the book where I cover the Balance Sheet. This will tell you where you are now, what assets you have to invest, and what assets are not working for you. You will see how close you are to Complete Financial Choice®.
Listen to the Wealth On Any Income podcast on your favorite platform and please rate, review and subscribe.
Until next week, be prosperous. Bye, bye for now.
Return to podcast by clicking here.
