Tag Archives: Know Debt

images (15)When I designed my coaching website, I needed to create a tag line. A type of a one line description of what the site was all about. I wanted it to summarize how I felt about the process of getting out of debt and why so many people start at it but quickly give up.

Science was my first love as a career. I spent my first ten years of work life in the biotechnology world. So the idea of a math equation flashed into my mind.

There are thousands of websites and probably millions of blog posts and articles about how to get out of debt. "Seven methods to lower your credit card debt". "Five tips to reduce your holiday spending". Tons and tons of information out there.

So why do less than half of Americans pay off our credit card balances every month? Why do 35% of us have accounts in collections?

I reflected on my two journeys through debt. The first ended in credit counseling and bankruptcy. The second ended with everything paid off, including our home mortgage. What was the difference?

I "knew" that we had debt both times. In my head.

The difference was acknowledging my debt in my heart; my gut. The first time I did not do this. My "plan" to get out of debt was that my business would finally begin earning real money. My heart said everything would work out. My heart knowledge never supported my head knowledge. And I failed.

"Know Debt" was accomplished but nothing else.

In the second plan I got mad (as did my wife). We plugged into this anger and other emotions. We got our hearts involved. We "KNEW" our debt. 17 months later we had paid off our credit card, auto loan, department store card and orthodontist. And then 30 months later we paid off our home mortgage.

"KNOW Debt" was added to "Know Debt". They added up to "NO DEBT".

My math equation tag line crystallized. It explained why we want to get out of debt and have the best intentions to get out of debt. But we rarely get there.

We generally acknowledge that we have debt in our heads. We know we have three credit cards with balances on them. We know we have an auto loan that pays off in 2018. We know we have five student loans. And we might know the total debt that we owe. We have the head knowledge.

So we read posts, articles and forum advice that make logical sense on how to pay off our debts. Eliminate every expense that we can. No cable TV, no going out to a movie, etc. Live a spartan lifestyle.

And work three jobs.

Our heads can do this for 2-3 weeks. Maybe a month or two. But if our hearts do not support this lifestyle and behavior, something is going to cause us to quit this plan. Once the fun of the adventure dies off, the idea of living on dog food and replacing electricity with candles becomes so unappealing that we give up.

Once our hearts are out of the equation, our plans to get out of debt are dead in the water. Because there are no easy, pixie dust plans to get out of debt. It takes focus. It takes work. It may take some sacrifice. But your plan needs to be realistic; a plan that you can live with. Logically it may take longer. But emotionally you will stick with it all the way to the end and get to NO DEBT.

Take what you know in your head and get it into your heart. Then you will get out of debt.

download (12)Have you ever tried to focus on accomplishing five different tasks at the same time? Or three? How did you end up performing them? Were you satisfied with the outcomes?

I am a linear kind of guy. When I try to do two things at once, both suffer. They take longer to accomplish than if I worked one from start to finish and then tackled the second project. If you have ever heard the phrase "the sum of the whole is greater than the sum of the parts", this describes my multitasking skill!

Paying off debts can be the same. The commercial I hear on the radio about "put an extra $10 towards each of your loans" sounds good. After all you are paying back some extra principal. But when you do this with a car loan, two credit cards and a store loan, you do not see any progress.

I always recommend to my clients that they pick ONE debt to throw their weight against. Pay the minimums on everything else and put the extra principal towards that one account. Highest interest rate, lowest balance, I do not care. I want my clients to see BIG progress against a bill.

When I was in the midst of my debt, I was paying extra towards each debt. And I was getting more and more frustrated. Why? Because I was not seeing any real progress. The extra $50 or $100 towards our car loan did not look like much compared to the $10,000 balance. But when we began to pay $500 extra each month towards our $2000 orthodontist balance, we saw big decreases FAST.

My motto is "Know Debt + KNOW Debt = NO DEBT". The results you see from seeing that one debt drop quickly keeps your heart in the game (KNOW Debt). This supports your brain (Know Debt) and the two working together will get you to NO DEBT.

Think of the sun. When it shines down on you, you feel warmth. But when you shine it through a magnifying glass, you have the power to burn things!

Or think about boiling water on your stove. If you put a pot of water out in the sun, the water gets warm but only tepid. Put that same pot on a stove and the water begins to boil rapidly.

Focus your extra money on one debt at a time. You will remain excited about your plan towards debt freedom because you will see and feel positive progress. The intensity of that magnifying glass will burn through your debts in no time!