099 Beyond Your Wedding Day Podcast-Get Rid Of Your Debt Fast
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*You have to identify debt as the enemy
-Your income is your biggest wealth-building tool
-If most of your income is going out the door to payments, then you are unable to utilize it the most effectively
-Take a minute to add up all of your debt payments you have going out (mortgage, vehicles, student loan, CCs, other various debts (furniture, stereo, etc.)). Send me the amount and I will tell you what that amount invested each month would look like in 15 years. It will blow your mind!
-It takes extreme amounts of effort to get out of debt. Most of you, honestly, won’t do it. It’s too hard.
*The most effective way to pay of your debt is by using the debt snowball
-Remember, this is about behavior modification, not just math
-First, you need to make a list of your debts from smallest balance to largest balance (not including your mortgage). I don’t care about the interest rates!
-It’s all about getting quick wins to keep you motivated and fired up
-Once you have this list, pay the minimum payments on every single one except the smallest one
-Any extra money you can squeeze goes towards paying that first, smallest debt off
-Then, once it’s paid, the payment you were making plus the “extra” money goes on the next one. That is how the snowball effect works.
-In order for this to work, you have to be over-the-top, radical intense
-Remember, you have to make a commitment to take on no more debt! You will be tested early, you have to prove that you are committed to no more debt!
*You must do something to get the snowball rolling
-You may have to sell something: in fact, chances are you will have to sell the vehicle with the most debt on it
-Work overtime, get an extra job, anything to find the extra money to start paying down your debt!
*What about saving for retirement while paying off debt?
-Even though it may be really difficult to comprehend, you should stop contributing to retirement even if you get a match
-Think about how much you will be able to contribute to the plan once you have no payments going out
-The only exception is if you have a very deep hole with an extremely small shovel
*If you have to use the emergency fund, then stop the debt snowball temporarily to get the emergency fund back to $1,000, then return to it.
*If you have other large debts (such as a 2nd mortgage, business debt, or rental property debt), do not include them in the debt snowball if they are over 50% of your annual income.
*If you do whatever it takes and are fired up, baby step 2 should take an average of 18 to 20 months.