099 Beyond Your Wedding Day Podcast-Get Rid Of Your Debt Fast

by mike on November 22, 2012

099 Beyond Your Wedding Day Podcast-Get Rid Of Your Debt Fast

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In this episode of the Beyond Your Wedding Day Podcast, we discuss the Total Money Makeover by Dave Ramsey.  We take a look at Chapter 7: “The Debt Snowball: Lose Weight Fast, Really.”

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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.

 

Would you like to work with Mandy and Mike one on one?  Check out the Beyond Your Wedding Day Marriage Prep Course.

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