This is my wife and I in February of 2010. We had just gotten married two weeks before. We had just returned from our honeymoon and life was just beginning. It started with $57,000 in debt.
I was a businessman struggling with a spending habit that led me to owe the IRS $21,000. He was someone who did not know how to plan, for which he had another debt of US$7,000 in medical expenses. I was impatient, I had my credit cards with a balance of $15,000. I “needed” a good car, so we had another $14,000 in vehicle loans. In terms of savings, we only had $1,000 and regularly borrowed money from our parents.
Our monthly debt payments were almost US$2,000, this was 34% of our income at the time. This didn’t look bad, right? Most young people have debts, debts for university loans, the car, credit cards… all this was normal.
Debt is common, but this is not normal Click To Tweet
Normal is not spending more than you earn. The normal thing is to have self-control to manage your money instead of it controlling you. Normal is that you are responsible and patient enough to build an adequate savings account. The normal thing is to have the ability to eat out, go out with your friends, give to charities, have options.
On the contrary, poverty is common, debt is common. People who hate their jobs, get divorced, lose their homes, take out loans, have no savings, and want a better life are common.
But I was determined that our life would not be an ordinary life.
It started with an email that a mentor wrote me:
“Dale, after talking about your financial goals, I need to be honest with you…. You are a fool, you are acting like the poor and expect to be rich. You hide in excuses and think that money is a mind game. Give it… money is a game of behavior, you need to change your actions and fast”
I felt ashamed, trapped, I needed to change our behaviors around the use of money immediately. It reminded me of Dave Ramsey’s famous saying: “Act on your salary”, and that’s how it all began.
We sold everything we didn’t need. We ate at home most days for two years, I focused on building a more profitable business that doubled or tripled our income.
Fast forward 5 years and my wife and I have zero debt. We own a couple of small businesses. I write books about entrepreneurship. Our savings are in the 6 figures, our 7-acre ranch in central Oregon is almost paid off, and our income is between $50,000 and $130,000 a month. We travel when we want, we give to causes we care about, we have money saved for our children, all of this we did before I was 30.
After looking back, here are 4 steps everyone should consider on their way to debt-free.
How to get out of debt.
1. Say yes to education no to university.
40 years ago we had a great education system. Learning was affordable, employers offered higher wages to those with college degrees. This is not now so. The median value of a college tuition is $50,000 a year, and employers no longer measure candidates based on a degree but rather on a portfolio of skills, knowledge, and experience.
Young adults need to start thinking for themselves instead of starting college because “my parents want me to have a degree” as well as putting our youth in massive debt, two-thirds of graduates to be exact. Debts for university studies rank #2 for a value of US$1.2 trillion, only surpassed by mortgage loans.
2. Stop thinking like poor.
Broke or poor, what’s the difference? Poor is an attitude, it refers to the fact that you cannot get ahead and that you will never earn money. Just stay where you are, sulk, and deny your bad luck forever. The poor believe “I will save when I have more money” or “my car is an investment” or “those expensive vacations are worth it because they allow us to strengthen our family bond.”
In a recent study of communities most in need, researchers found the following:
- 7% of poor people think that they must have some intellectual gift that allows them to become rich.
- 90% think that faith determines how rich or poor they will be
- 18% think that they themselves are the cause of their financial condition
- 77% think that lying is a prerequisite for the accumulation of wealth
- 90% think that the rich are rich because their parents were wealthy and inherited their money
When you’re broke, on the other hand, it’s something you’re just passing through. We’ve all made bad money decisions over the years. The key point comes when you recognize your bad judgments and now you are trying to start with the nails, but above all never let this happen again.
You own your story, you own your mind. Being poor is a choice, just as being rich is.
3. Baby steps are big steps.
Eliminating your debt can be one of the biggest mountains you’ve ever climbed. The most complex issues found among people who are defeated are: they do not plan and they are not consistent.
“You don’t conquer the top of a mountain without a plan, on the other hand, you can’t stop when you’re tired”
A trick that I learned while we were paying off our debt was to always have the value of our debt on a piece of paper in the fridge, how much we had paid and when we had left to finish. I also added dates in which I wanted these to be paid. As humans we all have a need to see our progress, no one likes to feel like they have worked hard while not knowing how far they have already come.
4. Start a business immediately.
If you want to eliminate debt fast, you need to find a way to double or triple your current income. In most cases, this requires the creation of another source of income. In other words, you have to create your own business. You don’t have to replace your career (or at least not yet), instead think of it as a business for fun. You can start with an Etsy shop to display your art, or a consulting business alongside your work, even an online store.
No matter what idea you pursue, it is this change in behavior that will fuel your mission to be debt free.
I know what you’re thinking… I don’t know how to start a business, or, I don’t have a good business idea, or, I don’t have the time and money to start.
Luckily, I’m in the business of helping people start their own business. If you want to be wealthy, you must know what the wealthy know. You must think like a rich man. This takes time, there is no better investment you can make than learning how to make more money.
If you do not have an idea to start a business, you can apply this income strategy for sure.
Remember this, debt is like dieting, if you fall out of line or make some bad spending decision, you just have to go back to where you were. It’s not about big leaps, it’s about a coherent plan of small steps.
How big is your debt? Is starting a business an option for you? What about college, can you not go at all? what is your plan to start thinking like a rich person, creating a plan and staying consistent? Let me know below in the comments.
Lastly, would you consider sharing this article? Someone you know might need it.
And remember, if you are really interested in creating your own business, you can purchase our book “How to create a company while working: Discover how to manage your time, manage your money and motivate yourself while creating a company and working for another” , where you will find all the information you need to found your own company, without having to leave your job.
This article was originally published on Startupcamp.com Its translation and publication on ModoEmprendedor has been directly authorized by the author and may not be reproduced by any other means.
