How to defeat debt
Becoming Debt Free
“The grass of your garden feels different when you don’t have to make any more bond payments” – Dave Ramsey
Ah, debt. It’s like awful clothes that you know is both ugly and doesn’t fit you anymore, yet it stays in your cupboard for years upon years. Then, you finally get some sense in you, go on an absolute rampage, throwing all your clothes out and get rid of everything that doesn’t belong. You repack your cupboard, free from clutter.
Now you open your clothing cupboard, clean from clutter and you look and feel good. You feel like a million dollars. Not a million rand, that’s too cheap. But that’s exactly the point.
Making the decision of becoming debt free and carrying out that decision has a significant impact on your not only your wallet, your financial wellbeing, but also your mind, your psychological wellbeing.
My debt story
My early financial life was small in stature, but it made a big impact. Like Lionel Messi.
I had a measly salary of 3k per month and could barely afford anything – it was great to suffer. So I thought it would be a great idea to suffer some more by going into debt for the first time. Something my grandfather warned me against for hundreds of times. I got a clothing account with Markhams and bought a jacket for R 600. Wearing that jacket made me feel rich.
Shortly after that I took out my first credit card for R 5,000 and used my waitering money that paid better than my accounting job and built my first computer. And later on, I took out another credit card (for 20k) after moving to Cape Town, which I used to pay for my taxation diploma.
Sure, the amount of debt I was in wasn’t significant, but that’s not the point.
I was 19 when I went into debt for the first time. I only became debt free when I was 25.
Had I not made the intentional decision to become debt free, perhaps I would have still carried those credit card balances and paying crazy amounts of interest because it’s in my nature to do stupid things.
Tackling the debt
What does it look like? What does it take, becoming debt free?
Here’s another football analogy for you:
You don’t become debt free by defending like Harry Maguire. You defend like you’re Virgil van Dijk. You run like hell, anticipate the movements, and make the tackle with accuracy. When Virgil is on a one-on-one with an attacker, he has laser focus on that player, picks up the pace and try to throw them off.
Harry is a joke because his anticipation is bad. He closes in with bad timing, often misses the tackle or just simply gives up.
You can’t do that with debt. Debt and those companies and entities that serves the debt are sly. You see it in the way they advertise. They sell you a dream, but you end up in a with a nightmare. Your marriage has a big crack in it’s foundation, because it’s built on debt.
Those who you owe, owns you. You’re a slave to your debt.
The path to freedom is in your hands.
How to get out
It’s simple, but it’s not easy.
1. Be intentional. If you’re single, make it priority for you. If you are married and / or have children, make it a priority for your family. Help them buy into the idea.
Without sounding like motivational speaker, in practical terms this means – make BECOME DEBT FREE your next financial goal and focus on achieving it.
2. Find a method. The two most popular methods are: Snowball and avalanche. They work the same, but they’re mathematically different. Same outcome, different method.
Snowball: Smallest balance first, then roll up the monthly payment of the one that just got paid off to the next outstanding balance.
Avalanche: Largest interest first, then roll up the monthly payment of the one that just got paid off to the next outstanding balance.
Snowball focuses on the motivation factor of paying off small balances and making small wins. Avalanche focuses on the math. You pay less interest with this method.
3. Extra cash / cashing out. By far, the biggest and fastest impact you can make on getting out of debt faster, is by making extra cash, selling something, or cashing out something and throwing a big chunk of change at the debt balance.
Close your eyes and imagine the following: no credit card payment coming off this month. No car payment either. No clothing account or store card payment. Crazy? Yes. Possible? Perhaps.
You too, can have a sigh of a relief and say: I feel like a million dollars. Because that’s exactly what being debt free feels like.