Zero Down Your Debt. Greg Johnson
decreases your options. When you have bills to pay and mouths to feed, big financial risks – like quitting your job to start your dream business – don’t look too attractive. And the more bills you have, the less likely you’ll be able to take some risks in life. Debt forces you to become a wage slave and destroys your ability to make decisions for yourself. This voluntary purge of your freedom comes at a cost – mentally, emotionally, and monetarily.
•Debt stresses you out. Being in debt is downright stressful, especially when you fall behind. Is it any wonder that so many of us walk around depressed, stressed, and angry? Even if you don’t have debt collectors harassing you, all that debt hanging around your neck is enough to make you want to crawl into a hole and hide.
•Debt makes you give up control. He who has the gold makes the rules. When you owe somebody else, you have to play by their rules. They are in control, not you.
•Debt forces you to work longer and harder. Got a giant car payment to worry about? How about a mortgage to pay? When you’re in debt, you have to keep feeding the beast – and you’re paying more than the sticker price in the form of interest. That means working harder and longer just so you can turn around and give your money to somebody else. Doesn’t sound like much fun, does it?
•Debt hides the true cost. Debt is a sneaky little devil. It weasels its way in, delaying the pain of a purchase until later. It masks itself, so you don’t even realize the true cost of what you’ve just bought. Accruing more and more debt starts to feel normal… until you can’t even distinguish the damage it’s doing to your money, your life, and your dreams.
•Debt is a cycle that keeps building on itself. Debt never gets better. It only gets worse. The free money is addictive, but it’s only hiding the financial pain. The more you use it, the more you need, and the worse it gets. The only way out of it, the only way to heal your finances, is to pay it off.
•Debt makes everything more expensive. You didn’t think all this “free money” was actually free, did you? Lenders are in the business of making money, and they do it by charging you interest, month after month. Whenever you finance a purchase, you’re going to pay more for it in the long run – sometimes a lot more.
What Can You Do Now?
That’s all fine and good, you think, and maybe you wish you’d realized it sooner. But, you’re already in debt – so what should you do now?
We’ve come to the first step in our journey to debt freedom:
We need to recognize that we have a problem.
Yes, we are addicted to debt.
We know it’s hard to admit, but it’s the truth… and it’s the first step to recovery.
To really drive home this point, we need to assess the situation, understand the damage we’re dealing with, and fully acknowledge the problem. Here’s how.
First, bust out all of your bills and stack them into a pile. Now, take out the bills for your monthly living expenses – such as electric and gas utilities, insurance, childcare, cable, internet, and phone bills – and set them aside.
You should now have a pile of bills for items you financed. These might include credit card bills, your mortgage, car payments, furniture financing or store credit card bills, student loans, and other debts. Add up the total balance owed on each bill – not the minimum monthly payment, but the outstanding balance or remaining principal on each loan. This is the total amount of debt you owe. Grab a sheet of paper and write it down.
Next, subtract the amount of mortgage debt you owe from the total. This is your non-mortgage debt, and that is what we want you to focus on zeroing down in this book.
Grab another sheet of paper, and this time write down your total non-mortgage debt in the biggest, boldest, most horrifically disgusting gigantic black numbers that will fit on the page.
Look at that monster and see it clearly for what it is. Stare at it and let it sink in.
Shocking, isn’t it?
That’s your debt… and it is holding you back from the life you deserve.
Keep staring at it until you’ve really internalized what this debt means to you. Understand what this number represents, what that money could have been used for, and how it continues to hold you back.
Let it sink in.
Now, take that piece of paper and destroy it. Crumple it up, light it on fire, or tear that mothereffer to shreds! Scream out to the world and promise yourself, “Never again!”
Your debt doesn’t own you, it doesn’t define you, and you will overcome it!
When you perform this crazy stunt, you’re going to feel a sense of relief, a sense of accomplishment, and a sense of control that you never even knew existed.
Now you know what the problem is. You know what it looks like. It’s time to zero it down. It’s time to attack.
Action Items
Gather all of your debts together. Total them up so you know how much you owe in both total debt and non-mortgage debt. Write it down and internalize it. Acknowledge the problem and understand what it is costing you. Then, reassert your commitment to defeating it.
Don’t get intimidated or discouraged. Remember, even the longest journeys start with a single step. We’re going to defeat this monster together, one step at a time. You got this.
1. 2015 American Household Credit Card Debt Survey, Nerdwallet, https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/, April 15, 2016.
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CHAPTER 3
Zero Down Your Debt with a Zero-Sum Budget
In this chapter you’ll learn:
•Why making a monthly budget is the most important financial skill you can learn
•How a monthly budget actually creates freedom rather than restrictions
•Why your past budgets have failed
•How to create a monthly budget that actually works
•How to create a budget if you have a variable income
“A budget helps us curb these problems. Instead of spending unconsciously, a budget encourages us to spend our money deliberately and with purpose on the things we value most. It stops our paycheck from performing a vanishing act, and protects the money we’ve worked so hard to earn.”
Ah, budgeting. The dreaded B-word. It just sent shivers down your spine, didn’t it?
Seriously, it’s OK. There’s nothing to be afraid of.
You might not realize it yet, but a budget isn’t some steel cage holding you back from the things you want. In fact, it’s exactly the opposite.
A budget is a financial tool that, when used properly, can help set you free: Free from the stress of living paycheck to paycheck. Free from the wage-slave mentality that crushes your soul and forces you to stay in a job you despise. Free from the attitude that you’ll never live life on your own