Latest / Money Grows on Trees / #207 - The 5-Step Plan to Get Out of Debt Fast

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#207 - The 5-Step Plan to Get Out of Debt Fast · Money Grows on Trees

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  If you default on your credit cards, it means your credit score is... If you're
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  paying credit card debt of 21%, you cannot out-invest that.
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  Getting stuck in debt. But the question is, can
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  you get out of it? People want to get out of debt, but they don't even know what
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  debts they have. Have you ever gone outside, opened your letterbox up,
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  pulled out some envelopes, and opened them up, and
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  your heart starts to beat a bit faster as you realize that
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  you're swimming in credit card debt? I'm Lloyd James Ross, seven-figure
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  investor and entrepreneur, and I've helped thousands of business owners and
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  professionals turn financial stress into success. If
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  you're stuck in old money habits, overwhelmed by investing, or unsure where
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  to start, this is for you. I'll give you the mindset and
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  strategies to take control, grow your wealth, and achieve financial
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  freedom. It's time to make your money work for you. Before
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  I dive into the steps, here's some frightening statistics. The average
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  person has a debt of $6,400. That's
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  per person. So if you're in a household of two people, that's over $12,000 in
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  debt. The average credit card interest rate is a whopping 21%. Now,
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  just to put that in perspective, Warren Buffett, the best investor who's
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  ever lived, has compounded his money at 19%. So
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  if you're paying credit card debt of 21%, you cannot out-invest
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  that. Can't, right? Huge.
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  The next one, 50% of people are defaulting on their credit
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  cards, 50%. That's the highest since the global financial
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  recession. Why is that important? Because if you default on your credit cards, it
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  means your credit score is, you're gone, which means you
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  won't be able to go and borrow money to buy a house. You won't be able to borrow money
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  to buy a business. You will actually just handcuff yourself. So
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  you've got to be very careful. It's a slippery slope. Do not fall down
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  the bottom. 50% are defaulting. Make sure you're not
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  amongst the 50%. Have you ever gone outside, opened your letterbox
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  up, pulled out some envelopes and opened them up
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  and your heart starts to beat a bit faster as you realize
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  that you're swimming in credit card debt. Another statement from
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  another credit card company saying you owe us more money.
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  But you look at your bank account and you realize there's not enough there.
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  And you slipped off the slope into absolute credit card chaos.
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  It happens to everyone. It's easy to fall into this trap, getting
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  stuck in debt. But the question is, Can you
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  get out of it? How do you get out of it? You know you need to.
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  You know you want to. You know those interest payments every month are
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  causing a lot of financial stress and anguish in your household. But you're not
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  too sure where to start. So there are five steps
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  to getting out of credit card debt. And I know if you follow these steps,
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  you'll be well on your way to actually commanding your credit card
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  debt instead of it commanding you. Because you don't want to be a slave to your credit cards.
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  You want them to be a slave to you, all right? So here's the five steps to
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  get out of credit card debt. fast. Step number one,
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  you got to write them down. You know, like actually know
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  how many you've got. I had a guy recently, he actually reached
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  out to me on Instagram, right? I remember I was in service paradise having dinner there
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  in between an event we were hosting. And this guy DMs me on Instagram. And
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  I'm like, Oh, I'm just here having dinner by myself. I'll just have a chat with
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  him. And so sometimes I'll do that. And he said, Lloyd, I'm just swimming
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  in all this credit card debt got $27. I'm like, Hey
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  man, that sucks. I know you feel it's terrible to be there, right? And
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  I said, well, how many debts have you got and what's the interest rates
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  on them? And he went, I have no idea. I was like,
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  how is it that people wanna get out of debt, but they don't even
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  know what debts they have or what interest
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  rate they have? So the most important first step you gotta take is
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  to sit quietly for 15 minutes, quietly by
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  yourself and write down, this much, this
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  much, this much, and this much. Write down all the cards and
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  all the debts, okay? So list them. That's the first step, all right? Now,
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  once you've done that, the second step is to identify in
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  that list which one is the most expensive. You might be thinking to
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  yourself, what does that mean, the most expensive, right? And so the
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  debt that's the most expensive is the one with the highest interest
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  rate. Okay, so you might have a credit card with 20% interest rate,
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  you might have one with 10% interest rate, and you might have an
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  interest-free one, which is not expensive at all for now. So
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  the idea would be to list the debts. and then put
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  them from top to bottom, the most expensive at the top, and
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  then list them down to the least expensive, okay? Why is that important? Because
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  in the next step, I'm gonna explain why that is important to
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  list them from most expensive to least, okay? Because you gotta do that first because
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  otherwise you don't know which one to attack first, all right? And so list them out. And
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  I have had students before say, well, I don't even know, like how do you
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  know? And on your credit card statement, it'll show you what the actual interest
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  expense is, okay? So what you can do to figure
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  out the highest interest rate is to even just take, it'll tell
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  you on the statement what the interest rate is. If it doesn't, you can take the repayment and
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  divide it by the balance and it'll give you a bit of an indication of which
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  one's taking the most cashflow from you each and every single month,
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  all right? So we need to attack that one first because it's attacking you the
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  most. So we wanna get the biggest and most challenging one
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  done first, all right? So step number three is
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  to actually pay off the most expensive. But
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  here's a trick. If you haven't done this before, what
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  you could do potentially, and what I've seen people do before, all
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  right, is actually secure an interest-free card
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  from another card supplier to actually then use that to
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  pay off another one with a lot of interest. So
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  you can actually get an interest-free card and use that to
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  pay off a high-interest one, in which case you're saving a
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  ton of interest. Now, the interest-free card will be for a period
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  of time. So it's like, hey, interest-free for a year or interest-free for
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  six months. So what you want to do is get the card, use that to pay off the high-interest
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  one, but then you don't want to go and like, spend the
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  other one again, right? So use that advantage you're creating
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  for yourself and start to use the cash that you're saving to
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  pay off the principal. It's called snowballing. And Dave Ramsey has
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  made snowballing debt very popular. For me,
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  it's common sense. I'm like, should I pay off my debt and
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  Yes! What are you, stupid? Of course you should do
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  that. That's the whole objective, to get rid of your debt. Why
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  would you pay it off, create all these savings, and then go and buy a
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  car or something or clothes? What the hell is wrong with
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  Of course, when I read that, I'm like, Dave Ramsey says to Snowball, no
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  joke. What else would you do with it? We want to get you
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  out of debt. You don't want to stay in debt. So yes, anytime you're saving money
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  from your expense every month by paying the principal down, snowball
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  it. Use it for the next one. Use it for the next one. Use it. You're anti-compounding, right?
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  Because right now, if you've got a lot of debt, you're someone else's money tree.
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  and that you don't wanna be someone else's money tree. You wanna build your own, but you gotta
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  get out of this money tree situation yourself, and then you can start planning your own, right? So number
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  three is to use some other card to actually pay that off,
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  and you'll create a bit of a buffer for yourself to start attacking
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  that principle, right? So that's step number three. Just quickly, if you're ready to take
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  control of your finances, but feel stuck on where to start, I
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  have a solution. My book, Money Buys Happiness, simplifies
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  investing and wealth building with practical steps to help you achieve financial
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  peace. Get your copy via the link in the show notes and let's get your
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  money working for you. Now back to the episode. Step
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  number four, here it is. Buckle up for this one. It's
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  pretty wild. So complex. Ready?
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  Sell stuff. Sell stuff, right?
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  Had a student of mine, he's like, Lloyd, I've got 16,000 pounds in
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  debt. I said, okay, what's your goal this year? He said, well, in the next 12 months, I'm
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  gonna pay it all down to zero. I'm like, 12 months? Okay.
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  And I said to him, I challenged him and I said, what if you could do it in four weeks?
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  And it was almost like that thought had never entered his head. And
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  so I challenged him, I said, what if you could do it in four weeks? He said, oh, that's
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  interesting. I've never thought about that. And I left him on the call and he left
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  and he just pondered that and pondered that. And he said to me, he came back to me two weeks later. And
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  he said to me, you know, when you asked me that question, you challenged me to
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  do it in four weeks instead of a year. I said, yeah. He said, I started telling
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  my friends about that. And so we started thinking about ideas. And
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  I said, isn't that interesting? And what did you discover? And
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  he said, what I discovered was I started looking at ways, more
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  bold ways to actually paid off in the four
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  weeks. And I said, what did you discover? What did you come up with? He said, well, here's what I came up with. I
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  realized I was driving a really nice car and
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  it had some debt on it, but it also had some equity in it. It means I
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  could have sold it and downgraded it and created some cash. I said, so what'd you
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  do? He said, well, I sold my car. I was like, wow, that's amazing. He
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  said, yeah, and guess how much I paid off. I said, well, he goes, I paid off half of it in
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  just two weeks. So here's the lesson here. If
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  you ask better questions, you'll get better answers. So
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  my question to you is, what do you have in your house? What do you
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  own? What else is around you that you can sell to actually
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  start paying that debt off faster? Because when companies get into debt, when
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  companies have too much debt and they're sinking, you see this in
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  the news, such and such company is going through asset sales,
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  liquidation sale, right? And so you've got to treat yourself
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  as a company. So a company gets into trouble, it starts selling assets, okay?
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  When a state goes broke, or a country starts to
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  go broke, it starts to sell off assets. You're no different.
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  So I'd suggest to you, what do you have you can sell? This is where you got to
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  be brutal, right? And it's where you got to start getting rid of things. You know
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  when you go to your wardrobe and it's time to get rid of some of your clothes, you're sifting through
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  the wardrobe and you're like, oh, you don't know what to get rid of because you feel like
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  the clothes have feelings. Yeah, that's because you're emotionally attached
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  to it. So what you've got to do is for a bit of time, get unemotional,
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  get rid of the thing and pay it off. I had a student of mine, she
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  had four cars, right? She said, I'm tight every
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  month. I'm tight. Like it's time. I can't live in paycheck to paycheck. I
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  said, how many cars have you got? She goes, I've got four. I'm like, Sell
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  them. And she said, I would like to, but my husband just can't
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  let go of this. He can't let go of this. And it's really interesting to see this. If you have
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  emotional attachment to objects, they can start to create
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  a lot of financial turmoil in your life. So you can ask yourself the question, do
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  you want the thing? And do you want the relationship with the thing that doesn't have any
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  feelings, but you have feelings for it? Do you want that? Or do you want the feeling
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  of financial freedom? Do you want the feeling of financial independence? Do you want to
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  be stress-free and financially at peace? What
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  would you prefer? Your choice, right? So step four is to sell
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  stuff and pay it off faster. That's a very important step. Start looking
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  now. Put stuff on Facebook Marketplace. Go take some photos of it. List
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  it on there. Get some inquiries. Go sell it. Go sell it.
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  Go sell it, right? And of course, step number five, it
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  seems like you might not be able to be trusted with debt. So
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  here's the thing. If you know that this is a downfall for you or
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  it's a weak point, that's okay. It's just prevented
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  in future. So what that means is if you've got the cards, cut
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  them up. and just make a very strong money rule
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  that you don't use debt, right? We don't use debt here,
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  okay? One of my strong money rules is I never borrow money
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  unless I know I can pay it back in full in cash anytime, which
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  has kind of prevented me doing big deals that I could have probably done, but I
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  much prefer to sleep at night soundly, right? So cut
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  them up, and then you can start building cash. And once you can
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  start building cash, then you can start planting your very own
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  money tree. Imagine what it's going to be like when you've actually planted a money tree,
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  you've taken some cash, you've made some investments in something, and
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  then you've actually had some money come back to you. Then all of a sudden, you've got the opposite
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  of a credit card debt. You've actually got someone paying you money. And that's the
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  position I want you to be in. All right, you thought that was five steps, but... Wait,
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  there's more, not steak knives. I'm gonna give you one bonus step
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  here, which means this is very important. So sometimes
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  you're so swamped in credit card debt that you literally almost
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  can't get out of it. And I get it. I've had students have that happen to them. And we had to
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  go to DEF CON 5, right? Which is talking to your credit card company
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  about some sort of payment help program that they have available, which
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  are available depending which country you live in and which credit cards, your debts
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  you've got and so forth. there are programs to help you
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  alleviate the debt. However, understand this, if
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  you do that, it will have an impact on your credit score. So just
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  be careful, don't bite off more than you can chew and don't go down that
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  path if it's gonna wreck your score, but if you need to get out of jail, get out of jail, right?
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  So have a chat to your credit card company, ask them for ways to negotiate the
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  debt and ask them for ways to help your payment through that because the
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  last thing you wanna do, the last thing you wanna do is
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  go bankrupt. Okay, so go have a chat to them, see what they got an offer, but
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  everything is negotiable, including credit card debt, depending where you live. So
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  go do that. Hope that step helps you. It's a bonus, go do it.
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  But by all accounts, avoid it. Okay, avoid credit card
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  debt. So if you want to know, and you probably asking yourself, when
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  is it appropriate to get into debt? Is that good debt? Is that bad
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  debt? The answer is yes, there are. There's two different types of debt. And you can use
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  it effectively. How to do that is on another episode. Go check it out. So
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  don't delay. Start implementing these steps today. Sit
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  with your spouse and say, honey, we've got some problems here. We
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  need to sit down and we need to discuss it. Because what can happen is if you don't communicate
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  as a couple, then things can get out of control. I had a student once recently.
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  That's exactly what happened to him. He said, I've got all this credit card debt, but don't tell my
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  wife. I'm like, ah! That's a big red flag, okay? Not
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  just in your money game, but in your relationship game. So it's
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  time to take the gloves off, it's time to raise the white flag,
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  go and have a chat with your spouse, sit down and say, honey, I may have done this or this, it's
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  time to get this under control. Will you help me? And they'll come, it's
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  their problem too, right? So they'll come and say, yep, it's time to do this. So sit
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  down, go through it, list them, write them all down, identify
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  the most expensive, Find some way to get an interest-free card to
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  power something else and snowball it, snowball it, snowball it. Sell
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  stuff, be brutal. And of course, number five, cut
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  them up. Build some cash because then it's time to plant your
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  money tree. All right, so I hope you've enjoyed the episode. If you've gotten value, go
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  hit the subscribe button. Check out the other episodes. But most importantly,
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  I'd love to know in the comments, pop down below which step you're
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  gonna do next. Thanks for listening to Money Grows
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  on Trees. If you enjoyed the episode, leave a five-star review on Apple
• 14:30
  Podcasts and Spotify and subscribe to us on
• 14:33
  YouTube so you never miss an episode. And if you're serious about building wealth,
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  make sure to check out the links in the show notes and follow me on all
• 14:40
  social media platforms at LloydJamesRoss for