EPISODE #3: Debt is No Longer An Option

 

“Hello. And welcome back to the podcast. Today we are going to be talking about one of my absolute favorite subjects. What to do when debt is no longer an option.  

Have you heard of the Hippocratic oath? It’s a comprehensive overview of the obligations and behaviors of a doctor to their patients. Today, we kind of simplify it with just three words: Do No Harm.

Does this ring a bell? 

What does this have to do with debt? Everything. You can’t climb out of a hole while digging deeper. So, when I tell you to take the Hippocratic oath when it comes to your money, what I’m telling you to do is to never go into debt again. 

Let me tell you a little bit about what I mean. 

One of the things that you cannot do is consolidate your loans. A lot of people will do this with their credit card debt. They’ll say, “oh my goodness. I have $70,000 in credit card debt. Okay, look, what I’m going to do is I’m going to go down to the local bank. I’m going to get a consolidation loan, and I’m going to put all of that together.” 

Here’s the problem with that? You haven’t changed anything. You’re playing the financial shell game where you just move the pea, but it’s still under one of the shells.  If you don’t change any of your behavior, getting that loan is not going to help you. Here’s what you’re going to end up with. You’re going to end up with a $70,000 line of credit. That’s your consolidation loan that you took out to pay off all of your credit cards. And then you’re going to end up with a whole bunch of maxed out credit cards all over again. 

This happens with my clients over and over and over. You haven’t done anything to change the behavior. So, nothing is actually going to change. You’re just going to fill that back up. You have to take the time to change your behaviors before any of these math finagling is going to work. 

A lot of times people will come to me and they’ll say, “look, you know, I sat down and I made a budget and it makes sense on paper.” 

On paper. This all makes sense but let me tell you: money is not a math problem. Your problems with money, have nothing to do with addition and subtraction. Your problems with money have everything to do with the person in your mirror. It has everything to do with what you choose to spend your money on. 

Now look, I understand some people go into debt because there’s a life situation. Medical bills are the number one cause of bankruptcy in America. So, when I tell you to go get medical insurance, I know it’s expensive. But it’s nowhere near as expensive is paying for medical recovery after a car accident. 

The problem though, is when people are constantly going into debt to keep up with their lifestyle. They’re just putting things on a credit card because maybe they’ve lost a job and they don’t want people to know. Or they live in a city they just can’t afford. 

I live in Los Angeles, California. I know way too many people who cannot afford to live in the city. And yet they still try it. Every month they go further and further into debt, just paying their rent. It’s not a pretty look. It does not do anything for you. And let me tell you if you want to be a creative. If you want to be an actor or in the industry or whatever it is that you want to do. 

You should do it without debt on the table. Because debt is just going to weigh you down. You are going to be so much more creative without that weight on your shoulders. Trust me. 

I come to you today to tell you not to consolidate the loans. Not to try and move things around because this zero interest credit card will help me. And I can move this over here and I can jumble these things around. And the more you jumble things around. The more complicated you make things. And it doesn’t need to be complicated. Money does not need to be complicated. Believe it or not money can and should be simple. I’m here to help you make your money simple. 

When it comes down to it, what are you going to choose? Are you choosing to do things easy right now – which is just swiping your credit card and paying for it later? It’s going to be hard later. 

Or are you choosing to do something that’s a little bit hard right now – saving up for something that you want and paying cash for it? And that’s going to be so much easier down the road. 

You get to pick your hard. 

Hard now and easy later or easy now in hard later. And let me tell you when it’s hard later, it’s hard longer. But it’s your choice. You get to choose what you spend your money on.

Point number two, when it comes to doing no harm. 

Never co-sign another person’s debt. 

My grandmother, God bless her, was a very money conscious woman. My grandmother and grandfather both did very well for themselves. And one year I needed to buy a new car. My car that I had paid cash for died. And I wanted to go to the dealership to buy a new car. 

The dealership was like, “sure, you can get this loan. It’s no problem. We’ll take care of you.” And then, a couple of days later, they called and said, “Hey. Um, so we can’t actually approve that loan. You’re going to have to give a co-signer or we’re going to take the car back.”

I called the only person I knew with money. I called my grandma and I said, “look, grandma, I just need some help. Is there any way that you can co-sign this for me?” And she said, “Laura, I’m going to have to call you back.” 

About an hour later, she called me back and said, “there’s no way I can co-sign this for you.” I was heartbroken. I was crushed and I did not understand. 

It wasn’t until a few years later that I realized that if she co-signed for me, she would have to co-sign for a lot of my cousins as well. And some of them – they’re wonderful people, but they may not have been responsible enough to pay back that loan. She put up a boundary and made a choice for herself and said, I will not co-sign a loan.

And let’s be honest. The Bible says that those who co-sign for another are stupid. Okay. I know that’s a newer translation, obviously. That’s not the old king James, but the point is clear. Co-signing for someone else is just putting yourself at risk. Do not do it! 

You may think that you’re helping the other person, but the truth of the matter is if my grandmother had helped me in that way, I never would have learned to stand on my own two feet. I had to take care of myself. I had to make the car situation work. And I did. I didn’t get that beautiful brand-new car. That I had wanted. I had to get a different vehicle. But I got a vehicle that got me to and from work and was a nice car. It served me very well until I had a really big accident and had to say goodbye to Yeva, but she made me very happy until that point.

So those are the first two points. Don’t consolidate your loans. And don’t co-sign someone else’s loans.

And the third one. This is a big one guys. The third point. It’s to take debt off the table completely.

Debt is no longer an option for you. It’s no longer something you can do. You said you’re going to do no harm. You want to build wealth. 

Let’s talk about this. If you want to build wealth, you cannot continue to pay penalties. And by penalties I mean your interest on all those credit cards or loans. 

Every time you take out a loan there’s interest involved. The things that you have to pay back – that interest is making the bank wealthy. It’s not making you wealthy. Their buildings are bigger than yours. Their furniture is nicer than yours. And they can employ so many more people than you can because they’re getting rich off your penalties. 

Every time you pay a penalty. Every time you pay interest, you are letting your money be backwards focused, and you were not being forward focused. 

When I tell you to stop paying for your past, I mean, it. Stop paying those debts and obligations. Obviously, I want you to pay the debts that you have taken out already. But don’t take out anymore. 

You have to pay your debts back. And I don’t want you to continue to make this choice. Do not continue to go backward. Move forward with your money. Let all of your interests be a bonus that shows up in your retirement savings. Or in your mutual funds. Don’t let it be a penalty. Put that money in your pocket. You have to take that off the table completely. 

Okay. I was listening to another podcast by Amy Porterfield. I absolutely love her. And she was talking about how she and her husband had a conversation about taking divorce off the table. They were new in their marriage and they were fighting a lot and every time she would fight with him she was like, “well, maybe you just don’t want to be with me anymore. Maybe we should just get separated.” And her husband sat her down and said, “Amy, Divorce is not an option. Don’t ever say it again.”

That’s what you have to do with debt. You have to sit down and draw a line in the sand and say, debt is not an option. I have taken it off the table. That may mean that you have to put some parameters in place for yourself to help you get there. 

You’re going to need an emergency fund, something between you and life, because let me tell you, Murphy is going to come knocking on your door. 

Maybe you’ve heard of Murphy’s law. It says anything that can go wrong, will. 

I promise you that the second you decide you’re going to take control of your life, Murphy’s going to come knocking. 

One of my newest clients, sweet girl, she decided that she was going to take control of her money. And that first month that we were working together, she was in a car accident. The very first month. And she was like, “I think I’m going to have to change all of my goals and this is going to be such a problem.” I said, “you know, it’s amazing how, whenever we start getting our lives together, the world conspires against us.” 

It’s like the day we decide we’re going to start losing weight. We get invited to a birthday party. And, you know, there’s going to be cake. 

We have to continue moving forward on this path that we’ve created for ourselves. And we will be rewarded by staying focused and sticking to our word, doing what we said we were going to do. If we said debt is no longer on the table then it’s no longer on the table.  This girl got really smart and really creative. She sold some things around her house and she was able to pay for the whole car accident without going into debt. 

She hit that next goal sooner than she thought she was going to. 

She was able to make life choices that enabled her to follow through with her decisions to not let debt be an option. And she got to her destination quicker by sticking to what she said she was wanting to do.

If this sounds really radical to you. It shouldn’t this idea is vintage. Back in the 1950s, society looked down on anyone who took out debt. When my grandparents were buying a home, most people paid cash for their homes. We have totally different standards than those times. You know, the houses didn’t need as many bathrooms. Things didn’t have to be as beautiful and fancy and  forever home-ish. 

Things were simpler. They were starter homes. And people paid cash for their starter homes. And if they did take out a mortgage. That was the only time people in society didn’t look down on you. But if you needed a loan there was a serious stigma about it. Those are the people who aren’t doing well. Those are the poor people.  

But nowadays society is like, oh yeah, go get a loan for this. Go get a loan for that. Go get… You know what? There’s this thing called AfterPay. The shirt’s only $25, but you don’t have to pay $25. Split it up into four easy payments. 

Are you kidding me? That is ridiculous.

If you cannot afford a $25 shirt, do not be buying that shirt. It is time to go back to this vintage way of thinking and start looking differently at debt. It is a stupid tax that you do not need to pay.

Let’s go back even more vintage. Let’s look at the biblical book of Proverbs. They call debt dumb. It says those who have it are slaves. Actually, what it says is the borrower is slave to the lender. Do you want to be a slave? Absolutely not! You do not, but you are a slave to the banks when they tell you what you can and cannot do with your money. 

Take debt off the table. Debt is not an option from here forward. When you do that, you are being wise. 

You’ve taken down off the table. Congratulations. Come back to me. Next Monday and listen for more strategies that are going to help you figure out ways to change your money mindset.

Let’s radicalize this idea of debt not being an option! If you have questions about that, I’m 100% here for you. Be it my Money Mastery Program where we work together one-on-one for six months, or my Better Budget Bootcamp where you can create a values based budget that helps you reach your goals, I’m here for you. I want to be a resource for you. And I’m going to help you radically change your money life. 

You can check the show notes for ways to get in contact with me. Make sure that debt is no longer an option. And once you’ve done that – when we’ve ditched debt completely – we’re going to help you build crazy wealth and you are going to get to live outrageously generously. 

I cannot wait to talk to you next week. Bye for now.”