Tell me if you ever have thoughts like this: “I’ve worked diligently this year, I deserve to upgrade my car. I can afford the extra payment”. Or how about “I worked out really hard, I deserve to splurge today even though it’s not in the budget”. I know I have thoughts like these all the time. In fact, I catch myself giving into this mentality more often than I care to admit. I’m writing this to remind you AND myself about how to beat the “I deserve” troll back into its cave. This is finances 101 – if you can’t pay for it with cash, then you can’t afford it. Dave Ramsey calls this acting your wage. Here are four simple truths to follow to never worry about money again.
Now before you think that I’m casting stones, know that I’ve learned this lesson the hard way and am still fighting my way out of debt. It’s slow and hard, but I see finally the light at the end of the tunnel. Very few people I’ve ever spoken to don’t have student loans, credit card debt, or car payments. These things seem to be a perfectly acceptable part of life, but I’ve come to despise that notion. I look forward to a day when I owe nothing more than property taxes on my house each month. How amazing would your life be if you didn’t have to pay a mortgage payment every month?
The decision to get debt free starts with learning to say no to the “I deserve” emotion, it’s delaying gratification so that you will eventually be able to live a life that most can’t even imagine. Here are some practical steps you can take to get to that place:
1- Know your current financial situation
This means taking a snapshot of your all your finances regularly. Income, savings, investments, and debts. I’m sure you know your income already, so I want you to list your debts. All of them. I’ve found that having unknown quantities of debt floating over me is like being at an outdoor party and not knowing if it’s going to rain. It takes away joy. Listing everything might be a gut-check, but it will give you a clear understanding of what you’re up against and that will feel good. Knowing the numbers is freeing. It shows you your enemy and takes the claws away from the monster.
2- Learn to tame your thoughts
This is (drum roll, please) the tough one. The ability to delay gratification, to say no when I desperately “deserve” something, is very foreign in our society. The idea of taming your thoughts includes learning the difference between need and want. While working on this I realized that I had to be disgusted at the fact that I was spending about 70% of my income on mortgage debt and payments on things. The debt-free mindset is what keeps me on track. I have weak periods, sure, but that’s where accountability with my wife comes in. We can mutually support each other when making decisions.
3- Pay ’em off
In Dave Ramsey’s Financial Peace University (a course I highly recommend, click HERE to learn more), you will learn the idea of paying the debts from the smallest to largest with a snowball effect. Roll the payment you had on the one you just paid off as extra on the next one to build steam – it picks up quick and you will feel really good about it! Diligence and delaying gratification is key here. Keep track of the numbers by budgeting so you can stay on track, but you will also be encouraged by the shrinking numbers. And for Pete’s sake, don’t take on more debt!
4- Figure out what you will need money for in the future and save
If you don’t know where a target is you cannot hit it. Mindlessly saving into a 401k through work is better than nothing, but will it be enough? Pension plans are a thing of the past and it’s up to you to know how much you need in the bank to retire. Do you plan on getting your kids through college? How about paying for your daughter’s wedding? How much do you need to put away each month to make those things a reality? Get educated on saving and investing. It won’t take long to learn the different ways you can save money for these stages of life, there is no excuse and I guarantee that ignorance is not bliss. Ignorance will punch you in the face with payments on things until the day you die. Do you really want to pass debt onto your family when you die?
This feels like a lot. It is a lot. So start small by carefully finding people who know what they are talking about (nope, not your broke cousin that drives a nice car) and ask them questions. Pick up an audiobook or subscribe to a good podcast so that you’re consistently learning little nuggets of truth, a one-time education is unrealistic. I know it’s possible and that you can do it because I’m on this journey in my own life. It’s just a matter of whether or not you are willing to make to decision to start!
Let’s end mediocre finances and living in debt. Let’s end average together.