Have you ever stopped to consider the validity behind the lessons you’ve been taught about money? Financial fitness isn’t taught in most schools, which leaves it up to our parents to teach us about money.
If you’re like me, you grew up in a household where the topic was taboo. Throughout my entire life, I recall hearing the phrase, “there are four things you never talk about: sex, politics, religion, and money.”
So if we don’t learn about money in school or from our parents, where do we learn about personal finances?
How We Learn About Money
Looking back, there were a number of different sources I learned from. Some of the sources gave good advice, others did not.
My first source and the number one reason my husband, Jer, and I turned out okay was my grandfather Andrew. I have fond memories of staying with my grandparents as a young child. Every night my grandfather and I would sit in the dining room and eat vanilla ice cream with chocolate syrup while I watched him do the books. From early on I saw money as a tool. I saw tracking and budgeting as positive and fun.
The next source was friends and colleagues. This mostly consisted of bad advice, but I was usually able to discern which advice was good and which was bad. “Always lease cars because then you’ll never have expensive repairs” was bad advice. “Increase your 401k contributions with every raise” was pretty darn good advice.
The third source was so-called experts. When you’re in your teens and early twenties, you assume that adults know what they’re talking about. It wasn’t until I was in my thirties when I realized that many of them don’t.
You know who taught me about student loans when I went to college? The university’s financial aid counselor. You know what they told me? “You should take as much as you can get because you don’t have to start paying it back until you graduate. Your payments would only be $X,XXX, but you’ll be making $XX,XXX by then so you won’t even notice.”
Thank goodness I only half listened to this terrible advice. I took out a small loan to cover the difference between what I had and what I needed. After the first semester, I thought to myself, this is stupid, I could wait tables one day a week and make this money. And that’s what I did. I cut my expenses and worked my way through college.
The final source and the only source I recommend is studying and learning on your own.
- The first book I bought was The Automatic Millionaire by David Bach.
- Not long after that, my husband received the book, Financial Peace, from an uncle.
- Shortly after, I listened to the audiobook, The Total Money Makeover.
And the obsession began. I read everything I could get my hands on. The most notable titles include:
- Rich Dad Poor Dad
- The Millionaire Next Door
- The Millionaire Mind
- Thou Shall Prosper
- Business Secrets from the Bible
I’m still learning today but my focus has turned to investing with wisdom from Warren Buffett, Richard Branson, and many others. My hope is that this series will be a launching point for you on your own journey to financial education.
The Journey to Financial Freedom
Earlier this year I surveyed my readers about what they want more of. Nearly every respondent said they wanted more articles about personal finance.
Three years ago, my husband and I found financial freedom when we paid off our mortgage early. Many people mistakenly assume that we came from wealthy families or received some sort of windfall. But those who know better asked, “How did you do it?”
I decided to start from the very beginning and share our journey from the moment we started to get serious about creating financial freedom.
- The first step was figuring out where our money was going.
- Next, we took control of our finances by learning to budget.
- While we had been saving as long as we’d been earning, we learned how to do it better in the third step.
Which leads us to Step Four – Ditching Debt!
The Problem with Debt
My husband and I have lived with debt and without. Having experienced both, I would say that it’s very unlikely that we’ll take on any future debt. The reason is simple. Debt robs you of your freedom.Debt robs you of your freedom. Click To Tweet
I once heard Chris Guillebeau say in an interview, “Many people trade their dream for a car payment.” I couldn’t agree more. I’ve seen so many people trade their dreams, values, and happiness for payments.
But I could also argue that debt has value in this world. I don’t think my husband and I could have gotten where we are today without borrowing money to pay for our home. And I honestly don’t think we would have the same level of prosperity in this country without the availability of cheap debt.
That said, I’ve also seen debt destroy lives. I’ve worked with a lot of small business owners over the years and in my experience, there are two main reasons their businesses fail. The first is partnerships that go south. The other is financial, mismanaging debt and taxes.
When you carry debt, you increase risk. We talked to someone the other day who told us about how he has owned a cabin for 30 years. He would have it paid off, but he made the mistake of refinancing it in 2007, right before losing his job in 2008. That one decision has been a huge burden over the last ten years.
In our culture, we’ve been trained to see debt as a lifestyle, rather than a tool. What I mean is that we’re trained to look at our monthly payments instead of the overall cost. With this mentality, many people increase their monthly payments as their monthly income increases. Eventually, the unexpected happens, like the 2007 mortgage crisis, and then they’re trapped.
Rather than taking advice from financial aid officers, used car salesmen, and mortgage brokers, maybe we should listen to actual billionaires. Warren Buffett says, “I’ve seen more people fail because of liquor and leverage — leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.” Or as Mark Cuban said in an interview with Bloomberg, “If you start a business and take out a loan, you’re a moron.” 😀
What to Do About It
If you’re still reading this, you’re intrigued and interested in paying down your debt. So how do you do it?
Every personal finance expert seems to have a different view on how to deal with debt. So the best answer I can give you is to do what works best for you. How you decide to get rid of debt has a lot to do with who you are and how you’re wired. It’s also going to depend on your income, expenses, the amount and type of debt, your age, savings, and family situation.
If it were me, I would pay off the most expensive debt (amount and interest rate) first. However, that tactic wouldn’t work for my husband. He’s more motivated by seeing progress with small wins. He would see the most success by paying off the smallest debt first, using what Dave Ramsey and others call the Debt Snowball.
Whichever method you choose, here are some additional tips that are useful for everyone.
Know Your Why and Keep it Top of Mind
If you’re a regular reader, you’ve heard this before. If we don’t have a compelling reason to do something that’s difficult, we won’t stick with it. Why do you want to get rid of your debt?
Maybe you want to change careers and follow your dreams. Perhaps you want more than anything for your children to have a better future. You might be dreaming of less stress and peace in your marriage. It might be all of the above. Whatever it is, define it and review it often.
Commit, Create a Plan, and Go All In
Once you know your why, make a commitment, create a plan and go all in. You’ll want to know how much you need to pay off and how long it will take. You need to have a budget and you’ll want to maximize that budget to put everything you can spare toward paying off that debt.
You’ll be amazed by how quickly you build momentum. When my husband and I committed to paying off our mortgage, we created a plan that would have us completely debt free in five years. But once we started and went all in, we had that sucker paid off in two and a half years.
Set Benchmarks, Track Your Progress and Celebrate Small Wins
Part of creating your plan is setting benchmarks. Ask yourself where you need to be at the end of each quarter or year to meet your goal.
Track your progress and make it visual. During our last year and a half of paying down our mortgage, my husband started to experience frugality fatigue. I created a graph that showed how much we had left to pay and colored in our progress each month. This was just what he needed to give purpose to his sacrifice.
Make sure and celebrate your progress along the way. How you celebrate is going to depend on your situation. If you are deeply in debt, find inexpensive ways to celebrate meeting your targets. Plan a trip to a local museum on their monthly free day, make a special dessert or go for a romantic picnic in the park. There is no shortage of free and cheap ways to celebrate.
If you’re on the last step of paying off your mortgage, go ahead and reward yourself with a small getaway when you meet your annual goal. Taking control of your family’s future is a big deal. You deserve a celebration!
Choosing to pay off our debt was one of the best decisions we made. There is nothing we could ever purchase that would feel as good as financial freedom feels. In addition to freedom, we’ve enjoyed improvements to our physical and emotional health. We have less stress in our relationship. And we’ve been able to take risks with our careers that have brought a sense of fulfillment.There is nothing we could ever purchase that would feel as good as financial freedom feels. Click To Tweet
It’s not always easy. You’ll get tired. You might have people in your life who make fun of your decision. But we have lived with and without debt and I can say that every sacrifice we made was worth it. If you decide to take this journey, I want you to know that I’m here to support you along the way.We have lived with and without debt and every sacrifice we made was worth it. Click To Tweet
Ready to change your financial future?
Check out these posts to learn everything you need to know to go from surviving to thriving.
Step One – Figure Out Where Your Money Is Going
Step Two – Creating a Budget That Works For You
Step Three – Saving For Financial Freedom
Step Four – Ditch Your Debt
Step Five – Build Wealth on Any Income
Step Six – Achieving Your Goals As A Couple
What has been your biggest challenge in paying off debt? Share in the comments below. Don’t be shy, your openness is a gift to others.
Get the most value with my free weekly newsletter. I’ll even send you a free gift to say thanks.