Detonating Debt
So what is debt anyway?
Debt is money you owe. Whether you took out a loan, used a credit card, or fell behind on bills, it's all debt. That is the textbook answer. Debt can also limit your freedom and build someone else's legacy rather than your own. Managing your money, taking charge of YOUR last name, and living free to achieve what you want most is not worth trading for what you want right now.
Proverbs 22:7 tells us, "The rich rules over the poor, and the borrower is a slave to the lender." Debt is a massive part of the problem and is more than a simple math equation. I want to instill a mindset shift today where we go from thinking that debt is a tool to the mentality that debt is NOT an option.
What is the root cause of stress and anxiety causing bombs to explode in all aspects of your life? My finance nightmare, my DEBT nightmare, was the root cause of stress and anxiety that spilled over to my professional life, personal life, the way I communicated, and even my leadership ability.
Unfortunately, I'm alone. 3 out of 4 Americans claim that finances are the root cause of stress and anxiety in their lives also. Far too often, this reality keeps us from living for legacy and serving our given purpose. We're then reduced to struggling, surviving each day merely to collect a paycheck.
Money almost killed me. I lost my ability to be a good friend and truly be present for the ones I cared about the most. Thankfully, after being broken and defeated, God reached down and slapped some much-needed sense into me. I genuinely believe I survived that situation, so I can still be here to help eradicate these underlying financial problems and coach the mindset and tools that will enable and inspire you to control your money and find your freedom. These are the very same guidelines that saved my life, helped me regain control, and now empower me to live for legacy, freedom, and impact. Trust me; if I could figure out how to regain control of my downward money spiral and find true financial freedom, you can too!
But where do I even start?
There are 5 Hacks to DETONATE debt from your life, once and for all.
1. Establish Your Values
2. Define your "Why"
3. Build a Foundation
4. Know Your Strategy
5. Set S.M.A.R.T. Goals
How does anyone get anywhere these days? I know that when I need to get somewhere, I pull out my phone, open whatever maps app, plug in my destination, and hit "get directions." Now, who pays attention to what happens next? The internal GPS in whatever device you have pings one, if not multiple, satellites to find your current location. If your GPS doesn't know where you are, it cannot give directions to where you need to go.
Getting out of debt is a journey. To get where you want to go, you need to know where you are right now. To see where you are right now, first ESTABLISH YOUR VALUES, then once your values are crystal clear, use them to write a "Why" Statement or a personal mission statement.
Remember, getting out of debt is more than a math equation. Since we are humans and not robots, we cannot ignore the behavioral aspects of money. You will use your Mission Statement as a guiding light for your debt-free journey.
Once you know why you do the things you do, you can build a foundation. When your foundation is strong, you must know and trust your strategy, then set S.M.A.R.T. goals to mark the waypoints on your journey.
So now that we know the 5 hacks- let's dive a little deeper.
Step #1: Establish Your Values
What do you truly value? What does freedom mean to you?
Before we can answer those questions, we need to understand what is meant by 'values.'
Values are simply beliefs that guide or motivate attitudes or actions. These are the beliefs we use to guide our efforts, the sort of person we want to be – how we treat ourselves and others, and our interaction with the world. Think of values as the magnets in your moral compass.
I encourage you to pause reading and take a moment to write down your top three values. Set a two-minute timer for yourself, and write down what naturally comes to mind first!
Step #2: Define Your "Why"
Using your top three values from Step #1, define your "why" and create a mission statement to use as your guiding light during your debt-free journey.
We'll use me as an example:
Jay's Values: Influence | Connection | Freedom
Jay Believes: "What we do in life echoes in eternity." ← Bonus points for whoever can name this movie!
Jay's "Why": To identify needs and opportunities, so others can see alternatives to reaching their full potential.
How Jay's "Why" represent Jay's Values: Seeing the value in others allows the meaningful connection required to inspire action, so they take charge of THEIR last name and achieve their definition of freedom.
Again, I encourage you to set a two-minute timer and craft a "why"/mission statement for yourself!
Step #3: Build A Foundation
There are three core steps to building a foundation.
Make sure your 4 walls are covered FIRST!
Set aside or save $1000 for a starter emergency fund.
This amount is not supposed to make you feel comfortable. The sole purpose of the $1000 starter emergency fund is to put distance between you and an emergency.
Create and use a Zero-Based Budget: Income-Expenses=0.
(If you need help creating a zero-based budget, click here)
When we establish a plan, in this case, a budget, we discover peace of mind. Take it one step further: use your budget daily as a guide, and I promise you'll feel like you got a raise!
Step #4: Know & Trust Your Strategy
The Debt Snowball!
Pay minimums on all debts
Use extra income towards the smallest debt
When you pay off the smallest debt, FEEL THE WIN! Then put that minimum + extra income towards the second smallest debt.
Repeat until you DETONATE all your debt!
Cool, cool, cool, but what if we're in crisis mode?
Easy day. Remember, your foundation is solid now, and we have freed up some cash flow **insert deep breath**. Pause your debt snowball temporarily, and use the extra cash you've been tossing at your debt to cover your emergency. Tap into your emergency fund if that's not enough to cover it. However, when you tap into the E-Fund, next month's priority is beefing it back up to $1000 first, then resuming your debt snowball. Your emergency just became an inconvenience. Boom!
Step #5: Set S.M.A.R.T. Goals
Specific - Measurable - Attainable - Relevant - Time Sensitive
It would be best if you had at least one short-, medium-, and long-term goal (1 month out, 6 months out, and 12 months out, respectively). Here's an example of a long-term S.M.A.R.T. Goal:
Specific - I want to pay off all my debt
Measurable - Debt = $65,000
Attainable - You bet your sweet assumptions it is!
Relevant - Yes! I value freedom, and I'm not free when chained to debt.
Time Sensitive - 4 years, that's only $16,250/ year if I don't change anything.
By clarifying your values and defining your "why" goals and priorities, you will know how to use your income for purpose while identifying spending inconsistent with your defined values and goals. Feel the stability, feel the wins. I hope these steps will empower you to cut more profoundly than you thought you could, sacrifice more than you thought possible, and DETONATE this debt from your life, FOREVER!
