Finances

Phoebe’s Finance and Barefoot Investor Learnings – Chapter 3

Now that we have our everyday finances under control, let’s think about debt. I know that the word ‘debt’ makes you just as uncomfortable as it makes me. Home loans, car loans, student loans. That’s what immediately comes to mind when I think of debts.

In this economy, credit cards are the real money suckers. We have been brainwashed to think that credit cards are our saving grace and what the banks say is gospel. Surprisingly, that is one big pack of lies. Credit cards serve almost no purpose in today’s modern world and should only be used in emergencies but that’s what your savings are for. Having a credit card is like having the best night out but the next morning you have the biggest financial hangover that you can’t get rid of. Don’t let this debt control you.

Let’s rehydrate and get rid of that hangover forever.

1. Calculate: make a list of all your debts. Having them physically in front of you will help you to feel accomplished when you cross them off but also see what you have to do to get there. Leave your HECS-HELP debts alone – that comes out of your pay automatically.

2. Negotiate: you can actually negotiate with your bank. Call them and ask for a lower interest rate on your credit card, just to make it easier for you to pay it off. This may not always work but you won’t know unless you try.

3. Eliminate: cut up your credit cards! This will stop you from increasing your debts and help the dominos keep falling.

4. Detonate: make a list of your debts, now from smallest to largest and pay them off one by one – if all the interest rates are the same. If you’re unable to negotiate with banks, Hamish says pay off highest interest rate first and work backward. Up repayments on the smaller debts and consider if you want to use your savings speed up the process.

5. Celebrate: build momentum by celebrating all the small wins! This will give you the confidence to keep going until they’re all knocked down. Train your brain to love being debt free. Once you knock over the first domino, you’re in control.

Hamish Ferguson says that it’s difficult to go through life without acquiring some sort of debt so don’t think that makes you a failure. Be realistic and consider that the ‘debt’ has a purpose but can be dangerous if left unchecked. This domino process is only necessary if you lose control.

Tweak this template to work with your finances and don’t be afraid to ask for help. Having an extra hand in knocking off your debts can make this more manageable and take a bit of the weight off your shoulders. Make sure you can realistically clear your debts in under 18 months. Think about what you can do to make the dominos fall quicker. Can you increase your repayments? Can you afford to dip into your savings to pay your debts off a little quicker? Can you replace it as quickly as you take it? If you’re paid weekly, make repayments weekly. Keep yourself in check. But remember not to stretch yourself too thin; leave enough to function.

Your weekly Barefoot date nights can now become monthly according to Scott Pape. You are well and truly invested in your financial future and on your way to complete financial freedom.

Do you have trouble wrestling the debt demon? Don’t fight this alone! Get some help to get on track. Call Vision Property & Finance today and get your free Financial Health Check. You can reach Vision on 02 8354 3000 for Sydney or 02 4014 1999 for Newcastle.

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The Barefoot Investor

See my other blog posts on The Barefoot Investor here.

 

Are you interested in finding help so you can reach Financial Freedom too? Vision Property & Finance a call on 02 8354 3000 to reach Sydney’s office or 02 4014 1999 to talk to someone in Newcastle’s office. You can also contact us here.

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