I was first introduced to the books, Rich Dad, Poor Dad, by Robert Kiyosaki and Think and Grow Rich by Napoleon Hill during my sophomore year of college.  After reading these books, I knew I was going to be independently wealthy and not live an ordinary life in the rat race.  I would become a real estate investor and own hundreds of homes and apartments across the country.  Fast forward a decade and I was nowhere close to that.  

Actually, I was in the opposite position.  In June 2015, I received a wakeup call.  I was $60K in debt from a car loan, several credit cards, and student loans from my shiny new graduate degree.  

I had fully embraced the consumerism lifestyle and drifted mindlessly through life waiting for my next paycheck so that I could buy more stuff that I didn’t need. 

On this summer day, it was different though.  It was different because I needed to decide, would I choose financial freedom or my instant desire.  

My graduate program invited me to participate in an educational excursion to South Africa.   Yes!!! That would be so exciting.  I’ve always wanted to go to Africa. Total cost was about $3500.  The question was how was I going to pay for it?  

Would I use a portion of my savings or would I easily add another $3500+ to my debt?  

Would I choose my dream of being a real estate investor or satisfy my urge to visit the motherland?

After pouring over my finances and coming to terms that I DID NOT have the money, I made a decision that changed the course of my financial journey forever.  

Here’s how I paid down the debt to make room for my dreams. 

Shifted My Mindset to Focus on My Dream

The first step to any change in your life starts with a decision.  My decision was to demonstrate delayed gratification for this trip.  I won’t lie and say that it was easy; that I didn’t really want to go.  I really wanted to go and I was upset with myself because my lack of discipline put me in this situation.  However, my compromise was that after I paid my debt I would go to South Africa.

I had to associate so much pleasure in paying down my debt that waiting to travel to South Africa became a non-issue.  Next, I associated pain with keeping the debt and continuously having to work solely because I couldn’t control my desires.  

During this time, I also started to look around my home, and I saw massive amounts of junk that was once money or credit that got me to this point.  I started to feel disgusted with all the stuff that I purchased that I didn’t love.  I had a whole room that I rarely went in –  just full of stuff.  All of that used to be money that I now have to pay back.

Action: Decide that you want to change and state why.  Associate so much pleasure to reaching your goal that anything outside of that is painful to do.  

Note: Tony Robbins discusses the pain versus pleasure technique in great detail if you are interested in learning more.

Developed A Plan I Could Live With 

Now that I knew what I wanted to do and why, I needed to develop a plan on how to get there.  The first step was to get real with my financial situation.  This meant I had to face the damage I created.  So, I opened up an Excel workbook, listed all of the debts with the minimum payment, outstanding balance, and interest rate in a column and added it up. 

After I exhaled at the large amount of debt incurred, I chose the snowball method to pay it off.  For this method, you pay off the debt with the smallest balance first and make minimum payments on the remaining debt. Once the smallest debt is paid off, you reallocate that money to the next debt.  

While this is not the most cost-efficient way to pay down debt because you are not paying off the debt with the highest interest rate first, this method provided the momentum I needed to keep going.  As I paid off each balance, I took joy in watching my balances steadily decrease as I dropped large payments on the debt.  

Once I decided the payment method, I needed to determine how much I could pay monthly.  To maximize my payments, I did the following: 

• Stopped contributing to my cash reserve 
  • Popular financial experts will encourage you to have at least $1,000 saved in your emergency fund before you start tackling debt.  However, I had more than that and I encourage you to do the same.  Strive to have at least 2-3 months of living expenses set aside just in case there is an unexpected expense or lack of employment. 
• Reduced my 401K contributions to only the employer match.  
• Consolidated some credit cards to a zero percent interest card. 
• Established a small budget for fun and entertainment.  
  • This plan was going to take over a year to complete.  For this process to be sustainable (for me), I had to set aside a small budget for personal entertainment and expenses.  I knew that the beans and rice method was not going to work for me.  

Action:

• Save at least a couple months of living expenses and contribute only to the 401K match.  
  • You cannot afford to give away free money from your employer.  
• Develop a plan that you can commit too and not suffer through.  Sacrifice is required, but select a plan that is sustainable. 

Reduced the Convenience and Returned to the Basics

I had to take a hard look at my expenses and re-evaluate my lifestyle.  Before this epiphany, I purchased everything I wanted, with no regard to how it impacted my financial goals.  This had to change.  Everything was negotiable.  

The first expense to go was the cable bundle which included internet, phone, and TV.  I switched to a new provider with a low introductory rate and only purchased internet.  I also used an antenna to watch local TV and Amazon Prime to watch movies.  (P.S. You actually receive a lot of channels for free with just the antenna.)

Next, I scaled back tremendously on food purchases for groceries and restaurants.  I began meal prepping my lunch each day and reduced my grocery bill to $150 a month.  

I had to live with the current clothing in my closet (which was more than enough) and travel was basically non-existent.  

I also reduced my cellphone data plan to 1GB and try to use Wi-Fi as much as possible.

Action: 

• Interrogate every expense.  Ask yourself if you REALLY NEED it and if so, shop around to find the best deal.  
• Meal prep to avoid spending money on unplanned food purchases.  
• Get creative with your current wardrobe. Mix and match. 

Directed Additional Income to Debt Repayment

Because I was committed to my goal, any extra income was immediately applied to the debt.  This accelerated my payoff date because it was not included into the original plan.  At the beginning of the year, I received a cost of living increase from my employer. Instead of using this extra funding to enhance my lifestyle or restore items I had turned off, I directed this money to my debt.  I used the same process with my tax return.  

I also sold old books on Amazon at a discounted rate to recoup some of the money spent.  

Action:Avoid lifestyle creep when you receive unexpected income.  Reallocate this funding to your debt to accelerate the payoff.  

Stopped Using Credit Cards and Started a Cash Diet

I had to stop using credit cards to support my lifestyle and only pay with cash.  Now, I would still pay my bills online or use a credit card to hold purchases such as a rental car or hotel, but other than that, it was cash. This is CRITICAL.

Cash will make you re-evaluate everything.  It will make you tally up your groceries before you checkout so that you do not embarrass yourself.  You will begin to question how much retail cost and if you really NEED this item right now or if it could wait until next month.  Cash forces you to stay within your budget because once it’s gone, that’s it. 

Here’s the thing, you cannot expect a different result by doing the same thing.  Using credit cards without any restraint, got me into this place so I had to stop using them.  No more swiping the card for cash back or store rewards points.  That wasn’t working for me and if you are in thousands of dollars of credit card debt, it’s not working for your either.

Action:Use Cash.  Label some envelopes with a description of what the money should be used for and leave your credit card at home.  Cut up your credit cards if you need to.  Avoid online shopping where your card is automatically saved in your profile.  

Final Thoughts:

After 18 months, I had reached my goal and was on my way to purchase my first rental property.  (Blog post coming).

Making the shift from mindless spender to conscious money manager took some work, but it is achievable. Not only for me but for you as well. Implement the steps above and be amazed at how quickly your financial situation will turn around.  

Not only will you have more disposable income, but you will BECOME financially mature with your decision making and more intentional about where and how you spend your money.  

Lastly, if you want to accelerate the payoff, consider a side hustle that will help pay off your debt. 

Keep me posted on your journey.  I would love to hear what steps you are implementing and the progress you are making. 

Now that’s getting your FINANCES ON POINT.