Ditch Debt with a New Mindset
For one moment stop thinking about what you need to ‘do’ in order to ditch debt, and focus on the way you ‘think’ about money. If you’re busy making excuses as to why you’re in debt, then that is wasted energy. How about putting that brain power towards taking action and changing your financial future! Here are the four main excuses we hear from callers during their initial consultation, and how you can combat those thoughts of hopelessness:
I’m not good with money
Saying “I’m not good with money” is a massive cop out. It lets you off the hook for your financial problems. Being good with money doesn’t require some amazing mathematical ability or amazing financial knowledge. All ‘being good with money’ requires is spending less than you earn, and investing what’s left.
I don’t make enough money
If you’re working you can build wealth. All that is required is to spend less than you earn, then invest whats left. Many people have built large fortunes living modest lives, on modest incomes. People like Ronald Read who worked as a janitor and accumulated $8 mil in stocks by the time he died, which he donated to charity. Small amounts invested over time add up to big amounts. $200 invested weekly over 25 years in an ASX 200 index fund, given historic returns, would return $1.06Mil. You need to crush your expenses to generate excess income and then use that excess to smash your debts. When the debt is paid off, direct those funds towards investments.
Debt is normal
If everyone you know is complaining about making payments on their car loan and credit card debt, debt may seem like a perfectly normal part of life. When you look on Facebook everyone has a new car and is going on an overseas holiday, but its all funded with debt. Debt is not normal if you don’t want to be broke forever. Have the courage to be abnormal, ditch debt and be financially fit.
Banks will only lend me what I can afford.
Banks have no idea what you can afford. Strong privacy legislation in Australia prevents banks from knowing much about you so they make an educated guess as to what you can afford. They do pretty well about 97.5% of the time, but if you’re the 2.5%, they guess wrong you’re in a bunch of trouble. Banks also have a different definition of the word “afford”. They mean you can afford to pay them back, but its probably not going to be the best thing for your long term financial health.
Being frugal is no fun.
Yes, being in debt is bad but sticking to a budging is BORING! The sad thing is that people tend to equate fun with spending money, that there can be no fun without removing a credit card from your wallet. The truth is that the best things in life are free, or at least cheap. The most fun we have is when we do things with friends and family. However it is not the activity, it’s the time that’s important. You can have just as memorable evening with a cheap bottle of wine and a board game than dining at an expensive restaurant.
It might seem hard to change an ingrained mindset, but consider much you want to reach your goals and where you want to be in 5 years. Every time one of the above negative excuses enter your head, replace it with a positive thought. This will benefit your happiness, savings and ditch your debt!