Dump Your Life Sucking Debt

January 18, 2017 by Jason Smith

Your debt is a measure of how much of your future time and money is owned by someone else.

Debt is spending your future resources of Time and Income to have material possessions today that you cannot currently afford. You are attaching your future dollars to someone else.

Consumer debt is a harmful tool. As long as you have debt there will always be someone telling you what you have to do with your money. Debt also reduces the value of your time. If you finance something, say a $100 toy on your credit card, you will need to work long enough to not only pay for the toy but also the interest. Someone who saves up to buy the same exact toy will not have to work as long because they will not have to work to cover the credit card interest.

When you carry debt everything you buy has a premium. If you have $35 and you spend it on going to dinner and you have a credit card balance at 15% you choosing to use that money on dinner as opposed to paying your debt means that dinner cost $35 + 15% interest.

Whenever you have debt you are exchanging your future time and money to have something you can’t afford now.

Improve Your Life or The CEOs

Interest payments just flow upward to the financial CEOs. Would you rather be spending that money on improving your own life and not that of already rich CEOs?

Helping Banks Cover Losses

If you have a loan and you make the payments on time until the loan is paid off then you have helped cover the costs of those you default or skip out other loans. When you get a loan, a bank estimates how many people in your group (similar FICO score, income, location,…) will not make payments and takes this into account when determining your interest rate.

What Debt to Pay off First

Organizing your debts will be part science and part feeling. The most logical thing is to pay off the highest interest rate loans first. Thing is logic did not get you into this mess and logic may not be enough to get you out. So we created some guidelines that will help you order debts.
Order For Success – This is more of a rule than a guideline. Your debts need to be order in such a way that gives you the greatest chance for success.

There are generally 4 schools of thought on how to order your debts Emotional, Psychological, Mathematical, and Safety (Risk Elimination). Each method has its advantages and I will cover all four however if we were to only look at statistics most people will have the greatest chance of success with the psychological method. Thinking logically is not what got you into this mess and trying to find a logical solution out of it will be tough uphill battle.

You do this by picking a couple of your debts and placing them on top. These could be the lowest balance so you can say you paid off some accounts. Maybe you have some loans that irritate you for some reason. When these irritating ones get paid off you will gain some confidence to help you continue to the end.

Emotion vs Math

The shorter time to pay off debt or the harder you hit paying off your debt the faster it will happen and the less significant the interest rate, or the mathematics, will be.

My thoughts – we need to change your mindset and your behavior. Debt and dieting are so very much the same. We all know that if you spend $500 this week, and only make $400 this week, you will get I trouble. You also know that if you take in 2,000 calories today, but only burn 1,500 calories today, you will gain weight.

Like it or not humans get themselves into trouble with their money and weight when they act like lower species of animals than the (thought provoking, higher thinking? think of of something intellectual here) that they are fully capable of being. We do not get into trouble because before we eat or spend money we mis-calculate the numbers. We get into trouble because we ignore the calculations, the numbers, and the advice we have heard for years and just do whatever the hell we want. We skip the thought process and go straight to impulsive, reactive behavior that most animals in the wild depend on to survive. Here is the problem though, we are not in the wild. We are in a (mostly) civilized society and if you want to survive he you had better start thinking.

The real reason I got my finances in order though is because I wanted to go even further than just surviving. I wanted to prosper, I wanted to retire early, I wanted my family to be safe, stress free, and truly happy. And just like me if you want to do more than survive and get into prospering, we need to change the way you think and behave. We need to change your mind set.

If you are willing to do that then let’s get to how you need to be thinking and what things you need to start thinking about.

Things like better values, higher goals, child to adult, maturity, legacy, your kids want you home but you need to keep the roof over your head first, kind of stuff.

Let’s face it, the chances of you or I waking up rich one day is pretty slim. So like it or not financial freedom will take time. Though it takes less effort and no planning huge debt usually takes time to build up also, each day you work on debt or wealth. Each day you wake up ask yourself which direction you want to go in. Do you want to go deeper into debt or climb closer to financial freedom (a positive net worth).


You would pay off the highest interest loan first and work your way through.

Interest Rate

Keeping the credit cards on top, place the loans in order of interest rate from highest to lowest. Paying off the highest interest rate first means less of your money goes towards interest.

Emotional Method

The emotional method tries to create milestones that you can successfully achieve as fast as possible maybe even within a few months or weeks. Remember each time you achieve a milestone you will feel better and push harder to achieve the next.

So with the emotional method:

  1. Take all your debts
  2. Place them in order from lowest balance to highest balance
  3. Move any particularly irritating debts to the top
  4. Pay the minimum on each account
  5. Take all your extra money and put it towards the debt at the top of the list
  6. When the debt at the top gets paid off move all your extra funds to paying off the next debt in the list

I recommend taking the emotional path. Once you have a few achieved milestones and you have that fire inside you are welcome to move the debts around in the list. But never at any point ever decrease the total amount you pay to the loans until they are paid off. If anything, continue finding ways to increase the amount you use to pay off debt.

Psychological (Debt Snowball)

Just explain Debt Snowball and why it works for some.

Emotional vs Psychological is emotional moves any “emotional” debt to the top.

Placing your account based on interest rate makes the most mathematical sense. However since we are all human you may want to place the human factor into your list.


Suze Orman is a fan of this method and generally involves paying off debt that has the most danger attached to it. For instance student loans cannot be discharged in bankruptcy so she suggests getting rid of this debt as soon as possible.

Credit Does Not Equal Affordability

Your FICO score is a measure of how well you play the credit game. And it doesn’t measure your success, it measures how dependable you are making creditors rich.

Many people today appear to believe the first step in adulthood is to build good credit. Parents actually encourage this by getting them a credit card. Your credit score is entirely determined by how well you borrow money and the single biggest reason for caring at all about a credit score is so you can borrow money.

In today’s society so many believe the question “Can you afford this?” is identical to “Do you have enough Credit?” or “Can you afford the monthly payment?”

Stop allowing banks and creditors determine if you can afford something. Doesn’t that seem like a conflict of interest? I doubt the banks interests are in line with yours and a bank or creditor’s definition of afford is closer to “When this person doesn’t pay can I sue and garnish their wages?” Is that really how you want affordability to be determined?
If you are sewed and they win, in many states they can garnish 25% of your wages. That is redirect $25 for every hundred you make directly to their pocket before you even get your paycheck.

Look at these statistics from an NPR story in Sept, 20141.

  • “For workers earning $25,000 to $40,000 a year, more people were garnished for consumer debt than for child support.” NPR
  • “Only 7 percent of defendants in debt collection cases have their own attorneys.”
  • “In 2011 more than 100,000 such suits were filed in Missouri alone.”
  • Only a handful of states have significantly reduced or ban the practice of wage garnishment.
  • Sadly in today’s society with easy credit and loans it has become more important to have good credit then have a savings account. It has become to easy to spend more than you earn.

On top of that it is often a very slow process taking years to dig a debt hole large enough to create serious problems. By the time people realize the cost of breaking this rule they have dug a hole so deep it will take years to climb back out.

Protecting Your Credit

Our goal is to never need credit and credit is only really useful if you want to borrow money. However you should still protect our identity. Which is why we recommend getting your free report a couple times a year.

FICO Score

Your FICO score is an indication of your creditworthiness, and the range is from 300 – 850. The higher the score, the better credit risk you are. You will qualify for lower interest rates and be granted credit more than someone who has a lower rate.

Your credit score is a measure of how well you are funding banks and other creditors and the executives who run these institutions.

Think about it this way. For every dollar you spend in interest is the fee for having a credit score.

Your Free Credit Report

You are entitled to receive a free copy of your credit report once a year from each of the three credit reporting services: Equifax, Transunion, and Experian. You can obtain your report by going to www.annualcreditreport.com.

Each time you get your report you can choose which service you get the report from. This allows you to get your report every 4 months by simply selecting a different service each time you request your report.

You are often asked if you want to get your credit score for a fee. This is up to you. I would just recommend looking at the fine print to see if it is the FICO score. The FICO is the standard credit score and the last few times I got my free report the credit score being offered was not the FICO.



Sell It If You Owe On It

Do you have any secured debts, which are those debts attached to an item such as a car, boat, or quad runner? Do you have luxury or ‘fun’ items that you don’t need, such as a timeshare? Depending on how much you owe on them these should be sold and the debt paid off.

But I can’t get enough to cover the debt?

If you owe $5,000 on a small boat that is only worth $4,000 you can pay off the whole $5,000 over the next few years or you can sell the boat and pay off the $1,000 difference in a few months. Which option will get you to your vision of a better life quicker?

Not wanting to sell the boat is living under the mindset that got you into this trouble. Think about what selling it means. It means not having to pay $4,000 more, it means paying less interest, and it means achieving your vision even faster. If you are serious about changing your life, to live the life of your dreams, the boat needs to go.

You need to look at this boat like a roadblock preventing you from getting to your destination, not as a $1,000 loss. The loss has already happened. Whether you sell that boat or not you still will pay that $1,000 loss in value.

Sell It! (the car)

Cars are often a necessity however a new car, an expensive car, or an SUV or other high operating cost vehicle rarely ever is.

If you have a car payment that has 2 or more years of payments left, consider selling it. If the car has more than 4 years to go, you need to sell it. If your cars have a value of more than 30-40% of your gross pay, sell them and get cheaper cars. Use that money to pay down your debt. Be honest with yourself about whether your cars are out of your price range. Think about this – does a $20,000 car have any real practical value over a $10,000 or even a good priced $5,000 car?

“If you are having a hard time with selling something, ask yourself ‘Is this worth more to you than accomplishing your vision?’”