This is my wife and I in February 2010. We had just gotten married two weeks prior. We returned from our honeymoon and life had just begun. And it begun with $57,000 in debt.
I was a struggling entrepreneur with a spending habit who also owed the IRS $21,000. I was a poor planner so we had another $7,000 in medical bills. I was impatient so we had $15,000 in credit card debt. I “needed” a nice car so we had another $14,000 in automotive debt. As for savings, we only had $1,000 and would regularly borrow money from our parents.
Our monthly debt payments were almost $2,000. That was 34% of our income at the time. But this was okay, right? Most young people have debt. School debt, car debt, credit cards… this was all normal.
Wrong. Debt is common. But it’s NOT normal.
Normal is not spending more than you make. Normal is having the self-control to manage your money instead of it managing you. Normal is being responsible and patient enough to build an adequate savings account. Normal is having the ability to eat out, treat your friends, give to charities, and have choices.
On the contrary, Poor is common. Debt is common. People hating their jobs, getting divorces, losing their houses, borrowing money, having no savings, and wishing for a better life is common.
But I was determined our life would NOT be common.
It began with an email from a mentor who wrote me this:
“Dale, after talking about your financial goals I need to be real with you… You’re a fool. You’re acting like the poor and expecting to be wealthy. You hide behind excuses and think money is a mind game. Dale… money is a behavior game. You need to change your behavior. And fast.”
I felt embarrassed. I felt stuck. I needed to change our behaviors with money immediately. It reminded me of the famous Dave Ramsey quote, “Act your wage.” And so it began.
We sold everything we didn’t need. Ate at home almost every night for two years. And I focused on building a more lucrative business to double or triple our income.
Fast forward 5 years, and my wife and I have zero debt. We own a few small businesses, I write books on entrepreneurship, our savings is in the six figures, our 7 acre ranch in Central Oregon is paid off, and our income ranges from $50,000-$130,000 per month. We travel when we want. We give to causes we care about. We have money saved for our children. And we did it all before I turned 30 years old.
After looking back, here are 4 steps everyone should consider taking on their journey to become debt free.
1. Start A Business Immediately
If you want to remove debt quickly, you have to figure out how to at least double, if not triple, your current income. In most cases this requires creating another income stream. In other words, you have to start your own business. It doesn’t have to replace you career (at least for now). Instead, think of it as a hobby business. Maybe an Etsy shop for your art, or a consulting business on the side, or an online store.
Regardless of what idea you pursue, it’s this behavior change that will fuel your entire debt-free mission.
But I know what you’re thinking… I don’t know how to start a business. Or, I don’t have a good business idea. Or, I don’t have the time or money to start a business.
Luckily, I’m in the business of helping people start their own business. If you want to be wealthy, you must know what the wealthy know. You must think like the wealthy think. This requires a season of learning. There is no better investment you can make than learning how to make more money. And the best part is, you can afford it. Here’s how…
2. Say Yes To Education & No To College
40 years ago we had a great education system. Learning was affordable and employers offered higher paying jobs to those with degrees. Not anymore. The average annual college tuition is over $50,000 per year and employers are measuring candidates less on a degree and more on portfolio, knowledge, and experience.
Young adults need to start thinking for themselves instead of enrolling because “my parents want me to have a degree”. Furthermore, it’s putting our young people in massive debt. Two thirds of the graduating population to be exact. School loan debt now ranks #2 at $1.2 trillion only to be surpassed by mortgage loans.
While a degree no longer assures a job, it almost always assures debt. I’m not saying college is never an option, but if you can’t pay for it cash, it’s shouldn’t be. As of 2014, 44% of college graduates are at jobs that don’t even require a degree! If you’re not a doctor, lawyer, or some rare municipality, think hard about saying yes to what could be the biggest financial mistake of your life.
3. Stop Thinking Like The Poor
Broke or poor—what’s the difference? Poor is an attitude. It says you can’t get ahead and you’ll never win with money. Just stay where you are and sulk in your bad luck forever. Poor people believe, “I’ll save when I’m making more money” or “my car is an investment” or “that vacation we can’t afford is worth it because it will let our family bond.” In a recent study of poor communities, researchers found the following:
- 87% of poor people think you must be intellectually gifted in order to become wealthy
- 90% of poor people think fate determines your wealth or poverty in life
- 18% of the poor think they are the cause of their financial condition
- 77% of the poor think lying is a prerequisite for accumulating wealth
- 90% of the poor think rich people are rich because their parents were rich and they inherited money
Broke on the other hand is something you’re just passing through. We’ve all made some bad money decisions over the years. The turning point comes, however, when you’re willing to own up, claw your way out, and never allow poor thinking to happen again.
You own your story. You own your own mind. Poor is a choice. But so is wealthy.
4. Baby Steps Are Big Steps
Murdering your debt may be one of the largest mountains you ever climb. The deeper issue found in people who get stuck is two-fold: They don’t plan. And they aren’t consistent.
You don’t conquer mountains without a plan. Furthermore, you can’t stop when you’re tired.
A trick I learned while killing off our debt was to post all of the debt, how much we’ve paid off, and how much we still owe on a piece of paper on our fridge. I also added goal dates next to each category. As humans, we all have a need to see our progress. No one likes to feel like they have worked hard while not knowing how far they’ve come.
Remember this, debt is like dieting. If you fall off the wagon for one payment or make a bad spending decision, you just need to get back on. It’s not about big leaps, it’s about a consistent plan of baby steps.
How much debt do you have? Is starting a side business an option for you? What about college can you quit or not go at all? What’s your plan for thinking like the wealthy, creating a plan, and staying consistent? Let me know in the comments below.
The post Top 4 Ways To Become Debt Free By Age 30 appeared first on StartupCamp.
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