Читать книгу Sort Your Money Out - Glen James - Страница 24

Did you know it's not your intelligence or logic that got you into debt to start with? It was your habits and behaviours. It's not smart or logical to have debt for stuff that you consume and then have the pleasure of paying interest on it while tying up your cash flow and adding extra financial stress to your life. I am aware that people can end up with debt due to a situation outside of their control. But I am about to have a go at the former category of people (intelligent and logical). I feel I need to be a bit brash when talking about the debt snowball strategy because it may feel like it conflicts with your own intelligence, logic and reason. So I need to get your attention.

I am about to ask you to pay off your smallest debt first, regardless of the interest rate.

Now, you might be thinking that it doesn't make sense to pay off the smallest debt first if it has a lower interest rate than another debt. Truth is, it makes no sense to have debt and be paying interest on debt in the first place. Look at it this way: your way of managing money clearly hasn't worked so why not try my way … insert smiley face here, and so on … If you're offended, please film yourself burning this book and tag me. If you're not offended, I'll try harder next time. I need you to be encouraged so that you don't give up. That means getting some emotional wins along the way. Your (not-so-good) habits and behaviours likely got you into debt, so we need some (good) habits and behaviours to get you out of debt. Intelligence and/or logic clearly didn't get you into debt.

I know that other finance books and money people may tell you to arrange a credit card balance transfer to save interest, or to use a script to call companies and negotiate interest rates on loans. While that's cute and you're free to do this, I'm more interested in changing your underlying spending habits and behaviours. The danger with the balance transfer or negotiation approach is that you use energy and effort to make these changes thinking you've done something awesome when in fact all you've done is moved the debt. But you haven't addressed the underlying problem. You've either just moved the debt or tweaked an interest rate, but the debt is still there. It's not the interest rates and interest payments that are the problem. The problem is that you didn't have a good spending plan. Or, to put it simply, your overspending is the problem here. I know this sounds harsh because often our money habits and behaviours have been handed down to us during childhood. But while our financial past certainly doesn't define us or our future, we need to own our mistakes and take responsibility for learning and improving.

Now let's take a look at how to get out of debt using the debt snowball plan.

Here's a practical example.

Use this space to write your debts down from smallest to largest along with the minimum monthly repayment for each. If you have an ‘interest free, no-money-down’ debt, find out what the minimum payment is if you were to start paying it down now or what it will be when the payments are due to start. Remember, don't cheat and add this last because of the 0 per cent interest. Your way of managing money hasn't been great so far, so don't get cute with me now!