Why You Should Treat Debt Like An Emergency
Whenever most people talk about their finances, they’re interested in investing in the stock market or real estate. It’s fun and exciting to be an investor. After all, who doesn’t want to have their money making them more money?
But as the legendary college football broadcaster Lee Corso says, “Not so fast, my friend”
The reason to slow down is that when I get to know more about someone’s financial situation, I usually find out that they have debt. Sometimes large amounts of it. And worst of all, often at high interest rates.
To me, folks with heavy amounts of debt, at high interest rates, don’t need to be worrying about investing right now. They have a more pressing emergency on their hands: their debt.
Why is this such a priority for me? Because many people are nonchalant about their debt. It’s been around for so long, and the balance is so large, that they think they’re just going to die with debt. It’ll always be there, so why even worry about getting rid of it?
But that is the wrong attitude to take. I think the better attitude is to treat your debt like an emergency, something to eliminate as quickly as possible.
Because debt not only hurts you financially, limiting your cash flow and depriving you of the ability to save and invest. It also takes a heavy toll on your emotional health, leading to depression, anxiety, and stress.
In other words, debt can lead you to less wealth and worse health. Sounds like a losing combination, and one I hope you’ll avoid.
Just imagine what life would be like without any debt payments. What would you do with the extra money that you’re currently spending on your credit cards, student loans, or car payments?
What would it feel like knowing that you don’t have thousands of dollars of debt hanging over your head? How much less stressed would you be? How much happier would you be?
Yet once you’re on board to treat debt like an emergency and eliminate it quickly, how, exactly, do you get rid of it?
Try using something called the debt snowball
This is a method made famous by Dave Ramsey, a personal finance guru. The debt snowball steps are:
1: List your debts from smallest to largest (but don’t include the mortgage).
2: Make minimum payments on all your debts except the smallest.
3: Pay as much as possible on your smallest debt.
4: Repeat until each debt is paid in full.
I love this approach for its simplicity and for its focus. As I’ve written about before, if you’re having trouble making financial progress, try focusing on one thing at a time.
Using the debt snowball will allow you to focus on one debt at a time, and start making meaningful progress toward eliminating your debts.
So I would really encourage all of you, especially those that have lots of debt at high interest rates, to start treating your debt like it’s an emergency. Get it out of your life as soon as possible. Free up your cash flow and give yourself one less thing to worry about.
It’ll be hard, but well worth it.
If you feel like you can do this on your own, awesome! But if you need help organizing and eliminating your debts, I’d be happy to see if we’re a good fit to work together. You can email me at scott@dev-forthrightfinances.pantheonsite.io, call me at 424-258-4460, or contact me here.