Understanding Debt

organizational-debtHere’s the deal. There is a lie that is being told about money in North America that needs to be exposed.

Every part of the countries we live in believes that the way to live is to beg and borrow until you have achieved the standard of living you desire. The problem with this is that you never stop to actually breathe and be fully present in the few days we are given.

Think about it – the driving force behind how we survive is money – and more importantly, how we don’t have enough of it. Marketing companies will do everything they can to make you believe that you need a product, and better yet, one that you really don’t have a use for. Have you ever bought a product and then instantly felt buyers remorse? After a while, that feeling goes away, but especially on big purchases — you begin to feel like you could have spent that money on something different. I know guys who have AMAZING computers – to surf the web…..

The average person in the United States works more than 30% of their lives — and you can always work more – get a second or third job, all in an effort to get the money we absolutely need…?

It’s crazy. Debt is one of the leading ways people get into these messes. They take on homes or lifestyles that they can not reasonably support. Sometimes it’s in an effort to impress someone or some group, but most of the time I think it’s about how we perceive ourselves.

So when you hear about the new car dealership who is offering sweet deals on luxury cars, why do you think it appeals to someone? And if it appeals to that someone who can’t afford it…. they will work on the financing (debt) to get it in your possession. The problem with debt is that when you buy something with credit (on someone else’s dime), you don’t actually own it. Whoever lent you the money is the rightful owner – until you pay them back – usually with interest.

So now you’re not going to work to make a paycheck — now you’re going to work for them – because you told them you would pay them back in a specific time period — so you have to come up with that money — likely at a job.

So when you see someone driving an expensive car or living in large homes — remember that they likely don’t actually own it. They are borrowing it from someone who is getting rich off of them so they can use that item.

Simply: Why do you want to live your life for someone else’s gain? Doesn’t that just sound awful? I had this realization a few years ago and my wife and I started working hard to pay off our debts. It’s crazy to think that we go to work each day to pay other people for choices we made. There are a lot of studies too that show the wealthiest people have very little or no debt. They operate within their means, save and only buy things they can truly afford.

So the next time someone offers you a credit card to pay for something – scream and run. Focus on getting rid of your debt first — then your life can truly begin.


Why Budget? A confession about my Debt


budget-stock-photoBudgeting has become a lost art. Our parents and grandparents generation did it because they had nothing. Granted, prices weren’t quite as high as they are now, but for those who grew up in the depression, they knew that everything had value — every piece of paper, every twist tie, every scrap of fabric.

There is a sickness in North America. The want to need everything we set our eyes on. We will justify it many ways, but overall – it’s a sickness that isn’t getting a whole lot better. Marketing companies are experts in getting you to see a product and make you think how it will change your life – and if the marketing people are good at their job, you won’t even need the item to begin with.

So why is budgeting important?

Budgets are more than just learning how to not spend money. It teaches us several things about our way of life, our understanding of funds and ourselves as humans. Maybe we think we need a new car, or perhaps a car that will make a better impression to our clients. Maybe we think that our computer is too slow or our phones are too old. Maybe we think we need to “just get away” and go on vacation for a while. The problem is, regardless of our reasons, we have to understand that if we choose to go to the left or the right, these decisions greatly impact our budget. Every time we grab a coffee at Tim Hortons (for you Americans, a better Canadian version of Dunkin Donuts), every time we upgrade our phone or every time we buy things at the grocery store that are not on the planned list – we spend money that could be used elsewhere.

My wife and I started seriously budgeting WAY too late into our marriage. Almost 6 years went by before we both got seriously invested in our finances. I started listening to Dave Ramsey a little and wondered what about his message was so profound that thousands of people sing his praises. Now, Dave is a good salesman and he says that if you don’t go into his program, you are sure to fail (or at least it’ll be really difficult), but the truth is, his fundamentals are very simple. Get rid of debt, build an emergency fund, spend way less than you make and save, save, save. (Rocket Science, I know).

Now he has some things to say after you get out of debt, but the biggest problem right now is debt. Our countries run on debt. Even the governments are spending WAY outside their own means – which sets a bad example for the people living within the countries they govern. My wife and I were working full-time jobs and barely making it work. I couldn’t figure out where all our money was going. How were we bringing in all this cash and NONE of it was available? Well, it turns out, we were spending it all on debts and just treading water. If something broke (the car, the house, our immune systems), we had to take a hit or ask a favor from our families. It was a bad situation.

Dave and I fully agree that you have to get out of your debt first. There is no other greater hindrance to your wealth than to get out from under those who are holding you down – and I will tell you from first-hand experience – there is nothing more difficult than getting the snowball rolling. We looked at our debts, and there were many – and decided that we wanted to attack the smallest one first. We sold, begged and stole (just kidding about that last one) everything we needed to get out of that first, small debt. I think the interest payment was $24. The next month, we took that $24 and put it on the next smallest one. 3 months later, that one was gone, and we could put the whole snowball on the next one – and so on.

Now, I will admit, the budget got real tight – because every spare dollar we got went onto that debt snowball – but after 5 or 6 debts got paid off – we were rolling $700+ every month onto large debts – cutting into them quickly. Suddenly, we had a small emergency fund and things were better. Road bumps came up and the E-fund took care of them while we kept rolling funds on top of debts. It’s a great feeling cutting down debts – very freeing and you have no idea how free you become once you get out of credit and debts.

We still have big school loans and a few medical debts we owe – but we are making serious progress. We’ll be out of $50K of debt by 2020 (it’s not that far off).

Budgeting allows you to pay off debt and move forward with your life. If we didn’t start seriously budgeting, we would still be wondering where all our money was going. It gives us a CLEAR understanding of our funds and allows us to make wiser choices about our spending and our savings.

So, you’ve heard my story. What are you going to do about your own debt?

Here – let me give you some direction. Look on Google Docs for budgets templates that people have already made. Don’t start from scratch – there are lots of great FREE resources you can find to help you get out of your debt and onto living. Also look for “Debt Snowball calculators” to estimate payment options to get out. This will give you a clear indication where to start paying your debts off. Start now and the journey will soon be well underway. It’s crazy rewarding, I promise. Tough? YES! Rewarding? You have no idea.

Click this link to start looking for Google Doc Budgets.