What Did They Do 100 Years Ago?

Whenever somebody tells you that you have to have something… or you personally feel that you have to have something… ask yourself this powerful question:

“What did they do 100 years ago?”

The reason this question is so powerful is because it forces you to think outside of modern conveniences and modern “necessities.”

It also forces you to challenge your assumptions about how life is lived — and how it should be lived.

Let me offer you a few examples.

Example #1: Vaccinations

Everybody assumes that all children should be vaccinated. But what did they do 100 years ago? And what were child mortality rates? And how did vaccines impact those mortality rates?

Example #2: Cars

Everybody assumes that a car is a necessity. But is it really? Can you get by with a bicycle or simply walking? What would life look like if you couldn’t have a car?

Example #3: Health Insurance

Everybody assumes that health insurance is a necessity… that you’d be crazy to go without it. But what would your life look like without health insurance? How would you get health care, and how would you change your lifestyle?

My point is that we all make assumptions. Some of them are right and some are wrong.

And we have to be willing to challenge our assumptions if we ever hope to discover the wrong ones.

So next time you’re faced with a decision that involves purchasing something, just take a moment and reflect: What did they do 100 years ago?

The Secret to Getting Out of Debt & Staying Debt Free!

“Without consultation, plans are frustrated, but with many counselors they succeed.” -Proverbs 15:22

If you ever hope to be debt free, you will need the advice and guidance of many counselors.

As I’ve reflected on some of my biggest financial mistakes, I can trace them back to two things:

  1. Impatience – Not being willing to wait for what I want.
  2. Lack of Guidance – Not consulting my trusted friends and family members for their advice.

Often, these two go hand-in-hand. When you are impatient, you will not seek guidance. And, ultimately, your plans will be frustrated.

Let’s say your plan is to pay off all your debt.

But let’s say you also really want to replace your current vehicle with another one.

If you go car shopping just to look around… and you have no solid plan for HOW you will make a decision… chances are your impulsiveness will get the best of you.

You’ll trade your car in, buy a new one, and find yourself upside down on a fat, high-interest car loan. Your plan to be debt-free — poof!

Delayed by a year or two, at least.

That’s what happens when you don’t seek wise counsel from trusted advisors.

When you do take the time to get counsel, you will make much better decisions. Decisions that are in alignment with your plans.

Case in point: My wife and I are actively seeking to move out of our current rental and into a different rental.

Prices range from $1,500 to $2,500 a month.

Our families know us well, and they know our goal to be debt free. So they are giving us sound advice that will help establish our plan. They’re not telling us what we want to hear (“Sure, go ahead and get that McMansion that will make your friends drool!”).

Did you know my WORST financial decision ever can be traced to my impatience and not seeking guidance from many counselors?


I lost $30,000 on that hasty decision.

And I learned not to make that mistake again.

Plus, I’ve seen my brother make similarly poor decisions with his car purchases. He’s bought and sold and bought his way into a boatload (or car-load) of consumer debt. All because he makes spur-of-the-moment decisions, without input from me or anybody else.

I’m not pointing fingers here. I’m just as susceptible as my brother to making fast, “feel-good-in-the-moment” decisions — that I wind up paying for for years.

But I share the example because debt reduction — and becoming debt-free — is a long-term plan. And if you want to see your plan established… if you want to see it come true… then you absolutely MUST seek guidance and advice from many counselors.

More often than not, they’ll save you from a costly decision.

Is Bad News Better Than Good News?

Green with EnvyIt’s interesting.

Whenever I announce bad news I seem to get more response than when I announce good news.

So if I say I’ve gone deeper into debt — or had some unexpected expenses — people respond with sympathy and encouragement.

But when I say I’ve paid down my debt by a thousand or two, there is a noticeable silence.

I mention this because I’ve noticed this pattern not only on my blog, but on other financial blogs as well.

It seems the choir of misery chimes in whenever there’s darkness on the horizon.

But when the sky is bright and shining, the choir goes mute.

I have a theory about this…

Anybody who is in debt already feels a bit of shame and regret for getting in debt in the first place.

And it’s encouraging for an in-debt person to see other people screw up… because… it makes that person feel better, even if he or she is not currently doing anything to get out of debt.

I know it sounds sick, but I think there’s truth in it.

It’s like a fat person chuckling at another fat person and thinking, “Well, at least I’m not as fat as her!”

Of course, there’s an inverse relationship here as well.

When somebody is making more progress than you are, it can be difficult to offer authentic praise because you might be feeling a twinge of envy. YOU should be getting ahead, not that OTHER person!

Said another way: It’s hard to feel good about the success of others when you’re still failing.

Wouldn’t you agree?

Have I hit the nail on the head — or totally missed the mark?

Leave a comment below and let me know.

5-Step System for Paying Off Debt

Help Get Out of DebtAfter reading my update about my Outstanding Debt as of June 2008, Kate left this comment:

I applaud you posting your progress for the world. Have you shared your process yet? If you have, let me know the link, I’d like to read it. So far my favorite has been Dave Ramsey’s debt snowball effect.

I thought this was a good question, so rather than respond by leaving another comment, I decided to respond by writing a blog post.

First, you should know I’ve written three posts explaining my view on how to get into — and out of — debt:

I confess I haven’t studied Dave Ramsey much. But I’m familiar with his concept of the “debt snowball.” It’s the same concept as John Cummuta’s “accelerator margin.”

In both cases, you focus on paying off a low-balance, high-interest card as quickly as possible. Then you take the minimum payment you were paying toward that account and apply it to the next balance.

As each new line of credit is eliminated, the amount of money you can use to pay down debt grows, which accelerates the speed with which you can pay off debt.

While I fully endorse and support this approach, I take a slightly different view because I’m self-employed. I don’t have a regular paycheck.

So the common advice to create a budget and stick to a rigid repayment plan doesn’t work for me because my income fluctuates month-to-month, as do my expenses.

With that as background, here’s the “system” I’ve used to pay off debt since October 2007. This is the same approach that’s allowed me to reduce my debt by 33% in a period of 7 months — from $75,286 (in November 2007) to $50,343 (in June 2008).

Step #1: Commit to Getting Out of Debt

We all get into debt in a similar fashion. It starts with a few innocent purchases and then spins out of control.

In a sense, we are all a bit like the frog who is boiled to death slowly. By the time we realize how hot the water is getting, it’s almost too late!

For me, my commitment to pay off debt began when a credit card company jacked up my interest rate. This alone was bad, but it was made worse because I felt it was unjust.

As I made phone calls and found out how powerless I was, I realized my best and only recourse was to pay off the credit card and never do business with the company again.

To say I was livid would be an understatement.

But rather than internalize my anger, I translated it into a commitment to become debt free — and a virtuous cycle of daily action to pay off debt as quickly as possible.

So the first step for me was making the commitment to become debt free.

Step #2: Get a Grip on Your Spending

I’ve never been an out-of-control spender, but I still had plenty of “fat” to trim from our monthly expenses.

Since I’m self-employed, I have a number of recurring monthly expenses to pay for business tools, education, etc. I examined these expenses first and canceled anything I wasn’t using or didn’t need anymore.

The biggest decision for me was firing my brother. That freed up $2,500 a month. And while this was a difficult decision, it worked out really well for both my brother and for me.

After analyzing the business side, I moved to the personal side. We canceled our YMCA membership. We cut back on our Starbucks visits. And we adopted a mindset of not buying things unless we truly needed them.

So we’ve made some minor (and some major) changes in how we live and how we spend our money. This has freed up cash flow that we now use to pay down our debt.

Step #3: Liquidate Possessions of Value to Cancel Debt

After eliminating expenses and getting a grip on our spending, I focused on how I could make the biggest dent in our debt with as little effort as possible.

The answer: Sell any items that we had used as security for a loan.

Secured loans are usually given for cars and houses. In our case, we had loans secured by a van, a motorcycle, and a house.

So I sold my motorcycle (even though I didn’t want to). And we even sold our house and got a rental near our parents. (We still have the van and the loan attached to it.)

The sale of the motorcycle reduced our debt significantly. What’s more, it freed up $344 a month that can now be used as an “accelerator margin” to reduce other loans.

And by selling our house and getting a rental near our parents, we reduced our housing expenses by at least $100 a month — while getting an extra 300 square feet of living space at the same time.

Step #4: Consolidate High-Interest Debt into a Low-Interest Loan

Personally, I find it very troublesome to juggle multiple credit cards and loan balances. The more of them you have, the easier it is to overlook a statement or bill and get slapped with a late fee and a higher interest rate.

So in addition to paying off certain loan balances, I also consolidated a couple of high interest credit cards into a single fixed interest rate loan from Prosper.

I chose a Prosper loan because it was a fixed interest loan with a firm start and end date.

Although I’m not against zero interest offers from credit cards, I personally choose to avoid them when possible. I do this because zero interest offers come with a whole host of stipulations.

By making your minimum payments, you will probably not be able to pay off the balance by the end of the zero interest period. And if you’re even one day late with your minimum payment, you’ll be greeted with a new interest rate so high it’s criminal.

Furthermore, zero interest offers are designed to get you “stuck” with an even higher balance.

Basically, if you do a balance transfer to a zero interest card, and then continue using that card to make purchases, you become subject to a “hierarchy” of how the balance is paid off.

Every time you make a payment, it will pay off some of your zero-interest debt, but none of the debt that’s accumulating interest charges. So if you transfer $5,000 at zero interest… and then charge $1,000 in new purchases… you will have to pay off the $5,000 balance first before you can pay off the $1,000 balance.

This allows the credit card company to charge you 18% or 25% interest (or whatever) on that $1,000 new purchase balance for a long time.

You can use this information however you want. The key thing is to reduce the number of loan balances you’re paying and to consolidate them (if possible) into lower interest loans.

Step #5: Increase Income & Use It to Pay Off Debt

The fifth and final step of my personal system for paying down debt is to increase income. This is one of the most overlooked but highly effective opportunities for getting out of debt fast.

Basically, I have looked for ways to create more value for my clients, customers, and subscribers. This has directly increased my income during the last six months.

If you have a job, perhaps there’s something you can do on the side to earn a little extra money. You can sell stuff for cash, start a tutoring service, get involved in network marketing, or even embark on a new self-employed service career.

And if all that sounds like too much work, start by holding a garage sale.

Sometimes, all you need to do is take a little step to get started.

The way I see it, every single step in my system is important. But you can only reduce your monthly expenses so much. There is a limit to how little you can live on.

On the other hand, there is virtually no limit to how much you can earn. So Steps #1-4 are more important in the early stages of your debt reduction journey, while Step #5 becomes more important as time goes on.

Because, ultimately, increasing your income could have the largest impact on your ability to get out of debt.

These are the 5 steps in my personal system for paying off debt. Perhaps they will be of help to you as you seek to become debt free.


Check it out… my post “A Brief History of Grass Lawns” was just selected as an Editor’s Choice in the 146th Carnival of Debt Reduction:

Is Debt a Fact of Life?

Debt Money TrapQuestion: Is debt a fact of life?

Should we accept debt as a necessary evil of living in the 21st Century?

I’m not arguing in favor of debt, but raise the question since debt is such an integral component in today’s economy.

Consumption is funded by debt.

Government spending is funded by debt.

Cash is not king in the land of the plastic master.

Nearly everybody would argue for as little debt as possible. There isn’t much good about debt.

But what about some debt?

What about the use of debt in producing profits that exceed the interest, particularly in business?

What about the use of low-interest debt to fund higher-interest investments?

These are real-life questions.

It’s easy to talk theoretically about going “all cash” or spurning all debt. But as I go about my day-to-day life, it seems a bit unrealistic.

Not that I plan to hold onto my current debts. I still intend to pay them off as quickly as possible.

But once they are paid off, I can’t see myself getting rid of credit cards entirely. And from a business and investment perspective, I can’t see myself not using debt if it can be used to gain a financial advantage.

How about you? What are your thoughts?

[Here’s a related post I wrote in October 2007: Is There Such a Thing as Good Debt?]