Business Owner and Creative Explains: How I Paid Off $25k In 5 months...
As a business owner and creative, it’s hard enough to handle irregular income and late paying clients - but when you add a pile of debt to the equation, it’s easy to feel defeated.
So today, I’m going to walk you through a 3 step process that I teach to all of my clients, and that I’ve personally used to pay off debt 25k of debt in 5 months.
My name is Lucas and welcome. I got my first credit card when I was 21. For the next 2 decades I struggled in the longest lasting, worst relationship of my life. Being in debt is expensive, stressful and a huge waste of time, energy.
So let’s take a look at a common way to pay off debt but with a personal approach and as we get started, please know that I’m not a financial expert and this is not financial advice. I share what works for me and my clients so take what you will and remember, your financial choices are always your responsibility - I accept no liability
A Sustainable Way To Pay Off Debt:
The goal is to start small, get a quick win, build some confidence and then carry that momentum towards paying off larger debts. Grab a pen and a piece of paper and let’s get to it….
Step 1:
The first step is to list every single debt you currently have, plus, the total amount that you owe for each one. Put your smallest debt at the top of the list and work your way down to the largest.
As an example, let’s say I owe my sister $300, the bank $3k and my credit card $6k. I’ll put my ‘sis at the top of the list and work my way down. Once you have them listed, take a moment to look them over. How do you feel?
Oftentimes, debt can feel heavy and burdensome. If that’s the case, I invite you to think back to the time and situation that you were in when you first borrowed the money.
As an example, I borrowed from the bank to purchase a car. At the time, my old car was breaking down, so to be able to afford a new one was incredibly helpful. When I look at my current debt from that perspective, paying the money back feels a lot less heavy.
Make sense? This doesn’t take away the debt but it can lighten the load if you’re currently feeling overwhelmed.
Step 2:
Now that you’ve organized your debts, I’d like you to focus in on the smallest one and make it your new goal in life to pay it off, as fast as possible. Put every extra dollar you have towards getting rid of it as fast as you can.
And if you can hold off on the new shoes and bag or that set of wheels and tires you’ve been wanting, temporarily, and focus your efforts on paying off the first debt, all the better.
In the meantime, pay the bare minimum on all of your other debts temporarily. So for example, I’m going to pay the bare minimum to the bank and credit card and get my sister paid as fast as possible.
Once you pay off the first debt, CELEBRATE it. its doest have to be a big celebration - in-fact, when I was doing this, I would yell out ARRIGATO which is Japanese for Thank you.
Why Arrigato? Because I like to thank my money when it comes in and when it goes back out. I learned this gratitude practice from Ken Honda and it makes handling money, including debt, so much more fun. Ken, Arrigato…
The celebration is a simple way to build confidence and momentum for the next debt. And if it’s a large debt that’s taking a while to pay, create some momentum by celebrating each time you make a payment..
Now take the payment that was going towards debt 1, combine it with the payment for your 2nd smallest debt and pay it off as fast as you can. And once it’s paid off, celebrate it!
Why Not Pay Off The Debt With The Highest Interest First?
At this point in the lesson, most of my students will chime in with a question.. “Isn’t it more logical to pay off the debt with the highest interest first? Since it’s costing more money?”
To me, the answer is simple..
Logic cannot account for our emotional relationship with money.. We are highly emotional beings, especially when it comes to debt and feelings of self worth.
The moment we pay of our first debt, we INSTANTLY FEEL BETTER and LIGHTER - that builds confidence, making it so much easier to pay off the next debt. But, when we start with a large debt first, it’s much easier to get discouraged, lose momentum and fail.
Start small, pace yourself, achieve a few small wins and once you have momentum, tackling your large debts will be much easier.
How To Pay Off Debt Even Faster…
Earlier I mentioned paying off 25k of debt in 5 months.. In similar fashion, my client Jake paid of 14k of debt in 6 months and The Jensens paid off a whopping 90k of debt in less than year. So, how did we do it?
We combined the plan that I’m currently teaching you with splitting our money. For a temporary period of time, we make paying off our debt the priority and because of that, it get’s wiped out fairly quickly. If you’d like to learn more, click here to schedule a 1 on 1 call with me and I’ll walk you through a bird’s eye view of how splitting your money and paying off debt can be combined.
Step 3:
Once your two smallest debts are gone, take the payments for those two debts, combine them with your payment for the third smallest debt, pay it off as fast as you can and then you guessed it, celebrate your achievement!
Then, rinse and repeat until all of your debts are gone and once they are, CELEBRATE in a MASSIVE way. In-fact, please comment “Debt Free” so I can celebrate with you.
How to handle Crippling Debt:
And lastly, if you currently have a tremendous amount of debt, $50 or $100k or more, I know it sucks and it can be scary but there is hope. The Jensen’s came to me with $90k of debt. They were embarrassed, scared and hopeless.
Two months into splitting there money and they paid off their first $20k. Five months in and the paid off $45k. I remember that day because we celebrated that milestone together.
If you have a large debt and you’re currently freaking out, I’d like you to consider making it your new mission in life, temporarily, to get rid of it - Put all of your time and energy towards freeing yourself. It’s worth it.
So the 1st thing is to figure out how much you need to live on. List out all of your monthly expenses and and be honest with yourself. If there’s a few things you can do without temporarily, put them on pause. That will free up more money to put towards the debt.
Then, take every other available dollar you have and put it towards getting rid of the debt. It may take a little time to pay it off but if you focus all of your energy towards wiping it out, it’ll go faster than you thought possible.
When I first told the Jensens they could pay off 90k of debt in less than a year they laughed at me. A year later, they took me on an all expenses paid vacation to thank me.
Let’s Recap:
List of all your debts
Pay off the smallest one for a quick boost in confidence
Carry that momentum forward to tackle your second smallest debt
Then pay your third smallest debt
Repeat the process until all of your debts are gone
Celebrate your wins as you achieve them.
If you’d like to learn how to pay off your debt and grow your savings simultaneously without budgeting or cutting back on your lifestyle, click here to learn about The Big Split Method and schedule a free one on one call with me. On the call, I’ll help you identify your major financial leaks, I’ll help you calculate how much of your own money you’ve been wasting (and how much you can keep).
As always, thank you for your time & energy!
-Lucas