Have Your Mondays been feeling blue?
Halloooo there,
Thank you for all the fabulous Birthday wishes and I’m thrilled so many people are choosing to accept my gift and are giving their money a big sexy makeover to get this year on a super wealthy track. If you haven’t yet jumped in, you can still do so. Just click here and get your Money Makeover started.
So back to the Blues!
Blue Monday, aka the most depressing day of the year, usually falls on the third Monday in January , the week past!
It’s supposedly the day when the reality of overspending, over indulgence, over everything of the festive season dawns on people.
The arrival of credit card bills, cold grey winter weather for those in the Northern Hemisphere, the scales shouting about those excess pounds proving harder to shift, and the downer of knowing holidays are over for a while - all supposedly accumulate in the lowest moods of the whole year.
For most it’s the devastating burden of debt or having made a backwards step in their financial progress that really puts the knife in.
If you can relate, read on - we’ve got a plan to make this your last Blue Monday ever.
There is a quote that goes…
“If life serves you lemons - make lemonade”
Replace the word LEMON with DEBT and LEMONADE with SNOWBALLS and you’ve just discovered one of the greatest wealth creation strategies around.
Let me explain.
In my twenties, being completely financially illiterate, I believed all the hype of “You can have it all now”, “Buy now, pay later”, “you deserve it” and walked into modern day slavery with my eyes wide shut accumulating loads of consumer debt.
As I started earning money, even more money seemed to come my way. Everywhere I went I was offered a store card, a credit card, an overdraft.
The endless messaging of…
…You are worth it, you must have this to fit in and after all you are now “successful” - i.e. got a job and a salary - so you need to look the part.
Store cards got heated buying the power wardrobe, credit cards used for holidays and accessories, and I even got a bank loan to buy a white-water kayak which I used for one wild holiday, scaring myself half to death as I plunged down roaring rivers and never used it again. There was also the mortgage on the little apartment I bought because that was the next box on the tick box sheet of life.
It didn’t take long before I was working for everyone else except me.
Worry and anxiety became my norm, stressing that if I lost my job or wasn’t able to earn, I wouldn't be able to last more than a few weeks.
All my dreams and adventures I had planned were put in the bottom drawer of my heart and I wondered if this is what they must have meant when they said “wait until you get into the real world”.
The problem was the “real world”, the world everyone else around me seemed to be living in, it wasn't the least bit fun and definitely not wealthy.
I knew there had to be another way and I decided to find it.
“If you find yourself in a hole - stop digging”
I realised that if I was ever going to get my life back and get out of this debt hole I had created, then I had to put down the shovel. In this case I had to stop using credit and money I didn’t have.
I also knew that I had to do things differently from everyone else if I wanted to live the life I had always dreamed.
But just having made that key decision wasn’t enough.
I had to find out how to actually do it!
And so began my research.
I read loads of books on getting out of debt and discovered that getting rid of debt is the number 1 New Years Resolution after weight loss and is also right up there as one of those resolutions many people fail to achieve.
Why?
After all, there is no shortage of advice on how to get rid of it.
Many personal finance books suggested the same approach:
- Order your debts from highest interest rate to lowest interest rate.
- Designate a certain amount of money to pay toward debts each month.
- Pay the minimum payment on all debts except the one with the highest interest rate.
- Throw every other Rand and Cent at the debt with the highest interest rate.
- When that debt is gone, do not alter the monthly amount used to pay debts, but throw all you can at the debt with the next-highest interest rate.
This makes perfect “logical” sense but logical is NOT how you get your finances turned around.
Doing it this way makes sense because you pay the least interest over the long term. But the real problem is, you don’t, because this just doesn’t work.
The trouble is, the highest-interest rate debt is often the biggest debt and so focusing on this first is like tackling Everest when you’ve yet to master how to walk around the block.
You tackle it with determination and commitment but because it is such a giant it feels like you are getting nowhere, wearing you down until you feel defeated and then you give up and go and buy something to make yourself feel better.
The other thing that happens is one of those to-be-expected life’s unexpected events happen. Because everything you have is being thrown at the debt destroying activity, there is no financial safety net to catch you.
So you have to use credit to deal with the emergency - wiping out all your good work and setting you and your motivation back to square 1.
This happened over and over.
Start and fail.
Start and fail.
Then I discovered the Debt Snowball Method.
This is similar to the traditional approach except that instead of attacking high-interest rate debts first, you attack the debt which can be paid off the fastest.
YES - you start with the debt that will be the quickest to clear!
This often means low-balance debts first.
Why is this so much more successful?
Because you’ll get the psychological lift of blitzing debts off in rapid succession.
Logic says the first method is the best, but debt isn’t logical so using only logic to break free from it doesn’t deal with the emotional side.
If we were robots, great -BUT we are humans and for us money and wealth is far more about emotions than just numbers and that is why we have to approach money matters in ways that make us feel successful emotionally.
Many of us know what we should do but find it difficult to actually do it.
We are fantastic should’ing machines - should’ing all over ourselves, but let’s be honest - should’ing just doesn’t work.
If we were logical, we wouldn’t accumulate consumer debt in the first place!
It’s silly to tell somebody deep in debt that they must follow the repayment plan that minimizes interest payments. The important thing is to set up a system of positive reinforcement, a recipe which brings quick wins and provides the phycological support needed to keep going.
Success breeds enthusiasm and reinforces our motivation.
That is why this makes all the difference.
So let’s make snowballs:
- Commit to claiming back your life, claiming back your dreams and the ultimate gift of all, freedom of choice.
- Create a cash emergency fund of between $800 and $1000 to use in the event of a real emergency so you don’t have to bring out the plastic again. (That pair of shoes is not an emergency).
- Order your debts from lowest balance to highest balance.
- Identify the minimum monthly payment you need to make against each debt.
- Pay the minimum payment on all debts except the one with the lowest balance.
- Commit to a lump sum amount to throw at your debt in addition to the minimum repayments. This is your Debt Destroyer Fuel (DDF).
- Focus on destroying one debt at a time. Throw the full DDF at the debt with the lowest balance in addition to its minimum repayment amount.
- When that debt is gone, have a big celebration, congratulate yourself and focus on the second priority debt with the next-lowest balance.
- Add the minimum repayment from your first debt that has now been destroyed to your DDF and add that full amount to the monthly repayment on your second debt.
- In no time the second debt will have been destroyed and you will be feeling fantastic.
- Continue adding the repayments from your destroyed debts to your DDF (like a big snowball getting bigger as it rolls down the hill) and throw that all at the next debt until all of your consumer debts have been well and truly blitzed.
Every bit of consumer debt you wipe out adds to your net worth, increasing your wealth significantly.
Celebrate your new wealth creation skills, embrace the challenge and claim back your life.
Big love,
Ann
P.S. Make achieving your financial goals fun by tracking them. Here’s a FREE debt blitzing tracker for you to make your debt blitzing fun.
