I Still Hate Debt!

So what if, after these last two posts, you say “I still hate debt?”  What if my explanations didn’t shift your thinking at all?  What if you feel like the risk is not worth the reward?  There is good news!  There is nothing wrong with this.  You have to plot your own course.  My objective is to teach a few of the things I have picked up along the way to better your understanding of the options we have and to allow us to look ahead to where our choices may be guiding us.  Remember that true wealth is not getting what you want, but wanting what you have.  You may already be there and that is next to enlightenment, to me, in the hierarchy of pursuits.  Not many people that I know can say that they truly love what they have and are working for fulfillment alone.  

Some options for the debt averse:  

F.I.

One option is to research the “F.I.” (Financial Independence) or “F.I.R.E.” (Financial Independence Retire Early) movements.  They have been gaining traction with many who don’t want to be owned by a job and want to pursue whatever they want without the reliance on a big paycheck.  Many of these unconventional budgeters are excellent at aggressively minimizing expenses to “buy” their freedom.  Some sold a car or two and ride bikes.  Some sub-let rooms in their houses.  Many use index funds as their investment of choice through low or no-cost brokers.  They focus on “growing the gap”, which we could all learn from whether we desire to take their path of extreme frugality or not.  The “gap” is the difference between income and outflow of their money.  While we may not desire their level of austerity, we can all grow the gap to decrease our dependence on our paychecks.  With less dependence on our employer, we can be sure that we are doing what we feel we were put here to do.  We can follow our “calling” or whatever we really wanted to do when we were children; before we were influenced by the money.  Most of the F.I.ers that I read don’t truly desire to quit their jobs and sit around watching whatever television can be picked up on rabbit ear antennae (because cable is an unnecessary luxury).  Most of them have passions that they want to pursue without the pressure of making money.  Kinda cool idea.  Somehow I find austerity that we choose much more attractive than not planning and making it to a “retirement” of austerity not of our choosing.  

Dave Ramsey

Dave Ramsey is the epitome of the anti-debt crusaders.  His teachings will be referenced here often as he is responsible for my getting rid of consumer debts as a young man.  We later began using debt again for business purposes but Dave’s teachings still are important to me.  He teaches a simple system for budgeting that requires envelopes and cash.  It’s so old-fashioned and inconvenient that it just works!  After reading books upon books on personal finance and the complexity that every author wrote into them with balancing and re-balancing portfolios to maximize gains etc., I found it all overwhelming.  One day at the fire station, a medic told me about Dave Ramsey and I liked what I heard.  Simple steps and a clear plan to get out of debt.  Without debt, you essentially “grow the gap” as the F.I.ers do and it is very freeing to many; including me.  When you eliminate debts, you may feel a great freedom that makes you want to pile up money fast and then pursue that career or schooling that you always wanted to do but couldn’t afford.  Or maybe you just keep doing the job you love but can know that your retirement won’t mean a decrease in your standard of living once you finally have time to do all the things you’ve been waiting to do.

Warning:  One ex-girlfriend might have reported to a friends’s wife that she liked me pretty well but just couldn’t handle the envelopes.  I’d be remiss to warn you that not everyone gets this stuff.  It is just one approach to money that I know, from experience, works.  His book Total Money Makeover is a good starting point.  Then he has radio shows and podcasts if you want to really drink the kool-aid as I did.

Do nothing different

You could be happy with the direction your finances are headed.  Then stay the course.  Not everyone needs to change things.  Some already have this stuff figured out.  Some of you understand money innately or studied it in college.  Many of us studied other topics we found interesting and found ourselves unprepared to handle money and having no idea what to do with it-other than spend it.  If you have your direction plotted and are headed where you want to go then I applaud you.  You may very well be the “Millionaire Next Door” that Thomas J. Stanley and William D. Danko wrote about in their book by the same name.  This is an interesting read about those who are the unidentifiable millionaires amongst us.  I know a few people I suspect fall within this group but I’d never blow their cover here.

What can we do?

Ultimately many of us were taught about money from people who had an average or below average understanding of money.  We followed the guidance that they believed and which may have worked at a different time when pensions were strong and employees worked for an employer for twenty to thirty years.  This is not the time in which we live.  Pensions fail.  Economies tank.  Not understanding money is not an option.  This is exactly the point of the now-classic book by Robert Kiyosaki “Rich Dad Poor Dad”. It may not be your passion but take some time to learn more about money and pick the methods that you understand and that can help you make sense of it.  You’ll hear opposing views and will ultimately have to pick what works for you.  While Robert Kiyosaki and Dave Ramsey couldn’t be farther from each other in their beliefs and teachings about money, these two books would be the first two I would recommend if you are interested in taking your money back into your own hands.  It is your money after all.  Take guidance from those who have an understanding of it; not from someone who is deeply in debt or is just getting by.  Educate yourself about money.  Information is everywhere these days for FREE!  Even the F.I.ers amongst us can log on to free internet at a Starbucks while drinking water, from their refurbished iPhone 2 and hear podcasts and read blogs that are free for the taking!  Make your car a mobile university; unless you read the first two paragraphs of this and sold it.  In that case, just listen with one earbud so you can hear traffic while you ride your bike.  Think critically-it’s of critical importance.  It’s ultimately the balance of your life today and the life of your future self.  Not to get too serious, but it is!  So learn, continue to learn, figure out your priorities in life and “Keep the main thing the main thing!”