Getting out of debt

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‘The rich rule over the poor, and the borrower is the servant to the lender’

Proverbs 22:7

For years, financial planners and economic experts have attempted to figure out how to build wealth when you are deep in debt. There was an article that was published in a major global financial magazine that came to my attention and recent events have brought it back to sharp recall and just so you know, I honestly thought the article was a joke. I kept looking for a prompt to see if by any chance it was a re-direct from The Onion. The advice in the article is so awful that I couldn’t move on without asking my peers questions about it.

Scientists say that you need five positive interactions to overcome a negative one. I hope that another four readers will also respond with solid advice so that we can overcome the poor advice stemming from the article I am about to speak of. Let’s save some confused souls from the agony of debt slavery!

I’m referring to an article in a global financial magazine titled: Four Ways to Be Debt-Free for the Rest of Your Life. This advice doesn’t work for the majority of people out there. The author kind of means well by trying to bring a dose of optimism but it’s embedded in bad advice for the average citizen.

The article begins with the author telling a story of a conversation with a sales clerk while buying a suit. The conversation was going well, according to him, until she started talking about money and didn’t sound smart.

Here’s what she said, according to his recount of the interaction:

“I don’t know how people eat out every day. It’s too expensive. I can only do it once in a while, but not on a daily basis. I’d rather cook.” After cringing, the author asked her, “Why do you say it’s too expensive?”

She continued, “I have all these loans, mortgages, car, etc. They just weigh me down. It seems like I can’t do anything until I get out of debt. I basically have two full-time jobs and three kids to feed.”

The author goes on to explain how he clearly understood her dilemma. After all, he paid off all his bills last year, with ease.

He also says “if you keep thinking about debt, you will attract it. However, if you think about wealth, you will attract it, too.” I agree that we should think about wealth and how to acquire it, but that doesn’t mean we shouldn’t think about the debt that we carry, and how to get rid of it. As a matter of fact, you should think about getting rid of that debt and visualize how your life will be without it, not ignore it. The “out of sight, out of mind” approach is a great technique if you want to stay in debt forever.

He then moves on to explain his concept further: “When you think about debt, you’re inviting thoughts of despair, poverty, and the feeling of being overwhelmed. This forces you to think about putting in long hours and makes you believe that you’ll be paying your bills endlessly, which is a painful and miserable experience.”

I think that the best thing you can do is realize what situation got you into debt in the first place. If this invites thoughts of poverty because suddenly you realize that you were living above your means or acting like rich middle class while having a negative net worth, then this should be your motivation to get out of debt. And yes, you might put in longer hours at work or take an additional job to get rid of it, but it won’t be forever.

Make a definite sacrifice and reach the lifetime reward of becoming debt free. By the way, you’ll be attracting wealth as your net worth will still start to increase as you get rid of liabilities. Get motivated by seeing your net worth escalate!

After an explanation of his concept, the author moves on to provide his quick tips to getting out of debt for the rest of your life. On the contrary, I think these tips are a recipe for staying in debt. That being said, I’m going to leave his “quick tips” headers mainly untouched and state why I think these tips will more likely keep average Barbadians in debt for the rest of their lives instead of freeing them.

1. Think about wealth, not debts

Advice: “Since you think about money every day of your life, you might as well have good thoughts about it. When you think about gaining money, you’ll be more creative. If you think about debts, you’ll die.” Simply stop servicing your debt and watch your savings increase.

My Way: Not thinking about the accumulating debt is what probably got you into trouble. You’re going to die anyway, so you might as well think of creative ways to build income streams to pay debt off. Think about debt and don’t stay with your arms crossed waiting for divine intervention, do something about it. Not thinking about debt, as the article suggested, won’t make it go away.

Also, telling people that they’ll become debt free by ignoring debt is like telling young people that they’ll become a Bill Gates by dropping out of college. According to Bloomberg, 80 per cent of entrepreneurs who start businesses fail within the first 18 months. The odds are against you. How many people do you think became millionaires by ignoring debt until they can pay them off all at once with a stroke of a pen?

2. Do not pay your bills willingly

Advice: “The next time you get a bill, fine, or fee renegotiate it or don’t pay it at all. You will send a message that: 1) That money is hard to come by, and 2) You don’t enjoy the services that you’re getting.”

My Way: Pay all your bills and feel the pain when you pay a fine or an unnecessary fee. Who enjoys getting fines or late fees? Learn from your mistakes so that it doesn’t happen again. If you just pay for these unnecessary expenses without doing a mental check, they’ll become recurring expenses.

Money coming from active income is hard to come by because if you can’t work, you don’t get paid.   

Also, the money that you make today is not the money that you’ll make tomorrow. You often hear people waste money and say “I’ll make that money again”. Well, not really, that money is gone. Tomorrow’s money is new money, which, instead of being allocated differently, is just replacing the money that is gone.

3. Bless everything you have

Advice: “Appreciating your substance only allows you to have more of it. You’re basically telling the universe or God, “More of this, please.” Take inventory of everything you have and appreciate it. You’ve got to take what you get to get more of what you want.”

My Way: I agree that we should always be appreciative of what we have and be ambitious, but at some point, you should be able to know when you’ve gotten enough. More flat screen TVs and square footage won’t necessarily make you happier. Don’t believe me? Ask the folks who lost their jobs if they would be happier with more stuff or an income stream.

4. Get away from broke people

Advice: “There’s a ton of people who will share their gospels about wealth. Stay away from these folks. Many people are charlatans when it comes to earning money. Seek richer friends instead. They’ll help you get to where you need to be.”

My Way: We agree that you should stay away from charlatans, but beware of the richer friends that are just trying to keep up with the Joneses. Seek frugal-minded individuals that are living fulfilling lives. These people go around with a glow in their faces, not shiny new vehicles. You’ll be surprised to find out that they’re truly the millionaires next door.

Dear sales clerk,

You shouldn’t be doing anything that requires spending extra money and only spend on what you need for your essential expenses such as food, education, housing, transportation and health care, until you get rid of those pesky development loans. Don’t try to emulate what others that act rich around you do.They’re probably living from paycheck to paycheck.

With three kids, I’m assuming you have a cable or satellite service to keep them entertained while you work. Beware of the flat screen babysitter that is loaded with salespeople. Keep those salespeople out of your living room. They’ll be telling your kids what cereal to eat, what toys to ask for during Christmas and what clothes or gadgets they “need” for school. Cut the cord and get a cheap service and you’ll have affordable entertainment without the ads.

• Network with co-workers from different departments.

• Always be extremely nice to the customers and be willing to go the extra mile for them.

• Fix broken processes and provide suggestions for improvement.

• Keep learning more about the business.

• Let management know that you’re looking for new and challenging opportunities.

• Avoid those who say ‘We’re Back’ by simply not paying their bills.

By doing the above, you’ll be setting yourself up for promotions and will be able to take advantage of career opportunities that might present themselves.

George Connolly is a Finance and Technology professional.

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