RPF0660-Back_to_Basics-The_Problem_With_Debt
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00:00:30.360 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now, while building a plan for financial freedom in 10 years or less.
00:00:40.360 | Today on the show, we go back to basics, a series on the nuts and bolts of personal finance, some of those basic topics that beginners need to start with and/or most of us need a good refresher.
00:00:51.360 | We need a reminder on the blocking and tackling, the basic movements of our craft.
00:00:56.360 | And so today, we're going to talk about the problem with debt.
00:01:00.360 | Now, many people say, "Joshua, I don't need to know what the problem is with debt because I'm in it and I don't like it and I want out."
00:01:08.360 | Or, "I've been in it and I didn't like it and I got out."
00:01:11.360 | But I'd like to articulate the problem in a succinct way that I hope will help you to have a bit more thoughtfulness when next you consider going into debt.
00:01:22.360 | Here is the fundamental problem with debt.
00:01:28.360 | If you go into debt, you will find that your past is dragged into your future, thus limiting the choices and options that are available to you.
00:01:46.360 | Your past is dragged into the future and it limits the choices and options that are available to you.
00:01:54.360 | Since the central theme of this show has to do with freedom in all of its various expressions, we want to talk about how debt limits your freedom and how, if you care about freedom, be it personal freedom, financial freedom, freedom of choice, freedom of lifestyle, freedom of options,
00:02:15.360 | one of your best first steps will be to get rid of debt and/or avoid going into debt.
00:02:24.360 | I'd like to give you a scenario here to show how debt can be so destructive to your freedom.
00:02:31.360 | Let's assume, for whatever reason, you wind up losing your job.
00:02:38.360 | This was unanticipated. You find yourself in a difficult financial situation. Assume, for the sake of easy math, that you have some sources of income but not quite enough to meet your normal living expenses.
00:02:53.360 | Frankly, you're about $1,000 a month short.
00:02:56.360 | But you do have a credit card, which is available for you, and you could use it to cover your $1,000 of expenses if you need to.
00:03:05.360 | Assume for a moment now that you start borrowing $1,000 per month on your credit card just until you can get another job and get your feet back underneath you.
00:03:15.360 | Assume that happens.
00:03:17.360 | You do that for one month.
00:03:19.360 | Then you do it for another month.
00:03:21.360 | Three months, four months, five months.
00:03:23.360 | You do it for six months.
00:03:25.360 | And then, after six months, you are now able to be re-employed.
00:03:30.360 | You get another job.
00:03:31.360 | And now you can start paying your bills again, and you no longer have to borrow money on the credit card in order to pay your bills.
00:03:38.360 | But, over time, you've accumulated a total of $6,000 of debt.
00:03:44.360 | Perhaps some of that is grocery expenses to feed your family.
00:03:48.360 | Perhaps some of that is paying for your electric bill and your water bill.
00:03:53.360 | Perhaps a little bit of it is covering a car payment or just some miscellaneous expenses that you needed to cover during that period of unemployment.
00:04:03.360 | I think most people would acknowledge that the case that I have just described is fairly common, happens to a lot of people, and it's fairly benign.
00:04:14.360 | Nobody's going to declare bankruptcy over $6,000 of debt.
00:04:17.360 | It's not going to be something that you can't get out of.
00:04:20.360 | Most people would look at that and say, "That's a fairly prudent use of debt.
00:04:25.360 | You lost your job.
00:04:26.360 | You didn't anticipate losing your job.
00:04:28.360 | You didn't have the money, and you needed to cover those expenses, and you did."
00:04:34.360 | But what happened in that period of time?
00:04:38.360 | Well, you accumulated six months' worth of shortfall.
00:04:44.360 | So now in month seven, when you get reemployed, the question is, can you pay off your debt?
00:04:52.360 | Well, we would assume that you didn't get a job making 15 or 20 times as much as you were making previously.
00:04:59.360 | So let's assume that you got reemployed at about the same rate that you were previously employed in terms of your pay scale.
00:05:06.360 | So now you start paying off the debt.
00:05:08.360 | The problem is in month seven, you still have $1,000 of living expenses that you've got to cover plus the previous six months of living expenses.
00:05:21.360 | And then in month eight, you still have the eighth month's living expenses plus that six months of previous living expenses, and then nine, ten, eleven, twelve, and so on.
00:05:34.360 | And so you may set out a goal for yourself of paying off your debt very quickly and very aggressively.
00:05:40.360 | Perhaps you do it in six months.
00:05:43.360 | But what that means is for a total of 12 months, your choices were severely limited.
00:05:53.360 | Your freedom was severely curtailed because you had six months of stress where you couldn't pay your expenses except with going into debt.
00:06:02.360 | And then you've got six months of backbreaking hard work for you to pay those months living expenses and then to pay off the previous six months worth of expenses.
00:06:13.360 | And yet it would be an unusual person who actually was able to pay off those expenses in six months.
00:06:20.360 | More likely, it might take 12 or 18 or 24 months or many times even longer for you to pay back those six months of expenses.
00:06:29.360 | And so what happens is your income is already beholden to someone else paying off your debt.
00:06:40.360 | And so, yes, you had six months of trial of your being without work.
00:06:47.360 | But unfortunately, because you go into debt, that six months of trial is now extended to as long as it takes you to pay off the debt.
00:06:58.360 | Now, perhaps in response, you simply say, Joshua, well, I see what you're saying.
00:07:02.360 | I don't want the period of trial to be extended.
00:07:04.360 | But what other choice did I have?
00:07:06.360 | After all, I was fairly prudent.
00:07:08.360 | I only borrowed a thousand dollars a month.
00:07:10.360 | I didn't borrow four thousand dollars a month.
00:07:12.360 | I needed four thousand, but I only borrowed a thousand dollars a month.
00:07:14.360 | And then I was able to get re-employed.
00:07:17.360 | And once I got employed again, I started paying it back.
00:07:19.360 | And you're right.
00:07:21.360 | You haven't harmed anybody other than yourself, perhaps, in that scenario.
00:07:27.360 | If you were able to maintain your lifestyle and your living expenses, you didn't default on your debts, everything really is probably going to work out.
00:07:37.360 | Now, of course, it doesn't always work that way.
00:07:39.360 | What often happens is many people can't find a job very quickly.
00:07:44.360 | Many times people wind up borrowing more than a thousand dollars a month.
00:07:49.360 | Many times people spend much more than they anticipated.
00:07:53.360 | But you say, Joshua, I was prudent.
00:07:54.360 | I didn't do any of those things.
00:07:55.360 | What other option did I have?
00:07:57.360 | Well, I'm going to suggest to you that your other option was to not go into debt.
00:08:02.360 | If you had chosen not to go into debt, you would have had a period of pain and suffering.
00:08:10.360 | But that period of pain and suffering would have been much shorter.
00:08:13.360 | Now, let's assume for a moment that you could figure out some way to avoid going into debt.
00:08:18.360 | You are unemployed, but somehow you avoid going into debt because you figured out a way to earn a little bit of money that you didn't previously think you could earn,
00:08:27.360 | or you figured out a way to cut your expenses in a way that you didn't previously figure out how to cut, and you were able to avoid going into debt.
00:08:34.360 | But you had six months of deprivation, trial, hardship, et cetera.
00:08:39.360 | But then after six months, you're able to get your job back.
00:08:44.360 | Well, after six months, what can you do with your income?
00:08:49.360 | Now you have full control of your income.
00:08:52.360 | Yes, you need to cover $1,000 of living expenses, but whatever the extra was that previously you would have had to use to pay back debt, that's now yours to keep.
00:09:01.360 | That's now yours to save.
00:09:02.360 | That's now yours to spend.
00:09:05.360 | If you avoid going into debt, then you get your freedom back much more quickly.
00:09:13.360 | So you go through the six months of hardship and deprivation, but then on the other side, you immediately have the full use of your income.
00:09:23.360 | And here's what's amazing about debt, and this is the single thing that motivated me years ago when I started, when I decided to get out of credit card debt when I was in college,
00:09:32.360 | get and pay off my student loans.
00:09:34.360 | I think it was Dave Ramsey who asked the question, but somebody said, I know it was Dave Ramsey.
00:09:39.360 | Dave Ramsey said, "If you had no payments, how much money would you have every month?"
00:09:46.360 | If you had no payments, how much money would you have every single month?
00:09:52.360 | And it's a fascinating question, because for the vast majority of us, if we had no payments, we would have plenty of money available every single month.
00:10:07.360 | If we had no payments.
00:10:12.360 | Now there is a small subset of people for whom simply not having any payments is just not enough.
00:10:19.360 | But the vast majority of us are not in that situation.
00:10:24.360 | And here's the thing, even if you are in that tiny minority, where even if you have no payments, it's still not quite enough,
00:10:30.360 | you are in such desperate financial straits that you cannot afford to have any payments because it would be even worse if you did have payments.
00:10:38.360 | So we're all better off with no fixed payments.
00:10:43.360 | If you take the average person, the average income, and you simply say you have all this money available to you to meet your basic living expenses and then whatever else you want to do with it.
00:10:54.360 | If it's not all pre-committed to debt payment, there's usually plenty of money to cover the necessities of life.
00:11:01.360 | There's usually even plenty of money to have money to play with.
00:11:04.360 | Whether it's weekend fishing trips or traveling, whatever the interest that you have, going out to eat, going dancing, whatever your thing is that you like to do or your set of things.
00:11:16.360 | If you have no committed money payments, there's usually plenty of money every week or every month for you to do something fun and interesting.
00:11:25.360 | But if you have debt, the amount of money left over for something fun and interesting is largely gone.
00:11:33.360 | Same thing, what about accumulating money, saving money?
00:11:36.360 | If you have no payments, most of us could save quite a bit of money.
00:11:40.360 | Save a few hundred dollars per month, after a few months you've got a few thousand dollars.
00:11:44.360 | That piles up pretty quickly if you have no payments.
00:11:49.360 | If you internalize this and you recognize that there are periods of suffering and it's your choice how long they go for but they will be longer if you borrow money, then you can come up with ideas of how to minimize the periods of suffering.
00:12:04.360 | I want to give you a few examples.
00:12:05.360 | My show is called Radical Personal Finance for a reason.
00:12:08.360 | It's because I think those who are radical with their money, those who are willing to do things that most people are not willing to do are generally going to get better results.
00:12:16.360 | Let's talk about that scenario and say what could you do, how could you evade being entrapped by your circumstances in the scenario I described if you were committed to no debt?
00:12:30.360 | The first thing is if you're committed to not borrowing money, that commitment in and of itself will probably lead you as a thoughtful, sentient person to making the choice to plan ahead.
00:12:45.360 | If you're not going to borrow money, that means you're going to need money when times are lean.
00:12:50.360 | You're going to need savings and so you would probably start to work harder to save money.
00:12:56.360 | I point that out because it's really true.
00:12:58.360 | If you're committed to not borrowing money, you think ahead and you make plans.
00:13:03.360 | I'll give you an example.
00:13:04.360 | Most of us when we travel, we travel using credit cards which give us access to tens of thousands of dollars of spendable cash that we can use to buy airplane tickets and hotel rooms and food, etc.
00:13:16.360 | But let's say that I gave you a challenge and I told you I want you to travel without borrowing money, even using a credit card.
00:13:25.360 | What would you do?
00:13:27.360 | Well, you would recognize in that circumstance that you would have to plan ahead.
00:13:32.360 | You would have to have money.
00:13:34.360 | You would have to have physical currency.
00:13:36.360 | You would have to make sure that you set that currency aside.
00:13:39.360 | You would have to make sure that you figured out how to have it with you, how to secure it on your travels.
00:13:44.360 | You would need to make sure you had the right denominations, dollar for tips, $5 for tips, big bills for paying big bills, and you would make sure that you planned ahead.
00:13:53.360 | You might think, "Okay, well, if that doesn't work out, maybe I'll have some food because maybe there's no food available for me," etc.
00:13:59.360 | And you would plan ahead.
00:14:01.360 | By simply committing to avoid debt or even avoiding using something like a credit card, you would plan ahead.
00:14:08.360 | But back to my example of the person who loses the job.
00:14:10.360 | Let's say that you didn't have the money or the money ran out and you still find yourself in difficult circumstances.
00:14:16.360 | Well, what could you do?
00:14:18.360 | The first thing you would do is if you were committed to not borrowing money, you would immediately see the problem and you would immediately set about to generating money right away.
00:14:31.360 | Most people, when they lose a job, they sit back and wait.
00:14:36.360 | They wait a little bit just because they feel like, "I need a vacation."
00:14:40.360 | Then they wait a little bit longer because they feel like they need a little bit more time.
00:14:43.360 | Perhaps they're smarting from being laid off, the company wasn't fair, they didn't treat me fair, got to catch up on such and such a series on Netflix.
00:14:52.360 | And so they wait.
00:14:54.360 | And then after a while, they start looking for work.
00:14:56.360 | But most people don't throw their shoulder into it and really look for work quickly.
00:15:00.360 | But if you were committed to not borrowing money, you would have to move quickly.
00:15:04.360 | Once again, there's a massive element of preparation that you could make so that you could find a job quickly.
00:15:10.360 | But let's just assume you needed work. What would you do?
00:15:13.360 | Well, you would immediately start taking work.
00:15:17.360 | You would pick up the phone and you would ask people that you knew and say, "Hey, listen, I need some work. I just got laid off. Could you use some extra help?"
00:15:23.360 | You would call a buddy of yours who owns a contracting company.
00:15:27.360 | And that buddy might say, "Well, I'll tell you what. Why don't you come by and spend a couple days cleaning up my shop?
00:15:32.360 | I need some help, but I'll pay you for a few days to come by and clean up my shop."
00:15:35.360 | And you would generate a little bit of cash income.
00:15:37.360 | You might go and say, "Hey, you know what? Let me pick up something on the side.
00:15:41.360 | Maybe I can go to the day labor pool and do some day labor if that's it.
00:15:47.360 | Or maybe I can call a former client of mine and somebody I worked with and say, "Hey, listen, remember we talked about a contract? Give it a shot.
00:15:54.360 | Let's do this little project. I'll charge you a thousand bucks and I'll put this together. Would you be willing to give this a shot?"
00:15:59.360 | And your friend would say, "Okay, let's give it a shot."
00:16:02.360 | Or maybe you would say, "Hey, I've got a car. Let me go ahead and join Uber or Lyft and start driving for one of the ride-sharing services
00:16:09.360 | and see if I can make a couple hundred bucks this weekend to help get us through."
00:16:13.360 | Or you might say, "Well, how else could we bring money into our house? Maybe we could bring in a boarder.
00:16:19.360 | Maybe there's something that we could do to hire out an extra room or use the shed in the backyard and put it on Craigslist
00:16:25.360 | and see if somebody needs to buy it as a storage place for a few months."
00:16:29.360 | You would start looking around and you would think about creatively generating income from what you have.
00:16:36.360 | Now, all of us have different resources.
00:16:39.360 | If you have the ability to go and do a part-time consulting project for $5,000 for somebody, don't go to the day labor pool.
00:16:45.360 | But if you went to the day labor pool and you earned $12 an hour and you did that, say, three days a week, 10 hours a day, there's $360 a week.
00:16:57.360 | And if you just went and did $360 a week, in two weeks per month, you would--sorry, my math is not my strong suit--
00:17:04.360 | three weeks per month, you would cover your $1,000 shortfall with extra income and extra labor.
00:17:11.360 | Now, that would be hard because you would be looking for work and applying for jobs and going to interviews
00:17:16.360 | while simultaneously going and shoveling out somebody's backyard.
00:17:21.360 | But you know what? As soon as you got a full-time job, you can immediately have full control of your income.
00:17:28.360 | You can immediately be in a situation where you say, "Hey, I'm going to--I don't have to--my past doesn't control my future.
00:17:38.360 | I can make fresh plans, fresh opportunities, a fresh start."
00:17:42.360 | The other side you might go to is, of course, quickly cutting expenses.
00:17:47.360 | Most people who lose their job know that at some point they're going to need to cut expenses, but most people don't cut them quickly.
00:17:54.360 | And often this is for seemingly virtuous reasons.
00:17:57.360 | "I don't want the children to suffer. I don't want them to be scared, so I'm not going to cut off the cable, cut off the internet, etc.
00:18:03.360 | I'm not going to be radical in that because I don't want the children to suffer."
00:18:07.360 | Sometimes it's to maintain our self-image.
00:18:09.360 | "I'm embarrassed that I got laid off and I don't want my neighbors to know that we're struggling."
00:18:13.360 | The problem is if you keep that kind of stuff up, you wind up really hurting in the long run.
00:18:19.360 | And the kids know, and the kids are going to hurt.
00:18:22.360 | They're going to hurt because your six months of trials are going to be extended out over 18 months of saying no.
00:18:28.360 | And if you don't say no at some point, you're just going to get deeper in debt and it's never going to go away.
00:18:33.360 | And so what do you do?
00:18:35.360 | Well, if you were committed to not borrowing money, you might look at your expenses and say,
00:18:38.360 | "We're going into drastic expense-cut mode now."
00:18:42.360 | You might look at your food budget and say, "You know what? We need help with food."
00:18:46.360 | And so instead of waiting until months from now when you're really struggling,
00:18:50.360 | you immediately go down to the food bank and ask for food.
00:18:53.360 | Or you immediately say, "We're going to change what we're eating. Less meat, more beans, more rice."
00:18:59.360 | You might immediately go and say, "Well, how can we grow something in our backyard?
00:19:03.360 | Hey, we can have some plants up in 30, 60, 90 days we can have some food up.
00:19:07.360 | So let's use Monday and Tuesday and let's rip up the backyard and plant vegetables."
00:19:11.360 | I don't know what your solution would be, but you would immediately start going after it.
00:19:15.360 | You wouldn't sit around and wait until you're really hurting to apply for food stamps.
00:19:19.360 | You would apply for food stamps right away.
00:19:22.360 | You would make something happen quickly.
00:19:24.360 | You wouldn't sit around and power bill, for example.
00:19:28.360 | You say, "Well, I've got to have power, right?"
00:19:30.360 | Well, yeah, and you do. Most of our houses, you've got to have power.
00:19:34.360 | But you might look at it and you might say, "How could we make changes fast?
00:19:38.360 | Let's not sit around with a thermostat on the energy-consuming side.
00:19:43.360 | Let's just move it as high as possible or as low as possible, depending on whether we're talking air conditioning or heat."
00:19:49.360 | Or you might say, "We've got to stop using the lights."
00:19:52.360 | Or, "We're going to unplug the TV. It uses too much power."
00:19:55.360 | You would go into extreme conservation mode in some way.
00:19:58.360 | Start charging your cell phone in your car, harvest the power in your car.
00:20:02.360 | That's obviously not going to make much of a difference in your power bill, but you get the idea.
00:20:05.360 | You would start being creative. "Let's go to bed when the sun goes down and let's get up when the sun gets up."
00:20:10.360 | Most people don't make those changes when they lose their job.
00:20:13.360 | Most people do nothing but watch TV when they lose their job, unless they really know they've got to make something happen quickly.
00:20:19.360 | So don't be one of those. Make changes quickly.
00:20:22.360 | Say, we've got to cut off the Internet.
00:20:24.360 | You need a phone to get a job, so you can't cut off the phone, but you make changes quickly is the point.
00:20:29.360 | And you could probably buy some drastic, radical changes, lower your monthly expenses by $400,
00:20:34.360 | and now you've just got to make $600.
00:20:37.360 | So, after you've done these things, what do you get?
00:20:44.360 | Well, you acknowledge that there's a period of pain, because there certainly is a period of pain.
00:20:51.360 | You're going to have pain one way or the other, but the period of pain is short,
00:20:55.360 | and you maintain your freedom the whole time.
00:20:59.360 | You maintain your mental freedom, because instead of feeling trapped by your circumstances,
00:21:04.360 | you're exercising your creativity in solving your problems.
00:21:08.360 | I've given you extreme examples. I know there are tough examples.
00:21:11.360 | But there's no tough problem.
00:21:13.360 | There's no difficult, impossible situation that can't be made better by some creative thinking.
00:21:19.360 | Thinking about what are the resources that this house has, this household, this family, etc.
00:21:24.360 | Maybe it means you wind up renting your house out on a short term, putting it on Airbnb,
00:21:30.360 | renting it out on the weekend, and you're down at the state park with a tent and a fishing pole
00:21:35.360 | on the weekend while your house is being rented out for $400.
00:21:39.360 | That might feel really difficult.
00:21:43.360 | But at least if you're taking drastic action, you'll have the confidence of knowing you're tackling your problems.
00:21:50.360 | And if you are insufficient, you can't overcome your problems, at least you know you tried.
00:21:55.360 | You did something. You didn't sit around and get mope and get depressed.
00:21:59.360 | You tried, and you did everything you were capable of doing.
00:22:03.360 | Send your wife and kids to Grandma and Grandpa's for a summer vacation.
00:22:08.360 | Put the house on Airbnb. Spend all your time at Uber, and you go sleep at a friend's house.
00:22:14.360 | Solve it something.
00:22:16.360 | If you wind up moving back in with Mom and Dad and renting the house out, it's better to move back in with Mom and Dad,
00:22:21.360 | rent the house out for six months, and then be able to move back into your house in six months
00:22:25.360 | and have full control of your income than to be deeply in debt and have years lost to a six-month temporary job loss.
00:22:33.360 | I'm not trying to sugarcoat the problems. I hope that's coming through.
00:22:36.360 | I hope there's some empathy coming through, that you understand that life is tough.
00:22:41.360 | Finances are tough. There are so many difficult situations that we can face.
00:22:46.360 | But no difficult situation is going to be made better by stretching it out longer.
00:22:52.360 | Rather, difficult situations are going to be made better by solving them as quickly as possible
00:22:58.360 | so you can get on to living the kind of future that you want to live in.
00:23:04.360 | If you will avoid debt, you will always have freedom of choice.
00:23:14.360 | And if you're talking about freedom, and if you care about freedom, your personal freedom, your personal liberty,
00:23:21.360 | it's hard to think of any more basic freedom than that.
00:23:28.360 | The freedom of choice.
00:23:32.360 | It's extremely empowering to know you have options.
00:23:39.360 | If you get out of debt, stay out of debt, and are committed to that, you'll be able to save some money.
00:23:49.360 | Then with a little bit of savings, almost any choice you want to make to improve your life is available to you.
00:23:57.360 | We only get one shot at life, and you have to progress through it sequentially.
00:24:02.360 | You begin at the beginning, and you end at the end. And you can't skip steps.
00:24:07.360 | And here's what I think is interesting.
00:24:11.360 | There's a visual metaphor that is sometimes used with talking about life.
00:24:16.360 | I call it the hallway metaphor. It's not original to me, but I don't know who to cite for it.
00:24:20.360 | But just simply a hallway metaphor.
00:24:22.360 | Life is like a long hallway.
00:24:25.360 | And you begin at one end of the hallway, and you stare off down the hallway, and you can't really see the options that are available to you.
00:24:33.360 | But once you start walking down that hallway, you see a series of doors that start to come.
00:24:39.360 | And you can stop at the door, and you can open it up and look through it.
00:24:42.360 | And if you see what's in there looks interesting to you, looks attractive, you can walk through the door and try some different path.
00:24:48.360 | You don't have to stay on the same hallway, the same central path through the hallway.
00:24:52.360 | But you don't see those doors until you start going through the hallway.
00:24:56.360 | You can't stand at one end of it and still see them.
00:24:59.360 | And this is an exciting thing about life.
00:25:02.360 | When you're light and you're unencumbered, you can start off at the end of the hallway.
00:25:05.360 | You can merrily walk your way along.
00:25:08.360 | And then with every door, you open it up, you look through it, and if you want to go for it, you turn and go.
00:25:12.360 | Oftentimes, it's another hallway, it leads a different direction.
00:25:15.360 | All metaphors break down eventually.
00:25:18.360 | But what does debt do?
00:25:20.360 | Well, debt is a commitment to not be able to go through those doors a lot of times.
00:25:26.360 | You start at one end of the hallway, and somebody puts a pack on your back and says,
00:25:30.360 | "This pack has to go straight down the hallway all the way to the end."
00:25:34.360 | And so you start trudging it because you can't see any doors.
00:25:37.360 | And so you start trudging forward with the pack on your back, and you say,
00:25:40.360 | "This is okay. I'm going to walk down the hallway anyway. I might as well walk down with a pack on my back."
00:25:45.360 | But then all of a sudden, you open up the door to the left.
00:25:48.360 | And the door to the left says, all of a sudden, "Career change."
00:25:52.360 | And somebody's inviting you to come along into a new career that you think would be so exciting.
00:25:57.360 | The problem is that it'll be 50% of your current pay scale, and you've got this giant burden on your back,
00:26:03.360 | and the burden has to be delivered to the end of the hallway.
00:26:06.360 | And so you say, "Well, I can't make that career change."
00:26:09.360 | So you sadly close the door.
00:26:12.360 | Or you go down, and the next door, you open it up to the right, and all of a sudden, there's a tropical beach.
00:26:15.360 | A buddy of yours says, "Hey, come with me on vacation. I got this wonderful house.
00:26:19.360 | All you've got to do is buy a plane ticket. If you can just get the plane ticket, you can come down.
00:26:22.360 | We've got a week at the beach house. We'll go surfing. We'll go partying.
00:26:25.360 | We're going to have a great time. Just come on down."
00:26:27.360 | But you've got to deliver the burden to the back.
00:26:30.360 | So you can't take the week off and just cover the plane tickets.
00:26:33.360 | You've got to get that burden all the way to the end of the hallway.
00:26:37.360 | And it goes on and on and on.
00:26:39.360 | Whereas if you have no burden, you can take any of those doors.
00:26:44.360 | If it seems interesting to you, you take it. If it doesn't, you don't.
00:26:48.360 | That is the best idea that I've come up with to how to describe what debt does.
00:26:52.360 | Debt encumbers you.
00:26:54.360 | Debt forces you to trudge the hallway until you deliver the load.
00:27:02.360 | Now, sometimes you can pick up your pace and jog down the hallway as quickly as you can with that burden,
00:27:07.360 | dump it at the end where it goes, and then come back,
00:27:10.360 | and sometimes the career change door is still available to you.
00:27:13.360 | Sometimes the beach's vacation is still available to you.
00:27:16.360 | Just because you have debt doesn't mean it's the end of the world.
00:27:19.360 | But if you're free and unencumbered, I beg you, don't burden yourself up.
00:27:24.360 | Stay light. Stay flexible. Stay free.
00:27:28.360 | And then you have a new zest every day.
00:27:31.360 | You have a new ability to take whatever comes at you.
00:27:34.360 | You are more resilient, but I'm talking about in an offensive way,
00:27:39.360 | in the context of simply, "Hey, what am I excited about?
00:27:44.360 | What plans can I make for the future?"
00:27:47.360 | And it's much easier to be optimistic when you're not trudging along under a heavy burden.
00:27:53.360 | That's the basic problem with debt.
00:27:55.360 | So I hope by identifying it for you, I can motivate you to get out of debt.
00:27:59.360 | I can also help you to avoid it.
00:28:03.360 | Because if you do, I can't say you'll regret it.
00:28:07.360 | I've done it both ways. I've done it with debt, I've done it without debt.
00:28:10.360 | I have always been happier to solve my fundamental problem faster than to do it with debt.
00:28:19.360 | Debt has always, in my life, it has always done these things for me.
00:28:22.360 | Number one, it has indulged my laziness.
00:28:25.360 | Indulged my laziness.
00:28:28.360 | And that's what it is. That's really what it is.
00:28:30.360 | One of the most embarrassing times when I went into debt,
00:28:33.360 | I was a financial advisor and I felt like I was overworked.
00:28:38.360 | And the key was, I was. I was doing everything myself.
00:28:41.360 | I didn't have enough staff. So I decided to hire staff.
00:28:44.360 | But I didn't quite have enough money to hire staff effectively at that point in time.
00:28:48.360 | So the idea was, I would hire staff.
00:28:51.360 | The staff would work for me.
00:28:53.360 | They would help me so that I could be more productive,
00:28:56.360 | so I could spend my time on higher dollar earning activities.
00:28:59.360 | And then I would make more money and I would have more money.
00:29:02.360 | And I would have the money to pay my staff.
00:29:04.360 | And that's sometimes how it works in business.
00:29:06.360 | And I thought that was how it was going to work for me.
00:29:08.360 | So I went ahead and hired staff.
00:29:11.360 | But I said, well, I'll just borrow the money.
00:29:14.360 | And I'll borrow the money to pay my staff for just the first couple of months.
00:29:17.360 | And then I'll have more income. I'll have more commissions.
00:29:19.360 | And I can pay my staff.
00:29:21.360 | Well, unfortunately, my staff came in.
00:29:26.360 | And I was able to lighten my burden.
00:29:30.360 | But instead of taking that extra time and putting it into those higher dollar activities
00:29:34.360 | so that I could make more money, I just took more time off.
00:29:38.360 | And I didn't make any more money.
00:29:41.360 | So I didn't make any more money, but I was going into debt to pay my staff.
00:29:46.360 | And this went on for month after month after month after month.
00:29:52.360 | And I was feeling good.
00:29:54.360 | I didn't bother to look at how much money debt was accumulating.
00:29:57.360 | I was feeling great.
00:29:59.360 | Until one day I woke up deeply in debt and had nothing to show for it.
00:30:05.360 | It's one of the most embarrassing things in the world
00:30:09.360 | to wake up and realize that you have behaved stupidly.
00:30:14.360 | I looked at it and I thought to myself, what kind of idiot am I?
00:30:18.360 | I would never in my life advise anybody to do what I have done.
00:30:24.360 | Remember, I'm a financial advisor, so I'm supposed to know what I'm doing with money.
00:30:27.360 | I would never advise a client to do this. This was stupid.
00:30:31.360 | Put yourself into debt so that you can hire staff and then not make any more money
00:30:35.360 | and not fix things quickly, not just immediately fire them so you can go back.
00:30:38.360 | No, I did this for a long time.
00:30:44.360 | I felt dumb. I felt worse than dumb. I felt foolish.
00:30:48.360 | And worse than that, I had nothing to show for it.
00:30:52.360 | Because those lazy afternoons and lazy evenings when I could have done a little extra work
00:30:56.360 | and not been in debt, now I was going to have to lay off my staff
00:31:00.360 | and redouble my work in order to pay that debt off.
00:31:04.360 | A lot of people have regrets when they buy something flashy and fancy
00:31:08.360 | and then they borrow money for it and then a year later it's not so flashy and fancy,
00:31:13.360 | but they at least still have it.
00:31:17.360 | A lot of people regret it, but at least they still have the thing,
00:31:20.360 | this shiny, flashy thing that they borrowed for.
00:31:23.360 | A lot of people regret it when they buy a nice trip, a nice family vacation,
00:31:27.360 | put it on a credit card and debt, and a year later they're still paying it off.
00:31:31.360 | But at least they can go back and look at the memories, the pictures,
00:31:34.360 | and have the memories of the great family vacation.
00:31:37.360 | But I'll tell you what, there is almost no form of debt worse than to spend months,
00:31:43.360 | and I don't know, maybe it was years, I can't remember, months of your life
00:31:47.360 | working to pay off debt for money that did nothing for you.
00:31:51.360 | Or money that went directly into somebody else's pocket to pay their bills.
00:31:55.360 | That stinks.
00:32:00.360 | I can't remember why I started telling you that story, just to say that I've done it both ways.
00:32:04.360 | So debt has always, okay, laziness, debt has always resulted in laziness.
00:32:09.360 | Debt has always resulted in my spending too much money.
00:32:13.360 | Any time I've borrowed money, I've ended up spending too much money, unnecessarily.
00:32:18.360 | It's hard to pull money from your pocket, cash from your pocket and buy things.
00:32:22.360 | It's easy to swipe a credit card.
00:32:24.360 | It's always resulted in my spending too much money.
00:32:29.360 | And there are many other things to it as well, but it's never been a blessing.
00:32:35.360 | It took me a long time to figure out why.
00:32:38.360 | I've shared now with you why. Limits your options.
00:32:41.360 | So I hope that this helps you to make different choices,
00:32:45.360 | to encourage you, if you're in debt, to get out.
00:32:48.360 | And I hope there's some useful ideas in here.
00:32:50.360 | There are ways, and there are ways that you can put any situation together and make it better.
00:32:56.360 | So often we just think that it's one or the other.
00:32:58.360 | You're either winning or you're losing.
00:33:00.360 | For example, you lost your job, you're either in the house or you're kicked out on the street.
00:33:05.360 | Something bad.
00:33:07.360 | Well, what if you made it something great?
00:33:09.360 | There's almost always a way to take something bad and turn it into something great.
00:33:16.360 | So we talk about having the silver lining.
00:33:20.360 | There's almost always a great way to take a job layoff and turn it into an adventure.
00:33:26.360 | And there's almost always ways of solving the money.
00:33:29.360 | I have almost never seen a situation that was truly insoluble.
00:33:33.360 | There are some desperate situations, but most of us are not in those.
00:33:37.360 | Usually what's needed is some creative thinking, a little bit of elbow grease,
00:33:41.360 | and somebody to really just say, "What can I do? How can I work things out?"
00:33:45.360 | And that's a better path.
00:33:47.360 | It's always been a better path for me.
00:33:49.360 | Thank you for listening to today's show. I hope this helps you.
00:33:51.360 | I hope it gives you a clarity on the topic.
00:33:54.360 | By the way, as I close today, I'm in a position now where I can do a little bit more private consulting work.
00:34:01.360 | I haven't done much private consulting work over the last six months because of family situations
00:34:07.360 | and new babies and traveling the world and all that stuff. It just wasn't possible.
00:34:10.360 | But I'm in a stable living situation now where I can take more private consulting work.
00:34:14.360 | I have better control over my schedule. Children are doing better. I have more time.
00:34:17.360 | So if you would be interested in doing private consulting and taking a private consultation with me,
00:34:23.360 | feel free to email me, joshua@radicalpersonalfinance.com.
00:34:26.360 | I provide it on an hourly basis, so I charge you, bill you on an hourly basis.
00:34:31.360 | But we can talk about really anything in the world.
00:34:34.360 | And I'm not aware of anybody out there who does basically what I do.
00:34:37.360 | You can judge the quality of my advice on this show every day.
00:34:40.360 | But I'm no longer a financial advisor. I don't have any licenses. I don't sell anything.
00:34:46.360 | I don't sell securities. I don't sell insurance. I have no... I'm not registered with the SEC.
00:34:50.360 | Which does two things, two wonderful things.
00:34:53.360 | Number one is it frees me up and means that I can pretty much say and do anything I want.
00:35:01.360 | I live and die by my own words, but I can pretty much say and do anything I want.
00:35:06.360 | The only thing legally that I can't do is I can't tell you to buy or sell a certain stock.
00:35:12.360 | I don't think. And interestingly, I'm not even in the United States anymore.
00:35:17.360 | So I don't even know what jurisdiction the US regulators and whatnot have over my words.
00:35:23.360 | But the point is I don't tell you to buy or sell a stock anyway.
00:35:26.360 | That's about the only thing I can't do.
00:35:28.360 | I can't say sell this stock or buy this stock because that's the kind of thing that approaches licensed,
00:35:33.360 | where the US government requires you to have licenses.
00:35:36.360 | The other thing though it does is it frees me up.
00:35:39.360 | And it frees you up that I don't even have to do many of the normal things that I used to do
00:35:43.360 | when I was a financial advisor. For example, as a financial advisor,
00:35:47.360 | there's all these rules about know your customer and money laundering and all this stuff.
00:35:51.360 | I don't keep notes on client interactions. I don't care what people's names are.
00:35:56.360 | If you want a private consultation with a former highly credentialed financial advisor, I'm your guy.
00:36:02.360 | I only talk with people. I won't go into the details.
00:36:06.360 | But there are a lot of benefits to that.
00:36:10.360 | So if you'd like a second opinion, if you'd like an opinion from somebody who doesn't have a horse in the race,
00:36:14.360 | I don't earn any commissions, I don't make any commissions, I have no ties with any financial companies whatsoever,
00:36:20.360 | shoot me an email, joshua@radicalpersonalfinance.com.
00:36:23.360 | I'd be happy to offer that kind of consultation to you.
00:36:25.360 | joshua@radicalpersonalfinance.com.
00:36:27.360 | That can be something specific.
00:36:29.360 | I've done product reviews for people.
00:36:32.360 | They're considering a certain thing and I say, "Well, let's talk about that."
00:36:35.360 | So they really understand things in a way that their financial advisor didn't explain it.
00:36:39.360 | I've done a lot of work just to give people creative ideas, how to get people unstuck out of their career problems
00:36:45.360 | or their debt problems, etc., how to set things up better.
00:36:49.360 | I've done a whole lot of interesting work.
00:36:51.360 | So if you're interested in that, I'm not cheap.
00:36:53.360 | But if you're interested in that, send me an email, joshua@radicalpersonalfinance.com,
00:36:56.360 | and I'd be happy to go over those details.
00:36:59.360 | And perhaps we can work together and solve some of your problems together.
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