Being Broke Isn’t Cute part III: Becoming Debt-Free

Whenever I see my bunny rabbits, I get excited about my financial future. This is because these cute bunnies have no worries in the world—something I am trying to achieve.

To be carefree and worry-free, we must first make a great effort to overcome financial adversity. Most of us start with financial limitations, whether limiting beliefs or money woes.

But, we are not here to dwell on the past. Welcome back to the Being Broke Isn’t Cute series (part I, part II). Today, let’s begin our journey from the depths of debt to the surface where we can breathe.

Income Investing vs. Inflation

Identify the problem. Before you can get out of debt, you must first recognize that your finances are in trouble. You laugh, but many people think they are going to be okay. However, most people will not survive.

Luckily, I wrote about recognizing the signs of money stress in part 1 of this series. Therefore we can jump right into the solutions.

Multiple ways to tackle debt. I love reading, and throughout my adventure, I stumbled upon different methods and techniques to destroy debt.

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I will briefly discuss each method, but it’s best to read each book in its entirety. I’ll label each way by its respective author. In the end, I’ll tell you my favorite method.

1. Dave Ramsey
2. Elizabeth Warren
3. Ramit Sethi

Dave Ramsey. Mr. Ramset uses the “7 Baby Steps” to get people out of debt. Step one is to save a $1,000 emergency fund, and step two is to use the debt snowball to defeat all your debt.

I read the following books under Dave Ramsey’s program: “Baby Step Millionaires,” “Debt-Free Degree,” and “Know Yourself, Know Your Money.”

Dave Ramsey’s has the most traction of all the different programs out there. He keeps his way simple and focuses on cutting costs and making sacrifices to recover your life.

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I recently read a short book (50 pages) under the Dave Ramsey banner called “Defeat Your Student Loan Debt.” If you don’t fancy yourself a reader, this book can quickly get you going in the right direction. 

Elizabeth Warren. Yes, the senator. Senator Warren wrote a compelling book in the early 2000s titled “The Two-Income Trap,” where she questioned if both parents should work.

Then she followed that up with “All Your Worth,” which gives us a detailed budgeting plan to get out of debt and stay debt-free (20s, 30s, 40s, 50s, 60s, 70s).

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Senator Warren’s plan focuses on the 50/20/30 rule of expenses/savings/wants. If you are over-leveraged in one of these areas, this budget will help you quickly identify it.

You are most likely paying too much for housing, which falls under the 50% category. That is why I focus so heavily on controlling or mitigating the effects of housing. You can find more in my Real Estate Investing at Any Age series (20s, 30s, 40s, 50s, 60s, 70s).

Ramit Sethi. Mr. Sethi is a funny person and the influencer who got me started on my debt-free journey. I was watching him on a podcast in September 2020 and finally decided to make a focused effort to pay off debt.

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Mr. Sethi’s book is “I Will Teach You to be Rich.” It was the first book (now on book 117) I read on my journey. It is such an easy-to-read book that I can recommend it to anyone. 

Mr. Sethi uses his CEO method to get you out of debt. It stands for Cut Costs, Earn More, and Optimize Spending. The program works because of his attention to detail in helping you call cable, phone, and debt companies to discuss your situation.

He also talks about how to earn and asks for a pay raise at work. You don’t just ask your boss; work your way up to that moment by asking for additional assignments. It is a good discussion for any career-minded professional. 

A Recession vs. USDC

My favorite method. This will be a tough choice; however, I will go with Elizabeth Warren’s method. When you look at the 50/20/30 rule, it instantly tells you where you are overspending.

You don’t need to guess or assume. You also don’t have to start following rules like “don’t drink Starbucks blindly.” You discover everything you need once you budget your expenses into these three bubbles.

Getting started. Go ahead and read these three books, “All Your Worth,” “Baby-Step Millionaires,” and “I Will Teach You to be Rich.”

Whichever method gets you the most motivation, choose that one. They all will work the same because you will be changing your habits. If you can get into the habit of documenting all your spending, you will instantly start saving money.

The debt snowball. Dave Ramsey talks about the debt snowball. Start by paying off your smallest debts and moving toward your largest headaches. 

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You use the cash flow you free up from the smaller debts to accelerate the paydown of the larger ones. This technique works by momentum. 

I can verify that this technique works magic. My wife and I paid off -$77,000 in debt in 22 months while saving $150,000 in a dividend portfolio. Read more about our story in the link above. 

Can you pay off your debt? You sure can, as soon as you believe you can. There is nothing complicated about paying off debt.

USDC vs Series “I” Bonds

However, it’ll be tough if you cannot adjust your lifestyle, live below your means, and stop consumerism. Paying off debt is 20% mindset and 80% habits. If you make it your top priority to pay off debt, you can be debt-free in 2-4 years.

Conclusion. Being debt-free is like Dorothy stepping into the land of Oz in the movie “Wizard of Oz.” I even created a series about this moment (Defeat Credit Card Debt, Defeat Automobile Debt).

As Smokey the Bear once said, “Only you can prevent forest fires.” Similarly, “Only you can pay off your debt.” Ramit Sethi says it best, “Nobody is coming to save you.”

Here is a link to the first video I watched on my debt-free journey—Ramti Sethi on a podcast. I wish you well on your journey. Next time, we will talk about saving and investing. Good Luck!

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