Debt, Getting Out of it, and Staying Out of it – S01E16

In this video I open the conversation about money. This week’s topic is specifically about debt, getting out of it, and staying out of it.

Original Script of the Video (not a direct transcript)

Hey, everybody. Welcome to this week’s episode of Watch Me Shine. My name is Brian and this week I want to open the conversation about Money. Today, we’re going to talk specifically about getting out of debt. I’m technically doing this topic a week early because I combined two weeks of learning into the last episode. I was supposed to talk about Nutrition and Exercise over two weeks, but my way of doing it doesn’t need two weeks of information.

So, let’s go over the tasks from last week and then we’ll get started.

  1. Make a list of things you can do to improve your diet. Don’t just go on a diet. Think of how you can change your diet to be better in the long run.
  2. Start doing those things, one at a time, until they become habit, until they become your diet, what you habitually put in your system.
  3. Start doing research into exercise. Figure out if you want to go to the gym or just work out at home like I did. Either way, start to do the research. Make a list of things you can do to improve your exercise.
  4. Start doing those things, one at a time, but only if you’re in a place weight-wise that will allow you to work out without injuring yourself. If you’re not, just focus on diet until you are.

Again, comment below if you want to talk to me about any of this and I’ll help you out as best I can. No pressure.

Debt is something I’ve struggled with my whole life. I started borrowing money from people at what I consider a very early age. When I was 13-years-old I asked my dad to buy me a computer. It was a Tandy 1000 RLX/HD from Radio Shack and it was on sale for $1000. The deal was that I would mow the lawn for $5 each time and pay it off. I could also use birthday and Christmas money as well.

I remember that computer vividly. It was, at the time, smaller than many home computers I’d seen. It was the ugly beige color that most computers came in at the time. It had both a keyboard and a mouse. The screen had lots of colors and I could play games on it. It was amazing. It didn’t run the new Windows operating system, but it had DOS 5.0 on it, which was enough for me. I was so happy. Until six months later when it was a total piece of crap. There were better computers out there and I then wanted those, but I was in debt.

When I was 17-years-old, I took a loan from a bank for $3000 to get a new computer. I remember this computer as well. It was an ACER P-166 and it was awesome. It was a Pentium 166 and had a 2GB hard drive. It was black and had a cool looking case. It had this design in the side with all these air holes, like someone shot it with a shotgun. It ran Windows 95. The screen was gorgeous. The capabilities of this machine were awesome compared to my first computer. Not only in games, but it had a 33.6 baud modem, which meant I could get on the Internet for the first time. It opened a whole new world to me. Because I knew computers better at this point, I bought one that would last a little longer than six months. But, even then, the shine started to fade within a couple years. There were better computers out there and I wanted those, but I was in debt.

When I was 18-years-old, I started to go to college. I took out government loans for it. I was told that, no matter what degree I got, there were employers out there that would pay well, anyone that had a degree. After two years in college, I transferred to a university. This cost even more money, but the loans were easy to get. Again, I was told that it didn’t matter what degree I got, as long as I had one. I was told that the jobs offered would pay well just because I had a degree and I would be able to pay them off easily. What they didn’t tell me was that the average worker pay in the United States had remained stagnant since the 1970s, during which time I was born. Worker pay had gone up an average of 3%, which was the traditional yearly increase of inflation. But, during that same time span, the cost of everything else went up much more and services were increasing in ubiquity every year. In the 1970s, there was no Internet in homes. There was no cable TV. There were no mobile phones. You could argue that these things aren’t necessary, but have you tried to get a job lately without having access to the Internet and receiving calls on a mobile phone? If you have, which jobs are those? I’ll bet you 9 times out of 10 they’re minimum wage jobs you can get by walking into a store and filling out an application. These increasing costs aren’t covered by that 3%.

When I was 25-years-old, I bought my first new car. It was a 2002 Mitsubishi Eclipse. This was at the time when they had these really flashy commercials on TV and the Barenaked Ladies were singing One Week over these cool images of people driving, singing, and having a blast in that car. I was making decent money and the car I was currently driving was going to cost more to fix to meet Atlanta’s exhaust requirements than the car was worth. I don’t remember how much the loan was on that car. I got a great deal, but I was bound to that loan until it was paid off, which was 5 years. But I loved that car. It was silver, just like the commercial, and it had a really great stereo and a sunroof. It took me all over the south, the midwest, and even to Canada a couple times. I loved driving it.

When I was 29-years-old someone pulled out in front of me on an icy morning and I hit them, crushing my beautiful 2002 Eclipse. The insurance company told me that they could fix it, but it would probably not drive the same because of the damage. It would cost pretty much exactly what the car was worth to fix, so they gave me the option of totalling it out, which would cancel out the rest of the loan and bring me to zero. Because I was in debt and my credit at this point was shot, I had to take a high-interest, short-term loan and buy a piece of junk 1997 Chevrolet Cavalier. I drove that car for 18 months. I used that time to fix my credit and then I did it again.

When I was 31-years-old I traded that car in for next to nothing and bought a 2008 Mazda 3 5-door. It was awesome. It drove really well, even in the snow and ice. It had a great stereo and a sunroof. I had lots of space in the back to haul stuff. I drove that car for eight years and nearly 250,000 miles. It took me all over the midwest and even took my family to Disney World once. I never once had a problem with that car that wasn’t regular maintenance. I did, however, have some problems making the payment on time here and there. But, again, I was bound to a loan… twice. At one point, after paying it off, I took out a loan to pay bills that came up by using my car as collateral.

When I was 41-years old my wife lost the ability to work. In order to make ends meet, I needed a second job. Because my car was too old, I went out and traded it in for my current car, a 2017 Mazda CX-3. Again, I look at this car and just get excited. I was getting overtime at work, which would pay the car payment every month and, for extra income would, my plan was to drive for Lyft and Uber, hopefully making enough money to make up for the missing paycheck. This plan worked great for about two years when I ended up losing my job. Lyft and Uber started to compete and take the price cuts out of the drivers’ portion of the fare. I was bound to a loan and, again, having problems making the payments.

And credit cards? I don’t even really want to get into those because that’s embarrassing. But I’m going to touch on it anyway to drive home a point. Twice now I’ve fallen victim to the trap that credit cards are a second source of income. They let you keep up your lifestyle in hopes that better times are coming. As I generally do contract work, credit cards narrowed the gaps during times of unemployment or underemployment. When I got a good contract or a full-time job that paid well, I would pay them off. But, again, that doesn’t always work. Twice now I’ve had to use debt assistance, where I pay a company money to negotiate with my debtors to bring down interest rates and stop late fees and such. These programs are great, but having to go through them is embarrassing. On top of that, when you spend your money paying off things you’ve already bought or things you’ve already done, you spend your life paying for life you’ve already lived. You’re living life backwards.

They say that the best laid plans of mice and men often go awry. This means that, no matter how carefully you plan, something can go wrong. Murphy has a law about this. The problem, though, is that when you’re bound to debt, the lienholder doesn’t care about your problems. They want their money and they’re either going to get it or take away the thing for which they’ve loaned you the money. I’m working my way through this problem again and I’m going to give you advice on the things I’ve learned. Hopefully you can use this information to help you.

There are two types of slavery alive and well in the United States today: incarceration and debt. The United States prison system incarcerates people in for-profit prisons, in which inmates are in work programs, getting paid sometimes $2 an hour to do work for which the prison makes a profit. If you think I’m kidding, I have links in the video description below. But it doesn’t stop there. The more nefarious version of this is the US system of Student Loans and credit cards. I’ve already touched on credit cards, so let’s look at student loans.

In the United States, the higher education system, meaning colleges and universities, have become increasingly expensive. And to compensate, the US Government offers citizens the ability to take government loans to pay for it. Knowing that the money will be there, colleges and universities keep increasing tuition every year. When this happens, the government increases the amount of loans students are allowed to take on every year. This has turned into a cycle.

And, knowing that more and more people are getting degrees, the employers in the US are starting to demand higher education for all levels of employment. It’s nearly impossible to get a job without a 2-year degree, for which most people go in debt. This isn’t always stated on the employment listing, of course. The requirement comes in knowing that people with degrees are often selected over ones that don’t. This is usually for entry level positions, as well, which are traditionally supposed to require nothing except the desire to learn and train on the job. The higher paying jobs are starting to need a minimum of a 4-year degree, which costs even more. And, for all of these jobs, they’re paying only what they have to, which often doesn’t cover the cost of paying the debt you’ve incurred to get a degree to give you access to that job. If it does, you often don’t have enough to afford buying even a modest home, which means you have to rent something you’re not going to get collateral out of to resell later in life. You’re living life in service to another.

So, how do we break this cycle? How do we get out of this modern day indentured servitude?

The first thing I had to do was change my mindset about money. I learned that I must learn to master my money, not let my money master me. The program taught me that a person who sees the powerful force for good that money can be will be more likely to keep their life in balance by earning, saving, and giving.

The first step to that is to see that money is a tool. That’s it. It doesn’t make you happy. It doesn’t even bring happiness. It’s no better at that than a screwdriver or a hammer. It’s a tool. What you do with it can bring happiness, but the money itself isn’t what makes you happy. Loans, credit cards, and debt make you a servant. You put yourself in the service of another, the lienholder. The work that you do belongs not to you, but to your master, the holder of the debt. When we owe someone money, they have a certain amount of control over us.

The second step is to get an understanding of what you’re paying for every month. Sit down with a piece of paper or a spreadsheet. Figure out how much you spend on everything. Rent, utilities, food, services, car payment, credit cards, maintenance, everything. Make it visual. See where your money is going. Know your debts and know where you stand.

The third step is to get some help. If you can’t afford a financial advisor, ask a friend that seems to be doing well with money. Have them take a look at your bills and debts and figure out a plan that will help you get things under control.

The fourth step is to get control and the sooner you do this the better off you’ll be. Make a commitment at this point to stop going into debt to buy things. If you can’t buy it outright, don’t buy it. Tell yourself that, if you buy something using debt, you’re going to end up paying up to 20% more for it in the end. That’s no lie, many credit cards charge up to 20% interest, which means that if you buy something that costs $1000, by the time you get done paying off the debt, you’ve probably paid up to $1200 for it. Could you use an extra $200 in your life? There’s an easy place to find it.

The fifth step is to get that plan together and work it. Stick to the plan. Do not deviate. Pay your credit cards monthly, no exceptions. When one gets paid off, don’t keep the money you paid on it. Pay extra on another card until it’s paid off. Then don’t keep that money either. Pay extra on another card until it’s paid off. Do this until they’re all gone. Cancel them, cut them up, burn them, and vow to never use them again. Use that money you were using to pay those cards and put it into savings. Use that savings to buy the things you want once you can afford them. We’ll talk about saving more next week.

If you get overtime, use it to pay debt. If you win a scratch ticket, use it to pay debt. If you hit a big one on a slot machine, use it to pay debt. If you get a check from your grandma for your birthday or Christmas, use it to pay debt. Get yourself to zero and stay above that line. The only thing I would argue that you may want to go into debt for is to buy a house. If you want to buy a house, by all means take a loan. But only take a loan that is going to cost you less than 25% of your current monthly income. Think of one of your weekly checks or half of your bi-weekly check as a mortgage payment.

Here are three final tips I have:

If you want to go to college or university, start saving early. Don’t go into debt as a young man, as I did. Start working in high school or take time off after high school and work until you can afford the college or university of your choice outright. Do not go into a life-time of debt to get a degree for which you may never find a job that will afford you the opportunity to pay off that debt. Start considering trade schools or self-employment. Unions will pay you to learn and get you experience in the field. There are training programs out there on the Internet that don’t cost a lot of money and will help you start your own business. This isn’t easy, of course, but it’s a lot more affordable than a degree and you can spend your time working on something that you own which allows you to bill what you want instead of what someone else is agreeing to give you. Benefits from a company are no longer provided. You pay for them out of your check anyway. Get them through the ACA, or If you’re self-employed, you have access and can often get a tax break on them.

Don’t buy something if you don’t need it. Take a car, for instance. If you live in a city that has a decent public transportation system, don’t buy a car. Use the public transportation system for your day-to-day travel until you have saved enough to buy a car. If you need immediate travel, take a cab, Lyft, or Uber. If you don’t have any of those and absolutely need a car, don’t buy something new. Buy a cheaper, used car and pay it off quickly so that you can save that money until you have enough to buy something better. Don’t buy the car you want, buy the car you need.

Don’t pay for all the streaming services. In my house, we pick one and binge watch the shows we’ve missed. When we’ve watched them, we switch to another for a few months and binge watch the shows we can only see on that one. Then we do switch again. If those shows are released weekly instead of as a whole season, wait until the season is over. Remember, television is a distraction. Spend your time learning, educating yourself. That Internet connection is access to a whole world of education, not just a conduit for streaming and social media. Use it to better yourself, not just distract yourself.

These, of course, are just examples. If you have any others, feel free to comment below and give advice to me and others looking for ways to save money.

So, here are your tasks for next week:

  1. Get your mindset right about money. Remember that it’s simply a tool. It doesn’t make you happy. Things won’t make you happy. They’re temporary and can be lost, stolen, broken, or taken away. It’s what you do with the money that makes you happy. Experiences, giving, donations, good will. These things make you happy and you’ll never lose them.
  2. Stop buying things using debt. Make a commitment to stop using loans and credit cards to buy things.
  3. Know where you are financially. Get an understanding of where your money goes. Understand where you’re paying for things you need or paying for life you’ve already lived.
  4. Get some help. Find a financial advisor or a friend that can help you get things under control by coming up with a plan. Contact credit card debt relief programs. My state has one that is non-profit. They do charge a small fee, but it’s so they can keep the lights on and keep doing this for other people.
  5. Use that plan. Work it. Stick to it. Get back to zero and start climbing.

To be fair, it took me a long time to realize all this and choose to live it. It’s not an easy path to follow. I’ve climbed out of debt three times in my life, two of those with assistance. I remember the feeling of getting there and how nice it was to have money again. But I forgot. Don’t forget. You can get out from under this, just as I did. And, when you do, it’ll be like a breath of fresh air. I’m climbing there myself for the fourth time and I’ll see you on the other side. So, until next week… Watch me shine.

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