Step Five – Your Crossroads


We are on Step five.  This is your first big challenge on your expedition.  Can you change your habits and not purchase the jacket you saw at Nordstrom Rack or Macys and instead put that toward paying off the balance of your credit card?  Can you choose not to eat out and spend $75 and use that to pay off that credit card faster?  At this point in time, you haven’t made any more money so the only avenue you have to continue your journey is to change your buying and spending habits.  It goes without saying that the more choices you make to forego buying more crap and more luxuries and instead focus on paying down the debt, the faster you will climb to your next plateau in your journey.


As you start paying down your credit cards and your car loans and your other debt, a funny thing will start happening.  When you check your NET WORTH, your overall worth will start to increase.  “How can that be?” you say, “I’m not making any more money and I am not making any investments yet.”  When your liabilities decrease (ie your credit card balances go down, your home mortgage loan decreases, your car loan balance decreases), guess what?  Your overall net worth starts to go up!   You have the same assets, but less debt.

Here is where you can start really making a difference.  What if you were really ready to get rid of all of your debt quickly and move even faster to your ultimate goal?  For almost everyone, the most expensive cost of any cashflow sheet is living expense.  How much are you paying for rent or mortgage?  If you have a sizable debt obligation, can you move home for a while to save while paying down debt?  Can you move in with roommates?  Can you rent out a room in the house you live in?  If you can save hundreds or thousands here, you can pay off your debt in no time and move on.

The second most expensive cost most people have is a car payment.  There is a common misconception that everyone “must have” a car payment.  My wife decided to lease a brand new Lexus and it costs $550/month.  The funny thing is she works from home and drives the car about 100 miles a week.  Maybe.  She has a fantastic job and she can afford the luxury, but I have to say it drives me up the wall every day I see that thing in the street.  That is way too much to spend on a car that sees the road almost never.  Her comment is “well, everyone has a car payment and I want to drive a nice car.”  Mind you this is a leased car and we have no ownership of it and it’s never driven.  I try to explain that if she had a used car, it could still be nice and we could save money that she could either save and invest or even shop with.

What if you had a car and could sell it and maybe downgrade to something nice and instead of a $500 or $600 monthly payment, you could buy an older car with cash while you pay down debt and get ready for the next leg of your journey?  If you could save $500-$600/month and simply drive a different car for a while, would it affect your life?  It won’t affect your daily life, but that savings could contribute to your financial future.   Mark Cuban is a billionaire who started out with nothing and drove a car he paid $200 for ($1000 in today’s dollars).  I’m pretty sure no one here would argue with his choices.


The beauty of all of these steps is that you will see immediate results!  We live in an age of on demand everything.  We want to see the tv shows or movies we want to see immediately at the click of a button.  We want results immediately.  We don’t want to wait.  When you use the tools outlined in these steps, you are able to login and start seeing the results of your efforts on a monthly, if not daily basis. As you pay down your debts or start putting in saving accounts, you will start to see your debts disappear and your net worth rising.  As you gain more confidence at work and look for ways to increase your income you will subconsciously look for more and more ways to increase your net worth and you will be on your way to your ultimate goals.

My biggest regret in my 30s was that I had a small business that paid my expenses, but because I never tracked my net worth or spending, I just went out and wasted money on everything from restaurants to cars to material things.  If I had something that I could use to easily to track my progress and saving and see that my efforts were resulting in more net worth, I would be far wealthier than I am today.  I just spent what I had, paid down some debt when I had it and spent some more.  Today is different.  You have all of the tools you need at your disposal and the ability to see results of your saving efforts immediately.



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