Home » Blog » Guest Blogs » What is your definition of debt?

What is your definition of debt?

by Tracy Latona |

Do you consider payments to be debt if you can pay it off quickly before interest kicks in? What does it feel like for you emotionally if you do have debt?

What if it didn’t have to be that way?

Debt is essentially borrowing someone else’s money to make a purchase. It’s borrowing money to pay for present purchases, which steals from your future, and causes you to pay for the past. Debt can be touted as a “tool to wealth,” to build your own empire off of “leverage” of using someone else’s money. I had a district manager brag that she used $7,000 of someone else’s money to put storm shudders on her house, even though she had the money in the bank.  In reality, debt equals risk; when you owe, you don’t own that money, and the owner of that money can come calling at any time and ask for it to be paid in full, immediately.

Debt actually carries mental and emotional consequences, too. I have personally felt, and have several clients say, “WOW! It feels like a weight has been lifted off of my shoulders!” when they finally become debt free! When you aren’t giving your income away in payments, you can use that money to build your future.

So, how do you destroy debt?

First, start off with some cushion in the bank. Starting with a $500-$1,000 emergency fund allows you to not go into debt when little things keep popping up, such as an alternator going out on your car, or your sink won’t drain and you need a plumber. This cushion is not meant to be a fully funded emergency fund. It’s designed to keep HOPE in place, because when you’re on the journey to destroy debt, and you have to keep borrowing money for Murphy, it can get frustrating really fast.

Next, list all your debts from the smallest amount owed to the largest amount owed. You won’t look at the interest rates or monthly payments; those focus on math. The “Snowball Method” here focuses on behavior, which is what money habits are. Pay the MINIMUM on all your debts except the smallest one. Then, throw everything extra you can towards that smallest one. Once it’s paid off, CELEBRATE! (WHOO-HOO! We’re paying off debt!) and take all the money from the first debt and roll it into the next. By the time you’re at your third or fourth debt, you’re throwing big chunks of money at it, and you can SEE the progress.

Make it visible. Have a thermometer chart or some way to tangibly see the progress you’ve made! This will help keep up the motivation and be encouraging when it feels like progress is slowing down with the bigger ones. Wash. Rinse. Repeat, until all your debts are paid off, and YOU’RE DEBT FREE!!!

Tracy Latona  

Golden Rose Financial Coaching