5 Steps to Pay Off Your Consumer Debt

Video Transcript: 5 steps to pay off your consumer debt

0:00 This is Phil with Foundation Wealth Planning. Thanks for stopping by got another video today that I think will be helpful It's gonna be five steps to pay off your consumer debt. 0:08 So if you like the video Please like it if you have liked some of the content that put out or you think they're interested in some this personal finance stuff Especially with the biblical You know focus on it, please follow the channel follow me on Instagram And we love to keep getting the message out 0:27 and I appreciate y'all. So hope this helps.

Again, how do you have your consumer debt? So step one is Pretty simple. 0:36 You got to stop Borrowing. Okay, so when we look at the Bible This isn't gonna be an in-depth video of all the different Bible verses. 0:45 that talk about it, but I should do one of those I've kind of around some of the different verses out there, but it is not something that the Bible is fond of, is debt. 0:56 Okay? So when we look at consumer debt, most people sadly are in consumer debt and way more than we should be. 1:05 And so what we need to do is we need to first of all stop borrowing, stop putting money on the credit card, stop buying new cars. 1:12 that we don't have cash for. Obviously, if you got student loans, you're probably not adding that anymore if you're out in the workforce, but we gotta get the student loans paid off. 1:23 Personal loans, inflation is raging, prices are increasing, and it seems like there's people out there that are having to put some of their lifestyle on the credit card. 1:33 Especially now we're taking trips, and we're financing trips. So the first thing we gotta do is we gotta stop the bleeding and that might take some prayer and reflection to figure out You know, why are we spending this way asking for some strength from God to help 1:48 rein in our spending or you know, whatever different things that we're doing It has gotten us into debt for about what happened and how we can fix it and you know try to resolve to not do that anymore So step one is we got to stop the bleeding and get ourselves in the right mindset, get ourselves in 2:05 the right spiritual state. So that would be step one. And then once we've got that in place that we know that it is now time, we've committed, we're getting out of debt. 2:17 Step one. 

Step two is going to build your budget. And again, I should do another separate video on that. 2:21 But what you have to do is you have to look at your income sources and every single month, because this is what people often get mixed up, is that they try to set a budget and say, well, this month they had this thing come up, and this month they had this thing come up. 2:35 Well, especially when you're focusing on getting out of debt, you have to look at it every single month, and you have to say, okay, well, this is my projected income for this month, and this is my projected spending for this month, and you have to account for that. 2:47 So if there are things that are coming up that you have to pay for, this month, that means that you may have to spend less on other things. 2:54 And so the focus is, getting your debt paid off, right? Again, if we're talking about how foolish debt is and you're just not able to live the way God wants us to, it's going to limit a lot of opportunities that God might present. 3:07 And it's going to inhibit you from saving for your future and for your family and investing. So building your budget out and making sure that every dollar that comes in is going to be allocated and spent in an intentional way with a good chunk of that being put on your debts. 3:27 

Okay, now step three for most of you is probably going to involve trying to find a way to increase your income. 3:32 There are some people out there that are in consumer debt and they do make enough income with their jobs that they could pay it off in a reasonable amount of time, you just have to be more intentional. 3:41 So if that's you, just get focused. But most people could stand to use a little bit more income to get this thing paid off faster. 3:49 So there's a lot of extra ways you could do that, whether that's focusing on your full-time job and getting some additional certifications or, you know, training that might increase your income. 4:01 at your full-time job. That's a really great way to get a boost is to figure out what is the way just within that same track you're already working to make it happen. 4:11 Now if you're in a job that is going to be hard to do that, well maybe you should start retooling for a different job, right? 4:18 That would be another option is a different job that could pay you more. Or if you like your job you can't add to it right now but you think there's the future that you want to stay in. 4:26 But you just in the short term need some extra income. There's a ton of work out there. I'm sure you all have seen that over the last few years it seems like no company can keep employees. 4:38 So if you're able to do physical work, you know, there's construction sites all over the place that are needing help. 4:44 You can make a way above minimum wage working on any sort of physical trade just helping out as a manual labor if you don't have any skills. 4:53 Of course, you can do all the classic stuff, like deliver pizzas and what have you. You can walk dogs and anything with pets. 5:01 People seem to pay a lot of money for pet sitting, anything of that nature. So get creative. You can rake leaves in the fall, you can mow grass. 5:12 And there's a lot of things that you could do. But there's some things that are just, you know, anything stock and shelves at any sort of store overnight. 5:22 You know, those things are just kind of already prebuilt. You can just go do that. But I would focus on finding a way that you can get a little bit more income because that's gonna help speed up your process. 

5:29 Now, four is gonna be pay down your smallest debt first. This is gonna be the one that's a little bit controversial. 5:39 So again, in all of the financial training that I've done, they have said, you know, look at the interest rates and pay down the loan with the highest interest rates because that's going to help save you the most money. 5:50 And that is absolutely true. And in a vacuum, that is what someone should do. So if you are able to be disciplined and you think you could handle it, you could take down the highest interest rate that's going to save you some money along the way. But when you list out your debts and you put them in order, not of interest rate, but of balance, right? 6:10 So you put the top of the page, the one that's 500 bucks, then the next one list is the one that's 1,000, then the next one list is the 3,000 dollar one, then the last one will be list is say your $10,000 car payment. 6:19 You have them kind of in that order with those four debts. And you take out, you just focus everything on the $500 one. 6:26 That would be something called the debt snowball, which has been popularized by Dave Ramsey and company ( https://www.ramseysolutions.com/ ). And he gets a lot of hate for that because people say, well, why would you not worry about the interest rate? 6:40 I just need to pay off the highest interest rate. Again, in theory that works, but Davis is tapped into something so powerful and that is controlling your behavior. 6:50 And I've seen that in my work working with clients directly is getting any sort of behavior change. You have to have a catalyst for the hinge and you have to have motivation to keep going. 7:03 And the thing about the debt snowball, when you're paying off that first debt, you feel euphoric. You feel like there's a weight lifted. 7:13 And I've done this in my own experience when I, to pay off my debt journey is getting those little debts out of your life is unbelievably empowering. 7:23 So Dave is really tapping into something there. It bucks the conventional wisdom, but I got to say go with the debt snowball as he's taught for years. 7:32 It's going to be the way it's going to get you there. And then you got to get paid off fast. 7:36 So if you're going to go with the debt snowball and you're just going to go for the smallest one and not worry about the interest rates but then you know slow roll and you don't get it done in the next year or two well then you're really gonna be missing out on a lot of you know that the interest 7:52 rate so I guess what I'm saying is if you are going to do the debt paid off and next one to two years. 8:05 Most people can do that if you have a lot of debt, maybe it's three years or four years. But you take the debt snowball and you gotta go, you gotta hammer it hard. 8:12 If you're gonna lolligag through it, you're gonna just never get out of debt. And all those ones that have the higher, higher interest rates are gonna continue to grow because you're not paying those down. 8:21 So once you commit to it, you can do it, get it done. 

And that's step five is to stay focused, stay consistent and it will be over before you know it. 8:32 You know, the one or two or three years that's going to take you to get a debt. It's going to pass anyway. 8:36 So why not pass? Why not have the time pass while being focused on the debt, get it paid off. And then when that two or three years is done, you'll be debt free and it'll be an amazing feeling. 8:48 So I hope that helps. Feel free to reach out to me if you have questions or any follow-ups on that. 8:57 And if you have any additional topics that you want me to talk about, feel free to leave a comment. You can email me, or send me a message. 9:04 We'd love to hear from you. And I appreciate your time and God bless.

Phil Francois
Owner and Financial Advisor at Foundation Wealth Planning
phil@foundationwealthplanning.com
www.foundationwealthplanning.com