I assume that you have already worked out how much debt you have and the three ratios that will allow you to decide how to deal with it. If you have not done this yet you can do it by reading the articles we published on The Money Principle under the Debt Movement category – they are all there; from feelings, through number to tools.
Today, I would like to share with you how important I found mental attitude to be in dealing with debt and paying it down in record time. I already mentioned that when I first realised how much debt we had, I also realised what the saying ‘my world collapsed’ really means. It is like someone has put out the light of your life; like someone has built big, tall walls around your present and your past and future don’t exist. You look at your life partner and see betrayal; you look at your parents and see shame; and you look at your children and see deprivation for generations. I know it sounds dramatic – but this is how I felt for couple of weeks. I remember a hotel room in Lausanne (Switzerland) and me sitting in bed, not being able to concentrate on my work, just repeating ‘We’ll be OK one day’ again and again.
This was it really – I was not able to work and function; and working, having my smarts about me, was essential to getting out of the financial hole we found ourselves in. This continued until I realised that the only way to win was to change the way I thought about the situation; in other words, to change my mentality and attitude.
I did it; and so should you! There are three shifts in mentality that I found particularly helpful.
From ‘debt’ to ‘negative wealth’
This one is about not letting the debt get you down and upset you to a level where you are in a negative cycle around money and not having it. Allowing this to happen is a sure way to see debt as shameful (there are enough people who will try to make you feel somehow inferior for having debt anyway), and debt busting as a Sisyphus struggle – not good. Remember, Sisyphus continued pushing the rock up the mountain not because he was so strong willed but because this was his punishment from the Gods; so he had no choice. When debt busting, you have choice – to fall off the wagon and this is something you don’t want to do; it only leads to a cycle of self loathing.
How to change your attitude to debt? Remember that our thoughts (and the way we express these in words), our emotions and our actions are an unity. So, one way to change how you feel about debt is to change the way to think about it.
I, for instance, started calling our debt ‘negative wealth’ – technically it is correct; by reducing your debt you increase your wealth albeit a bit less quickly than through savings and investments. When I started doing this, someone asked me whether I call my savings ‘positive debt’ which completely missed the point. And the points is:
What you call your debt shouldn’t be wrong but this is not about what is correct or exact: it is about what is useful in making you feel better about yourself, your life and allowing you to continue with it.
Call me naive but I fail to see how calling my savings ‘positive debt’ is helpful; ‘negative wealth’ is another matter entirely.
You don’t have to do this; find your own way. Just don’t let the b*stard get you down!
From ‘gazelles’ to ‘tigers’
Don’t get me wrong; I think that Dave Ramsey is one of the smart people in personal finance – I think that of anyone who has helped, and is helping, so many people get out of debt. There is one thing, I believe, he got wrong and by people repeating it, and adopting it, damage is caused: the ‘gazelle intensity’. This is where Dave explains that to get out of debt one has to develop gazelle-like intensity and focus.
What is the problem with this? The problem is that while you develop gazelle intensity you become prey. You may eventually get out of debt, but you will never win the money game if you become, and stay, prey.
I believe it is better to develop the focus of a tiger; then you are a hunter not prey. Becoming a tiger and ‘hunting’ with extraordinary focus and purpose is what will get you out of debt and help you win.
Most of us act in accordance with what is conventionally seen as appropriate behaviour. Nothing wrong with that – most of us spend most of our lives not wanting to attract attention. However, keeping within the confines of the ‘acceptable’ means that we strip ourselves of the creativity we need to ‘jump’ and are likely just to try to run fast.
If you want to get out of debt and change your financial destiny you need to learn to ‘jump’; this means learn to forego convention. Tim Ferriss helped me do this by the examples of ‘crazy’ awesome stuff he does as exercises. I tried my own ‘crazy’ stuff – and I knew that I am winning when I was standing at the bottom of a ski slope asking people to sell me the day passes they no longer needed for half price.
And this was only the beginning :).
In a drive to be ‘objective’, mentality is often underplayed in personal finance. I found that it is as important, if not more important, than the numbers, ratios and spreadsheets.
Try it! What do you have to lose?