Today, I want to help you learn something
that I knew or at least I thought I knew,
but then because I was little to clever with things,
it ended up kicking me in the butt
and took me awhile to figure it out.
Maybe you're in the same situation.
Now, if you look at statistics on credit card debt
for Americans, you'll see numbers anywhere
from 4,000 to 6,000 per individual
or 10,000 to 16,000 per household.
And it'll all depend on whether you look
at households that are carrying balances
or not carrying balances, so there's a lot of data
that you can read either way.
Rather than try to prove anything,
I want to just show you a mathematical example
of what it can be costing you in vacation time
for you to be carrying credit card debt.
And what I'm going to do like I usually do
is use an example that's somewhat easy on the math
as far as using some round numbers here.
So whether you're listening to this or watching this,
hopefully, this will be easy to digest.
Imagine you have $12,000 of credit card debt,
and you're paying 25% on that.
25% of that would be $3,000.
In other words, a quarter of $12,000 would be $3,000,
and if you divided that, that would be $250 per month
that you're paying in credit card interest.
You're paying that with after tax dollars,
so there's no tax breaks on that.
It's not like a mortgage that could get
a tax break or student loan interest.
And that's what you're paying just
let's say to carry a balance.
Let's assume for a moment, again, round, pretty,
simple numbers, that you're earning $10 an hour.
You're taking home a little bit less than that
because you're working, let's say eight hours a day,
so $80 a day, eight times 10.
And again, just to keep things simple,
let's say that your taxes in total,
brackets, everything, costs you 25% of your paycheck.
So you're taking home $60.
Well, $60 times four would be 240 bucks per month,
right around the same number we just looked at.
So it would be costing you four days per month
to carry this balance.
Nobody's giving you anything extra for that.
You're not getting any benefits for that.
You're just working four extra days
just to tread water with your credit card interest.
Now, you might say, wait.
I make more than $10 an hour.
Okay, what if you make $20 an hour?
Well, similar concept, you're making more.
You're taking home $120 per day, let's say.
And it's still costing you two days per month.
That's two Fridays per month you could be taking off
if you were able to get on top of your credit card interest.
And if you're making $40 per hour, same concept,
just slightly different math.
You're taking home about $240 per day,
so it's still costing you one day per month.
That's one vacation day per month.
That's 12 days per year for you simply
to carry credit card interest.
You're getting nothing additional in benefits for that.
So I want you to think about this from a standpoint
of what it means to be carrying interest
that's just really high interest.
It's not getting you anything.
It's not backed up or guaranteed by a home or a car.
This is just money that was spent
that there was nothing else to cover it.
So whether your numbers are exactly like this
or slightly different numbers, this is the basic concept.
So what do you do about it?
How can you reduce your credit card debt?
I come from the generation where we were
first introduced to credit cards when we were 18 and 19,
and they had these mass mailers that would come out.
My parents' generation didn't experience this.
The most I ever had was a checking account
that was signed on with my parents.
So credit card debt for a lot of people
got them in trouble very quickly.
Now, today, student loan debt might
be doing the same for some people.
That's a little bit of a different conversation.
But the concept of having a lot of debt impacting
your situation, especially when it's not guaranteed
by anything is really brutal on you.
So first thing you can do is get clear about
what is it that's more important to you
than either overspending on your current lifestyle
or that's important enough that you
want to take time off where you say, gosh.
I gotta get a handle of this credit card debt
so I can start taking Fridays off or one Friday
a month or two Fridays a month, whatever it might be.
So you have to have a goal that's more exciting
than what you're currently doing with your money
otherwise you'll say, wait.
I'll just keep paying for my premium cable channels,
my latte Frappuccinos, whatever they are.
I'll pay for all these premium price things that maybe
I don't need, but I haven't thought of something better.
The second thing which ties along with this
is to reduce your current lifestyle spending.
This is not about trying to make your life horrible.
This is about saying, okay.
What could I cut away that I'm really not even using?
Very often, gym memberships are not being used.
Maybe it's you.
I've done that sometimes.
Who knows?
Maybe you're not using the premium cable channels
or you're recording DVRs, but you're recording it here.
You've got an HD recorder here and another feature
over here and other cable channels over here.
See what you could be saving money on.
Very often you can renegotiate credit card rates.
You can call the bank and say, hey.
Can I get a break on my credit card interest?
And they might not say forever, but they might say, okay.
For six months, we'll get you to 20% or 15%.
Remember, banks are not necessarily evil,
but they're not your friends.
And I'm sure some of the people who work at banks might be
your friends, but the banks just want to make money.
They love credit card customers.
Credit card customers pay the highest interest rates.
They want to keep you.
Know that.
If not, we'll find a way to go somewhere else,
and you can always go to credit counseling as well
if you're ready to cut up your credit cards.
But let's say you're not at that stage yet,
although that can be very important
and very helpful if necessary.
Sometimes you can get a 0% balance transfer
credit card with another company.
This is a catch 22.
If your credit's really not good, and your credit score
is bad, that might be tougher.
The other thing is you gotta be careful that you don't
go and spend that money as well.
It's one of the traps I got into when I was younger
and thought I knew a lot more than I did today.
Throw away all the other new credit card offers.
If they're not good, if it's something that's just
going to get you further into credit card debt,
just throw them away.
Unless it's going to be a lower percent interest rate,
and you're going to cut up another card or in some way
to again reduce the total amount of either interest and/or
total debt you have, stay away from it.
Pay off your highest balance credit cards first.
This is really one of the core strategies of doing
credit counseling, but again, a lot of these things
like doing that and renegotiating your credit card rates
are things you can do without having
to use a credit card counseling company.
Again, they can be awesome, but sometimes
it doesn't necessarily work out for you.
Temporarily, this is a huge one, the temporarily part.
Reduce investments in your savings if necessary.
Again, this is another tough one because if you do this
and get in the habit of doing this,
then you just might adjust your lifestyle
and just start spending more, and now you're not saving.
But in the short run, if you say, wait.
You know what?
I've just got say this $12,000 credit card debt.
I've been saving $500 a month into my savings.
I could knock out that 25% interest quickly
and get back to my savings.
My savings aren't making me 25% weighed,
so again, mathematically, that can make sense.
But since we're humans and sometimes do foolish things,
that can hurt you if you don't execute properly.
Track your credit score and work to improve it.
This can be done very often with your bank
on the online website you have for your bank.
They might say, hey.
You can get your credit score.
If you can't do that, I've used at times CreditKarma.com
to look at my score, and again, track things
over all, looking for habits that help
you reduce your credit score.
Excuse me.
Help you increase your credit score
so that you can reduce your credit card
interest as a result of that.
Number nine, create a budget.
It sounds old fashioned.
It sounds boring.
But at the end of the day, a lot of this is just math.
And then finally, track your finances monthly.
I've used Quicken for years.
At times when I've not done well with my finances,
I've kind of ignored it and put it to the side
and said, you know what?
I'm too smart for this stuff.
I'm just going to go do other stuff.
And as a entrepreneur sometimes I'd say,
well, I'm just going to make it.
I'm going to out-earn this.
I'm going to make so much money that the fact I'm paying
high interest rates whether it be on credit cards
because of personal lifestyle spending
or in my small business taking risks that were maybe bigger
risks than I should be taking, I'd convince myself.
Well, I'll out-earn this.
And sometimes you don't.
So track your finances monthly.
If it's small business it might be QuickBooks
or one of the other tools that does that.
So if you want further help with this,
you can go to 4daytools.com, and you can get a tool.
an Excel-based tool that's the vacation debt calculator
to help you free up more time and see what it's costing you
to not be making the most of how you're managing your money.
If you want to get the show slides and the notes
from this one, you can go to 4dayentrepreneur.com,
and then if you want to start creating your
4-Day Work Week Game Plan, go to 4daygameplan.com.
And this really integrates the concept of the budgeting
your income and how you start creating the plan
that gets you to 4 days.
As I've told you before if you've watched any of my videos
or listened to any of this.
It took me 22 years to lock in a four day work week
where I was working a 4-Day Work Week
at least 90 to 95% of the time.
Many years to do that.
It doesn't need to take that long.
It's a lot easier today than it used to be.
So if you have any questions on this,
put it in the comment section below or shoot me an email.
As always, I look forward to helping you create
the lifestyle you most desire and helping you
make more money in less time doing what you do best.
Thanks for listening.
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