"Three great essentials to achieving anything worthwhile are: hard work, stick-to-itiveness and common sense.” - Thomas Edison
At this point, you’ve probably heard of the 80/20 rule (aka the “Pareto Principle”) a billion times, but in just case you haven’t or just need a refresher, here’s a little rundown.
"The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. "
"So, how does the 80/20 rule apply to my debt elimination?”, you may ask.
In successful debt elimination, 80% of your (new, more financially sound) behaviors should grow out of 20% of your (new, more financially sound) head knowledge (principles).
Put another way, 80% of the process of successful debt elimination involves the actual behaviors (i.e. budgeting, spending less than you earn, saving, working the 8 steps) required to get you to the desired destination: debt freedom and financial peace.
And 20% of the process involves the “head knowledge” or understanding the underlying principles (budgeting, spending less than you earn, saving, working the 8 steps) enough to put them into practice.
As you can imagine, the 80% is the much harder of the two. Almost everyone "gets" the 20% head knowledge. It's usually the 80% behaviors that are the challenge.
These are the 8 steps I followed to eliminate $43,000 in debt in 2.5 years. Trust me, they work!
Dave Ramsey is fond of saying, “you can wander into debt, but you definitely cannot wander out of it."
Halting the paycheck to paycheck cycle and eliminating debt takes having a foundational system (“8 Steps To Erase Debt”) and having the discipline to follow it.
This discipline is definitely internal, but sometimes it takes some external controls to make sure the discipline is maintained.
This is where having some sort of coaching mechanism, whether virtual (like this blog) and/or personal (like working with an actual human coach).
Having the accountability of an actual human coach gives “teeth” to the system and all but ensures your follow through and ultimately, your success.
As you may be starting to see, coaching can be a fantastic instrument for you to enforce the behaviors you need to get to the place you want (debt free and in financial peace).
A question I routinely ask my students and client is, “how sick of this are you?”.
Are you so sick and tired of being sick and tired that you might literally vomit at the thought of it? Sounds a bit extreme I know, but stick with me for a moment.
The cold hard truth is that, if you’re living paycheck to paycheck, you’re not winning with money. And, if you want to start winning, you have to be at "the end of your rope" in order to want to change.
Think about it this way, when you’re living paycheck to paycheck, you’re quite literally a wage slave and my desperate passion is to pull you out of that at all costs
The real question is, are you ready to pull yourself out?
This whole winning with money thing requires a total reset on both the way you think about and the way you tactically handle money.
And if I can do it, you can too.
So, “vomit-ready” was the point I reached over ten years ago. And I believe that’s pretty much what it takes to force you into doing something about chucking your debt.
“Pure hell forces action, but anything less can be endured with enough clever rationalization.” - Tim Ferriss, The Four Hour Work Week
This will help you determine whether or not you're working the plan or working the plan"-ish".
The whole reason I emphasize being "sick" is that, anything less than pure disgust just promotes “dabbling” in these principles.
This is basically a total waste of your time.
As a financial coach, I’ve seen it quite literally hundreds of times.
Prospective coaching clients who reach out with desperately worded emails time stamped at 2am, but never return the call or the email.
"I've gotten my wife and I into a financial hole. While I earn around $90K/yr, I owe $100K in CC and $70K in home eq. I'm getting calls from creditors. I've tried to find people who can help me but they always fall short. I thought I'd reach out to you. Let me know who I can work with.”
I routinely don’t hear back from many of these types of desperate inquiries so apparently, they’re just not at the point of complete and utter disgust with their situation.
And, statements like, "I've tried to find people who can help me but they always fall short”, indicates dabbling to me.
Why? Because successful debt eliminators both accept total responsibility for their situation and have a posture of humility in seeking help. I've seen it a thousand times.
And, the internet is literally FULL of tips, tricks and systems to follow to get you out of debt. YOU have to resolve to take responsibility of YOU.
It’s okay, I suppose. Hopefully for this person’s sake, they will get to the point of desperation and seek out the help they need.
Working with a financial coach is really not much different than working with any other kind of coach, really.
The whole idea is that you have some sort of result that you’re trying to get that you’re not having much luck getting to on by your own efforts.
Or, like in the case of a professional athlete like Tiger Woods, you’ve already reached a certain level of greatness and you’re now trying to go to the next one.
In either scenario the coach is there to observe, report and advise toward optimization.
A great coach will carefully observe your practices, report to you what you’re doing well and what you’re not doing well and then advise you on the specifics of what you need to get the desired results you’re looking for.
I know, this is all like common sense, right? But sometimes it’s important to tease out a concept in a more known context (i.e. sports coach) to make it understood in a less known context (financial coaching).
But before I delve more into why using a financial coach to help you eliminate your debt faster, let me tell you a little of my story.
I, like you, started imperfectly. Just begin and correct course as you go.
A little over a decade ago, my finances were a total train wreck.
In 2001, I transitioned from a very lucrative (corporate sales) career to a very much less lucrative (contract musician) one.
Financially speaking, I was woefully unprepared for the transition and, within three years was desperately broke and in flailing uncontrollably in an olympic-sized pool of debt.
As it turns out the main problem was that I, like most of us, had no financial literacy. I didn’t know how to budget. I had no savings and my debt was rising faster than an apocalyptic tsunami.
Things were so out of control that, I quite literally hated my life. Like, every day.
The mounting inability to pay my bills riddled me with both anxiety AND depression simultaneously.
The mental and psychological anguish became relentless to the point that I had trouble sleeping.
You can read more about that story at: $43k Paid Off!
It was one of the most difficult seasons of my life. But by God’s grace, following a solid system alongside some great coaching, it had a VERY happy ending!
Think about that for a second. By mid-2004 I was completely broke, drowning in debt and pretty much hopeless.
Then, by 2007 I was completely debt free.
How did I do it?
I discovered Dave Ramsey’s material and filled my head with all the information I needed, for one.
Then, I engaged a financial coach and accelerated my progress.
The encouragement and accountability sparked something inside of me that I didn’t even realize I needed.
As a result, two-and-a-half years later I was completely debt free and my life had never been the same (in all the right ways).
Whether you're a paid student of my programs, products, one-to-one coaching sessions OR you just consuming all of my free content, you’re my student.
In other words, I’m already your coach. I’m in and here to help! I desperately want you to be debt free and attain financial peace!
So, the question is, how can I best help you? What questions do you have? What are you struggling with?
Some of your issues might be solved with a piece of content (part of the 20% skills and head knowledge). Tell me what you need and I’ll be happy to create it.
If you’ve got the "8 Steps" down, understand and are working the concepts, then you might need some encouragement or accountability if you’re not getting the results you want (part of the 80% of behaving your way to success).
I’ll be honest that, most of my students don’t struggle with the 20% head knowledge people, it’s the 80% behavioral piece that keeps them from getting to where they want to be.
So the question is, how can I help you behave your way to debt freedom and financial peace?
0. Stop All Retirement Investing (Until Step 4)2. Starter Emergency Fund of $10003. Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)4. Full Emergency Fund of 3-6+ Months’ Expenses5. Invest A Minimum of 15% Income Into Retirement Accounts (and increase savings rate to 50%+ if possible)6. College Funding (if applicable)7. Pay Off The Home Mortgage8. Build Wealth, Serve, Be Ridiculously Generous And Go FI (Financial Independence)!