Prioritizing Your Debt

I have often read and heard from financial experts about paying down debts from lowest balance to highest, obviously paying at least minimum on all of them. This “snowball” effect, as it is commonly termed, makes sense. However, this is just a psychological benefit. It’s a “win” to pay off a quick low balance to continue on with paying the next.

It’s refreshing to hear, however, the other choice: to pay down debts from highest APR to lowest, again paying at least minimum on all of them. It makes sense to choose a choice that mathematically makes more sense.

The way I see it, you’re either motivated to pay off your debt or you’re not. Why pay more in the snowball method to psychologically feel a win? If you do the math there, the psychology doesn’t add up quite right–but I get it.

I’ve paid for my schooling out-of-pocket my entire life, through undergrad and my first three years of grad school; and I am quite proud of this hard work in doing so. My final two years of grad school created some debt, but not comparatively to those I hear from other students. School debt is definitely a problem, but it’s too important to equally stay engaged in learning how to get a handle on it, and from various perspectives.


Check Out What I’m Studying


 

Advertisements
Prioritizing Your Debt

Rich vs Wealthy

“Wealth is measured in time, not dollars.”

Being rich is only about making money. People can make money, but often times it simply goes straight to their expenses. Being wealthy is different. In the very interesting book, Rich Dad Poor Dad, Robert Kiyosaki describes how being rich is not the same thing as being wealthy, and wealthy is where you want to be.

He defines “wealth” as “the number of days you can survive without physically working (or anyone in your household physically working) and still maintain your standard of living.” Wealth is measured in time, not in dollars. How many days can you survive without working? That number is your wealth. When you are wealthy, you are considered financially free.

I find this differentiation to be so interesting and very simple to understand. The definitions on these terms seem to vary from person to person given their perspective, but I think this explanation really makes it clear.


Check Out What I’m Studying


 

Rich vs Wealthy

There is No Know-It-All

Steven Pressfield’s book The War of Art has recently become one of my favorite reads, and I regularly go back to it. If you’re an artist of any kind, or if you enjoy creating things, I highly recommend this book. It provides a good list of points to combat resistance that may be blocking your creativity.

In one section, Pressfield highlights the importance of understanding what you don’t know:

“She gets an agent, she gets a lawyer, she gets an accountant. She knows she can only be a professional at one thing. She brings in other pros and treats them with respect.”

Here, Pressfield is making a point that when you don’t know something, you should bring in an expert who does. Include this person as part of your team in order to stay focused on your own work at hand. Don’t try to be a “know-it-all”—these people don’t exist. If you think you know a know-it-all or believe you are one yourself, you have been fooled. Believing this will surely cause obstacles in the road.

Being vulnerable to look at what you don’t know can be difficult, but it’s honorable to be truthful in understanding this so that you can keep your work moving forward and not falsely push it backward to save your pride instead.

A true professional knows what they don’t know and when to call for assistance from other experts.


Check Out What I’m Studying


 

There is No Know-It-All

The Proactive Model

Stephen Covey describes the difference between proactive and reactive people. Perhaps is easy for us to identify others as being proactive or reactive, but how about yourself? I thought Covey introduces the concept nicely by breaking down the word responsibility—which breaks down to “response-ability”. How do you choose to respond to scenarios? This is important because your response impacts your ability to succeed. In summary, Covey says:

“Proactive people are still influenced by external stimuli, whether physical, social, or psychological. But their response to the stimuli, conscious or unconscious, is a value-based choice or response.”

Value-based decisions resonate so well with me because I feel it’s the uncommon route for many. How wonderful the world would be if this type of decision-making process was at the core. It’s hard to stick to your values when the external stimuli is trying to influence you otherwise generally for someone else’s hidden agenda.

You do have the ability to choose your response, and this proactive response will get you ahead.


Check Out What I’m Studying


 

The Proactive Model

There is an Offline

“Word of mouth is more targeted.”

I am fascinated by Jonah Berger’s book I am currently reading called Contagious, where he talks about why things catch on. Why do some things go viral and some don’t? It’s a good book to complement The Tipping Point, by Malcolm Gladwell, of which I thoroughly enjoyed reading as well.

One thing that struck me is the answer to the question: what percent of word of mouth occurs online? If you’re like me you may guess a large number, perhaps even above 50%. Berger highlights research by Keller Fay Group that only 7% of word-of-mouth occurs online. Wait, what?!

If you think about it however, this makes sense. We (society) may spend a lot of time online, but it’s not 24/7. The average person spends a few hours a day on social media, but there are 24 hours in a day. Comparatively, those few hours are not much in the bigger picture. Top off the fact that just because people are online doesn’t mean they are consuming your content or talking about it.—Yep, people are not waiting at the edge of their seat for your next social media ad to appear in their feed. Shocking I know.

“We tend to overestimate online word of mouth because it’s easier to see.”

It’s easy to get hung up on “numbers”, the analytics that social media “tools” provide us. However, be careful here because it’s dangerous to get hung up only on things that can be seen without inserting perspective on what is not as quantitative.

Companies still grew when social media didn’t exist in the past. There still is an offline world. Just take a look at Seth Godin, the best-selling author of 18 books alongside admirable work in entrepreneurship and marketing. Aside from his daily blog, he doesn’t use social media channels. He doesn’t need it and is doing just fine.

Makes you think.


Check Out What I’m Studying


 

There is an Offline

Remove Time Thieves

Know the difference between important and urgent, and do important first. – Steven Pressfield

Time is a Poor Indicator

Tim Ferriss argues that time spent at the office is a terrible metric for productivity. Often times we are spending our time doing unimportant tasks simply to fill up the time. Location in the office doesn’t mean you are spending time doing the right things. Focus on the 80/20 rule where 20% of the work produces 80% of the results. How do you know if something is important? Ask yourself, “If this was the only thing I did today, would I be happy with this day?”

Get rid of time thieves and focus only on what is important. Email is one of our greatest time thieves, and Ferriss stresses to not start our days by reading email, as do many other people I’ve researched. In fact, he challenges you to only check email twice a day and get it down to once per week. Can you imagine!?

Don’t Take Calls

Tim Ferriss says that one way we can save time is by letting phone calls go to voicemail, text, or email to answer later. Very rarely does a call require the need to interrupt your work at that moment to tend to its distraction. Add the task of addressing calls to the time block when you address email, and do it in a concentrated time.

Urgent verse Important Tasks

Maria Forleo highlights Steven Pressfield’s work when she describes that there is a difference between urgent and important tasks. Urgent tasks often only feel urgent, and these tasks will always keep you behind. The moment someone says “this task is urgent”, you put on hold your entire planned workflow to fix this one urgent thing. At this point, you get off track, and it eats up time to get back on track. Lastly, things that are “urgent” often relate to other people’s goals, not your own; therefore, it’s a bit hard to get your real mission work done.


Check Out What I’m Studying:


 

Remove Time Thieves

Your Emotional Bank Account

Invest into other people’s mission statements.

Forming stable relationships is important not only in life but also business. In the book The 7 Habits of Highly Successful People, I like Stephen Covey’s metaphor where he describes relationships as having their own bank accounts. The greater the trust within the relationship, the greater the balance and wealthier you will be. You want to make regular payments to the account, but you should only withdraw rarely. You make payments by investing into other people’s mission statements.

This too makes me think about how hard it is to invest into others if they don’t make their mission statement be known. You should be open about sharing your goals and personal mission, vision and values so that others can help you achieve it.

In addition, it’s hard to invest in other people’s mission statement if you are only investing in yourself. Sometimes you need to step back and create an awareness of your own behavior to see if you are taking the time to also help those people helping you.


Check Out What I’m Studying


 

Your Emotional Bank Account