$163k Debt Case Study: Paying Off Debt FAST With THIS Formula

Hello and welcome. Denzel Rodriguez here, your personal finance geek of the 21st century. In today's video, we're going to talk about this unique formula that can help you, anyone listening, to overcome this tremendous barrier many Americans face today and have been facing for generations, which is debt. How do you remove it? How do you pay it off fast? How can you continue on your personal financial journey to financial independence, financial freedom, passive income, wealth, building generational wealth and leaving a legacy behind for your family? Debt is that number one biggest block in a lot of people's finances. And what I want to illustrate today on my whiteboard is a way for you to become aware to the problem at hand. What you have going through. I think first step to achieving financial transformation in your life and mastery is awareness. That's step one. We need to become aware to the problem. And then we're going to incorporate strategies, education to achieve a breakthrough moment, a paradigm shift in your personal finances. Then through application, through action, through accountability and support, you then lead a life of mastery where you're able to master the your economic household, you're able to master your personal finances, help you make better decisions because of these steps that you took. So it's awareness, it's breakthrough, and then it's transformation into masterful living, living a life worth living, living your life intentionally according to the way you see money. So with that, let's take a look at this whiteboard here. This is an example of a husband and wife have a lot of debts, a lot of credit cards, a lot of loans. We had a mortgage, we have lines of credits, we've got debt owed to everybody. Here are our four major numbers. This is critical for you to. Do you know how much money is coming in net after tax each and every month? What's coming in. So in this family, we've got 10,689. We have a total expense. This number includes all of these debt payments, living expenses, saving tithing, all of it right here. 7,703. 95. We have a total debt amount of 163,554. 73 with a cash flow of around 2,985. 05. So 2,900 bucks, almost $3,000 a month. We have a personal line of credit for 15,000 at 10.4% at a bank called Becu out of Washington, got about a thousand bucks in savings. We have two term life policies, one on wife for 250, one on husband for four. We've got no retirement. We're 50 and 62 years old. We don't have any money invested anywhere, not really anything worth significantly putting on the whiteboard here. So really nothing. And in order for us to really build the kind of wealth that this family ought to build for themselves and for the next generation, they're going to have to overcome this dead obstacle. Now this is an example you a little more context. This client I've been working with since 2019, so when I first met them, they had even more debt and we paid down debt and then we got more debt and we paid down debt and we got more debt. In my career so far, I've been on YouTube now for seven years. I've been in the financial space for seven years as a financial coach, consultant, accountability partner, support specialists on many other strategies on this YouTube channel. So in my career over the last seven years, working with clients, all walks of life, all different ages, all different incomes, I've been able to witness unique financial transformation. The moment people become debt free or at least experience for a period of time what it is to be debt free, even if it's only for six months or three months, there is a transformation that absolutely occurs. And I would argue that the person that seeks that path of becoming debt free first, before trying to explode, leverage, make more money, all this other stuff I've seen, this person actually yield better returns, have more success, faster success than the people that try to cut corners, that try to eliminate some debt and then try to leverage to make an investment, leverage to make more income. Oftentimes it just doesn't end up the way it was illustrated on a spreadsheet or on an Excel, or the way it was presented were sold to us that specific opportunity. Most of the time it's not the case. This family and many others I've worked with, this is an example of coming to the realization that I need to just eliminate all this debt. And I understand the age that I'm at, I understand how old I am and how little time we have to create wealth. But I'm going to make a big bold statement and argument for no matter how old you are, if you have been someone that's been in debt bondage for many years, many decades, you've never experienced a debt free life and retirement's approaching, or you're already in retirement age but still work and you're carrying all this debt, I think the biggest opportunity for you is to eliminate that debt and then your wealth would explode right afterwards in a very short period of time. That's my big bold assumption theory that I would bet a ton of money on because of what I've been able to witness over the years being in the financial space for the last seven years now. So I feel like I have some very good context. Again, you can argue and debate me in the comments dialogue, let me know your criticism of this. But when you look at these numbers here on the board, and this is also very helpful for you to do, is just write it all out. A lot of you have no idea how much debt you have and what you're paying in interest and how much your monthly minimum payments are. Do something just like this, whether it's on a sheet of paper or you buy an easel, you buy a whiteboard and do it for your family. Just write it all out. Get the visual effect of what this does for you. So if you're watching this video and these aren't even your numbers, what kind of emotions are you feeling right now? Just seeing the amount of various debts and interest rates and payment? Are you like filled with stress and tons of emotions, like I would argue? Yes. So how can any educated investor make a clear decision on an opportunity if they've got this mountain of stress that they're dealing with? Because ultimately they're going to be always making a comparison on how they use this wealth to pay off all this debt, when instead, how can we just take your current skills, gifts and talents right now, spend less than what we make, pay ourselves first by eliminating debt, recovering cash on a guaranteed basis, guaranteed rate of return to then see the opportunity for creating wealth for this family. And I would argue like that you're going to create massive change. So the formula I want to share with you, this number right here, and these numbers right here is referring to the cash flow index formula. You might have heard of it before if you haven't. The formula is quite simple and life changing in my opinion in terms of how this will reduce the temperature and stress in your household. When wrestling with which debt do I pay off first and in which order? Right. So you've got the most common debt elimination strategies out there, Debt Snowball and Debt Avalanche. Debt Snowball ignores all these numbers over here in terms of monthly payment, interest rates. Okay. And just focuses on the balance owed, smallest to greatest. That's how you would line it up. That avalanche only focuses on interest. You tackle the highest interest rate first and work your way down. So 36%, that would be the first debt we go after. On this side it would be 29, 29, 29%, husband's side, and then You've got cash flow index. Simply taking the balance owed on a debt, dividing it by the monthly payment, you're going to get this number right here, 16.42. So if you owe 1,642 on a debt and the monthly payment is 100 bucks, take those two numbers, divide it, you're going to get 16.42. If the number is below 50, 50 or less, that debt you want to pay off, because that is a healthy amount of cash flow for you to recover, for you to then go deploy that into savings and investing for the future. So 50 or less, if the number is above 50, it's an unattractive debt to pay off. We want to put that on the back end. You can then make an argument for possibly never trying to accelerate that debt and rather investing instead. If you can earn a higher rate of return than the cost of interest that you're paying. And so it's not taking a lot of your cash flow if the number is above 50. So in this case, all their cash flow index numbers have been laid out for you. The Highest numbers are 88.8 and 61.06, which is literally a line of credit and a mortgage loan. Outside of that, everything should be getting paid off extremely fast according to cash flow index. So cash flow index focuses on cash flow. How quickly can I get to the cash flow of that monthly payment? Whoever has more cash flow wins all day, every day. So in this case, I'm looking at the lowest cash flow number. And when it comes to velocity banking, which is the other popular way of getting out of debt, or increasingly becoming more popular, is factoring in all three components, the balance, the monthly payment, the interest rate, actually factors in all of it to help us make the best decision. Now, even though their main line of credit, which is a P lock for velocity banking, it's got a 61.06. I'm illustrating that's their minimum monthly payment. What's actually happening is we're sending our income into that line of credit and then we're sending money out to pay all these bills and all these debt payments. Cash flow stays in here, which brings the line of credit down, increases the equity in the line of credit to then go and pay something off. So in the velocity banking world, you would be using the P lock, so you wouldn't even factor it into your cash flow index number. P lock's your main debt tool, and the goal is to consolidate all of this debt into your P lock in the form of chunking. Now, here's another thing I've been able to witness over the years and just learn through experience. Velocity banking is not for everyone. Velocity banking can be a phenomenal tool in your arsenal, right? Could mean a phenomenal vehicle for you to use in your personal finance. But it can also be very destructive if not properly managed and proper expectations are met. Certain standards, certain protocols of how to use that strategy can absolutely mess you up if you don't stick to the principle. So again, this is an example. Been working with a person for many years now, four or five plus years, and my coaching guidance for them was, hey, we actually need to stop velocity banking and we need to just simply make extra payments. We're not just going to make extra payments towards the smallest debt. We're going to focus on cash flow index to help us decide which debt to go first, in which order and go from there. We'll use that as our guide to help us, we can make changes along the way, use that as a guide. We're going to give velocity banking a break. It took us a long way, it's made tremendous progress, but it's also given us permission somehow to spend more than what we make in certain seasons of life. And I've been able to identify this with certain clients. And some of you watching may also be doing this, not even noticing. You may feel like you're under this illusion, like you've got more money just because you have a HELOC or line of credit and you know something comes up, I'll just run it through the HELOC and then velocity banking that what ends up happening, six months goes by, a year goes by, you're not making any progress, your overall debt balance is not going down. So you didn't learn much. You learned how to perpetuate your bad habits using velocity banking as an excuse as to why you couldn't get to where you want to get to. I know that might hurt for some people listening. The reality is that if we don't become aware of the problem, then it doesn't matter what strategy you're incorporating because you don't, you haven't removed the root issue. So in this case, what's the root issue? Full time, this husband and wife working full time as they get closer and closer to retiring. By removing debt over the next few years, are we going to be able to fully retire, not work at all? No, but we're going to be able to work far less than what we have to today because of our lifestyle. Expenses are significantly less, which then gives us permission to transition out of that, have to job and transition into something that you actually want to do with your remaining years on this planet. So I don't follow the traditional retirement strategy of accumulate enough money to live off of and then you sit on the couch, watch TV all day, take a vacation, see the kids two times a year. I don't buy that. I buy the retirement strategy that says this is what I did in my career or business. And now in retirement I'm transitioning into a philanthropic contribution kind of a role. I'm going to be on a board of a company, I'm going to work a non profit, I'm going to volunteer full time ministry because that's what my purpose is for the rest of my days here on this planet. That's what I'm going to be doing with my time. Staying social, staying active, increasing longevity, being happy. And yes, from time to time, watch tv, watch a movie, take a vacation, hang out with the kids, yes, do all those wonderful side activities. But your day to day and every, every other Monday, your, every other Tuesday, every other Wednesday is filled with, with joy because you are operating out of abundance and you are operating in your skills, your gifts, your talents according to your purpose. So you're living a rich life not because you have a certain amount of money built up, but because you're doing the thing you actually enjoy to do. Which is why you get up in the morning every day, right? And you're able to sleep peacefully. So that's the kind of retirement that I buy into, that I encourage my clients to adopt as well. Because then this, this frees up the second part of the stress factor is once you pay off all this debt, now what do we do with all this extra cash flow? Yes, there's going to be investing, yes, there's going to be saving, but also no, why are you here on this planet? You know, if you're 67 years old, you got another 30 years to go or more. What are you gonna do with that time? Sit on the couch, watch TV all day, see the kids a couple times a week, take a vacation here or there. Trust me, you need a bored out of your life. If you're not doing something that's, that's bringing joy and fulfillment into your life. I absolutely guarantee that. So coming to the formula again, balance owed divided by the monthly payment. Here are your cash flow index scores. We can see how this debt right Here got a 5. We've got 8.75, 9.9, 9.92. These are the most attractive Debts that we want to pay off in that specific order. Now, as much as I would personally follow this cash flow index formula or even do velocity banking on top of cash flow index, as great as that sounds, the other aspect you have to keep in mind is the person, what's the biggest stress that's on them right now. And for them it's credit cards. So the wife just really, really wants to pay off her credit card. So I said, okay, we could skip this loan for now and we'll go this credit card first. It's got the 8.75 to then go to that credit card number two, then three twelve, then four, then five, that specific order. And it's not gonna take a long time. If I've got 2,900 bucks in cash flow and you add up these five credit cards, these five, six credit cards, I mean, what are we talking, two months if that. So over the next two months, if I can just get rid of the, the credit cards that they have. And her P lock, her P lock is a second line of credit that she has. The husband has the 15,100. She's got a P lock, but it's got a much smaller credit line. It's only 2,500 bucks. So I'm like, I threw that in with the credit card. So if we can just get rid of those and then you commit, you say, I'm just going to stop using the credit cards altogether. We're going to come over to a cash based system. So we're actually abandoning velocity, we're abandoning leveraging and all that points hacking as wonderful as it is, gotta understand the context of the person you're working with. So this is also great tips for anyone that is aspiring to be a financial coach or consultant or strategist. When working with people and serving them, you don't want to be a one trick pony and only provide velocity banking. You want to incorporate these other debt elimination strategies. Cash flow index is great because at least gives us that guidance where it's like, hey, this is the mathematical fastest way from a cash flow perspective. You have more cash flow, you pay off debt faster, period. Whoever has more cash flow win. Then you factor in the emotional part and say, okay, well we can exclude a certain debt that's not a credit card and do cash flow index in the order of which cards need to be paid off in the fastest way. So again, two months gone. Then literally month three, this is gone. Then you go to the loan, this, this little loan right here, gone part of month three. Month four, you're coming over here to this loan at the, at the bottom. Month four, the next loan for 81.88. Obviously it'll be lesser three, four months from now and that'll take you like two and a half months, if that, to knock off. And then we're left with this final loan. It's got 172 cash flow index. So we're actually going to ignore that because we're going to want to come over here to husband's debts and then start to attack his credit cards. So you got 1, 2, 3, 4, 5, 6, 7, 8, 9, credit card, all at higher cash flow indexes, but still worthy to recapture. Now, depending on how this goes with the client, we may slowly bring back velocity banking on husband's debt. Just depends. But I'm perfectly fine with saying, hey, we're just going to pay off the P lock in cash flow index order. So being that it's out of 61, we'll, we'll leave that alone because that 10.4 interest rate, 180 monthly payment. And we'll direct our attention cash flow index paying down these credit cards. So you had a 16, 16.3 18. Right. Almost kind of in perfect order here. So 1, 2, 3, 4, 5, 6, 7, you know, say 7, 8, 9. All right, so we can write that out. So we got 1, 2, 3, 4. You could say, you know, they're so close, 26.5, 26.38. So, so it almost doesn't matter. But 5, 6, 7, 8, 9, that's the order in which we pay these credit cards off. By then we're cash flowing that 29 plus all of these payments except for that loan, we leave it alone. We got 353, 113, 242, 38, 40, 26. Add all that up another grand, roughly, probably more so 3, 4, 6, 7. Yeah. Nearly a thousand bucks in cash flow on top of the 29 I already have. Which means once we get over to debts, husband's debts, we're gonna be able to go even faster. And the goal is remove credit cards, stop using them, give yourself that, that reset. Many of us need a reset in our finances, especially with credit cards. Give yourself that period of cleansing where you simply don't use them. Develop that discipline that I don't need this. See, the people that do velocity banking, the best from what I've seen are those that don't feel like they need velocity banking. The reason why I do velocity banking so well in my personal finances and some of my clients do so well with velocity Banking. They get great performance, great results and others watching that maybe don't work with me one to one, but you're just a fan of the channel or you work with another Velocity banking coach or specialist. I want to say the number one reason why they're so successful is because they just look at it as a tool. They're not relying, they're not dependent on velocity banking to succeed. Like if for whatever reason, if their line of credit got shut tomorrow, they're not going to freak out. They know exactly what their next steps are and they can easily just transition back to extra payments. No, no issue. Because they have money set aside outside of Velocity Banking. They have additional protections. They have, they know how to leverage credit cards. They know how to just again look at these things like, like tools and resources. They're not dependent on it. So that's the way I like to teach you all is to acquire the knowledge of velocity banking. Cash flow index, debt snowball, debt avalanche, personal financial stewardship. Once you acquire the knowledge, apply the action, develop the disciplines, develop that foundation strong enough and then we work together one to one and we figure out what works best for you. So with that being said, I leave you with an action step coming off this video today you learned about the formula of cash flow index and how it applies into a real scenario and things to be aware of and how you lay it all out and just see it for yourself. Awareness, breakthrough transformation in your, in your finances. The action step I have for you is keep watching case study videos like this and if you want to take it to the next step, you can reach out to me below, you can jump on a phone call with me, we can run your numbers on the whiteboard, we can, you know, you join my one to one coaching program and literally go on a lifelong journey together. That's the way I set up my coaching is meant for me to, I want to be with you for the entire duration of you getting out of debt, not just for a period of time, although I do work with some people for just a period of time and that's all they need and you're good to go. But those that get the greatest results in my experience are, those are like, let's go Denzel, let's go all in, let's make this happen. So whether, if it's not with me and you use someone else, think of it long term. Think of coaching like as literally part of your financial structures, the way you continue to get better and better. That's how every athlete gets better and better. They never not have a coach. They have a coach in the off season, they have a coach. In season, they have a coach. In the finals, they have a coach after they won and after they won again. And after they've won again, they still have a coach. So think of financial coaching. Continue to get better and better. That's how every athlete gets better and better. They never not have a coach. They have a coach in the off season, they have a coach. In season, they have a coach. In the finals, they have a coach after they won and after they won again. And after they've won again, they still have a coat. So think of financial coaching not just when you need it and when you're struggling financially, but think of coaching as a way for you to continue to get better and better, better and better and better. Mastermind, brainstorm ideas. So again, it's not with me and someone else. Think of it long term. How do I actually keep this person on my lifestyle expenses? Just not just when you need it and when you're struggling financially. But think of coaching as a way for you to continue to get better and better and better and better and better. Mastermind, brainstorm ideas. So again, if it's not with me and someone else, think of it long term. How do I actually keep this person on my lifestyle expenses? Just like when it comes to taxes, you always have an accountant, you always have bookkeeper. How do you look at financial coaching in that way? Keeping them on your team, on your what I like to call your financial dream team with you for your whole life. And I'll argue your results will be phenomenal. You'll achieve financial freedom. It's like when it comes to taxes, you always have an accountant. You always have, you know, bookkeeper. How do you look at financial coaching in that way? Keeping them on your dependence. You'll live a rich, abundant, fulfillment filled life. God bless you. Have a wonderful day. Team on your what I like to call your financial dream team with you for your whole life. And I'll argue your results will be phenomenal. You'll achieve financial freedom, independence. You'll live a rich, abundant fulfillment. Build life. God bless you. Have a wonderful day.