Become Debt Free NOW (Even On Low Income)

People, you can take your life back. You can build a small business, you can build wealth, you can have a savings account. This debt that is suffocating you and drowning you. I've been there. It's hard, but you can come out of it. Someone that loves you has sent you this video to help you get out of debt. And I'm going to try to present it in the most easy to understand, simple format. Be careful what you spend your money on. Be conservative and save for the future. Hi there, my name is Mark Kohler. I'm a CPA attorney, best selling author, podcaster, YouTube personality, and I'm here to help you get out of debt. Someone that loves you or cares for you or your advisor has sent you this video to give you the practical steps to implement a debt snowball. Now, I did not invent the debt snowball. There are a variety of variations and different ways it's presented. And I'm going to try to present it in the most easy to understand, simple format. And with this video, there's going to be some attachments, specifically a spreadsheet that's going to help you fill out your own debt snowball. So that's where we're going and I hope to help you out in any constructive way I can. I am a firm believer that our lives become free, become more meaningful, and it opens so many more doors for us when we're out of bad debt. Now, there's a difference between good debt and bad debt. And I quickly want to hit this and then dive into the snowball procedure. Can we go over to the whiteboard real quick? All right, so this little tutorial and spreadsheet is for you. Now, I teach this as part of my Tax Advisor Pro network and program. And so a tax advisor that's working with you may have sent this to you, you may have gotten this just through on my website and that sort of thing. But anyway, doesn't matter where it came from. It's here for you now and you've got to take advantage of it. So here's the first point. Bad debt is often referred to as reductive debt, meaning. Meaning you're actually reducing your wealth. It's not going well. You don't want this debt. That could be consumer debt, like just buying a new couch on some payment plan. It could be student debt and some of you may be going, well, I got student debt to have a career, that's great, but a lot of people got into too much student debt and they're now carrying it around with Them everywhere they go, like luggage. Credit card debt, auto loans, medical debt. This is debt we need to eliminate from our lives and set ourselves free, have the ability to reinvent ourselves and build more wealth. That's our goal. Now, productive debt is not bad debt. Now Dave Ramsey and others out there will say all debts bad. I don't say that. A lot of wealthy people own rental property that creates cash flow, creates wealth. I do that. Debt is working for me. It's debt that's productive. And it could be owning my own home, buying a rental property, or even starting or expanding a business because the debt makes money. But if the debt's not making me money, it is not productive. So we want to be very careful of just eliminating all debt that can actually hold us back when it's debt that could help us move forward. And we got to be careful. That topic for another day maybe, but keep these in mind. Now the goal of the debt snowball, from my perspective, is to help you get out of reductive debt. I'm going to share the spreadsheet here with you in a minute. But conceptually we need to understand the average credit card can take up to 20 years to eliminate. If you just do the minimum payments just what they want you to do. Well, it's terrible, right? We don't want to go down that path. So if you can with a debt snowball, commit some extra money by picking up a second job, cutting out other costs out of your life, selling things, whatever it takes, and commit a certain dollar amount over the minimum payments you're already making. See, you're already making payments and feeling like you're drowning. Now I'm going to ask you to extend yourself, cut costs somewhere in your life, sell something, pick up a part time job just for a year or more to get out of debt and then it's going to open up a whole new world world to you. And we also need to create an emergency fund. This is a fund of some cash that really is going to prevent us from getting into credit card debt again. Because a lot of times, even me in my own life, I got into credit card debt because I had an emergency flat tire problem, healthcare issue where I needed to turn to a credit card because I did not have cash in the bank. Again, a lot of financial advisors, including Dave Ramsey is like, hey, you need to have $1,000, two to three months of living costs in cash somewhere just in case problems happen and problems will happen. So we want to build a little bit of a reserve and start getting out of debt as fast as we can. Now here's the steps. We're going to do a spreadsheet. I want you to do a little accounting and go through all the credit cards you have, write down how much you owe. You can look at the interest rates or the interest payments that you're paying, but really I just want to look at your total amount, like which debts are the most and, and we're going to put them in a spreadsheet here and I'll show you how. Then you're going to choose that dollar amount that you can commit over and above what you're already doing. Maybe it's only a hundred dollars a month, maybe it's 500amonth, maybe it's 1,000amonth. That's what I'm going to encourage you to do is think about thousand dollars a month that you could make. Even just picking up again a part time job in the evenings, being a janitor. I was janitor for eight years, getting through college myself and even through law school I was doing janitorial work. That's what paid the bills. It's a great business. Anyway, you're going to write down your debt snowball. Once you've got your list of debts, how much you're going to be able to commit over and above your current payments, you're going to write down that debt snowball. You're going to make it a huge win every time and celebrate every time you get out of debt at a certain point along the way because you're going to start knocking credit cards out of the way or debts and you want to celebrate those and gain momentum. You review your plan regularly. You're going to find out what's fascinating is that as you're getting out of debt, it actually starts to happen faster than you projected because you start finding extra money to throw at the debt. You get excited and you start to see the future. Now the last piece of this that's super important is once you're getting out of debt and you're out, we're not going to stop with those payments that you're setting aside. We're going to now shift that money because you're in a good habit now. You've been taking that money to make your payments and get out of debt. You're going to take that money and shift it towards savings. And within the same time that it would have taken to pay off debt, you're going to have money in the bank and I'm going to show you that. Now here's what Your basic report might look like your initial deal. You're going to say, okay, I've got these credit cards from low to high. So we could look at student debt, furniture financing, Visa and a auto loan. And so we go from low to high and the interest rates are going to vary. I don't care about the interest rates. I don't. And I really don't care what the current payment is either. What we want to know is what are those lowest debts? And we want to work towards the highest debt in a snowball type fashion. Now, you can see here that if we just made the regular payments on these debts, and I was very, very generous, these are not like a typical credit card at 18%, it'd take you 20 years to pay that off. But you know, this one is like four years to pay off. But if you kept making all these payments at $1153 a month, you'd be debt free in about five years. And that's not adding any more debt to the mix, which we know would probably happen and not changing your lifestyle. Now, with the debt snowball, we're going to take those same debts that are in the first column, going low to high, same interest rates, same current payments, but now we're going to add $1,000 to the mix. So you see there in that student debt, we're going to take that extra thousand that we're going to generate every month and throw it on top of that first debt. So instead of just making the $83 payment, which is what our current debt load is, we're going to make $1,083 payment, and then within 2.4 months, that debt's gone. And we're going to take that 1083 and plow it into the furniture financing debt. Now, that payment is $1,083 plus the 187 that you've already been making, and then we're going to add that up and push $1,270. So your monthly payments of $2,153 didn't change. We're just going to start plowing it towards different debts in this snowball type fashion. And by doing this, you're going to be debt free in 2.3 years or 27 months debt free. And it'll actually be faster than that if you look at the little disclaimer at the bottom, because you're still making minimum payments above while you're snowballing the amounts below. But then that made the spreadsheet even more complicated. So trust me, you're going to be out of debt a lot faster than 27 months. As you embark on the snowball now last concept. And then we'll go through the spreadsheet. You're going to make a pay yourself commitment of $1,000. And with that thousand dollars, you're going to get into a habit of this $2,153 and saving. And so if we take an average interest rate of 9.5%, that might be ETFs, an S&P 500 fund for, for example, right now money markets are paying 4.5%. Are you kidding me? You can get 9.5%. And you're going to be dedicated to funds and just letting that money grow. So after you're out of debt in about 27 months, you're going to keep saving the $2,153. So look at where we're at now. You're in debt 47,270. See down here on the left side, 47,270. Well, after one year, it's going to be down to 30,574. And then somewhere in that second year, mark 2.4, you're going to be out of debt. Oh, but you're going to keep taking that $2,153 and saving it. Now, in five years, where here, it would have taken you almost five years to be out of debt. You're going to have $88,000 in the bank, and then the savings starts to Snowball. So in 10 years, you're going to have $300,000. In 15 years, $639,000 and change. So this is the beauty of this. We're going to shift of being in debt to getting out of debt to saving all three steps. And it's going to blow your mind. Now let's look at the spreadsheet. Okay, so here's the spreadsheet that you will be able to download that was sent to you with this video. Now, I want you to start filling in the blanks wherever it's yellow. So important instructions at the top follow each step only change. And this is going to be in an Excel file, so it'll, it'll calculate your situation. So you want to choose your start date. I'm going to have a date where I'm going to have my emergency fund finish so I can start my debt snowball. So you might say I'm going to put away $1,000, which is step two, as an emergency fund. In step one, you're going to say, I can do that within the next 60 days. So I'm going to start getting a new job, starting a small business on the side, start driving Uber, whatever it takes. I'm going to make $1,000 in my spare time, and my start date is 60 days from now. So you've got step one and step two done. Now, once that step of having your emergency fund is completed now, you can start to commit that extra dollar amount. Now, in this example, I put in $500. You might say, well, I can do more than $500. That's fine. So you're going to sell anything you need, whatever you have to, to get that emergency fund done, which is step three, so you can speed up the start date. And then step four, you're going to nail that dollar amount that you can do on top of your current payments right now. So if right now you're making all your credit card payments, how much more could you come up with, driving Uber or small business? And you've already got your emergency funds set aside, so if crap happens, you can turn to that. You're never going to turn to those credit cards again. Then you're going to start running your calculations and start immediately. You're going to build momentum. You're going to start saving. So in this little spreadsheet, you'll be able to list the debts on the left. Throw in the interest rates. I don't care. Total amount due. There we go. $37,000. Your current monthly payments. $747 in this example. And now I'm going to put in an extra $500. So I'm going to be debt free. And you can start to see. It'll calculate for you in how many total months, and you'll be done. Now, with an average ROI of just 5%, where's that money going to put me in? 10, 15, 20, or 30 years. And folks, that's a 5% ROI. You didn't like my 9.5? Fine, throw in 5%. But I want you to take that monthly payment of that $1,247 and you're going to start plowing it into saving money, not just getting out of debt and going back to your old habits. We want to get out of debt. Save it, get out of debt, save it. And that's how this is going to play. Now, I've got some important final comments here that are critical. Okay? Special considerations. Always create your emergency fund first and continue your minimum payments on your credit cards. Number two, the snowball is Mathematically incorrect. It's probably not the fastest way to get out of debt, but it creates momentum, it creates emotional excitement. It's the best way to create new habits and a new mentality. Stick to it and it'll blow your mind. Number three, we're not cutting up credit cards because I want you to have good credit. I want you to go get debt to make money, whether it's rental properties, buy your own home or build a business. Now, I know there's big time names out there and both sides of the aisle that'll say productive is bad. Get out of all debt. All credit cards are bad. Cut up your credit cards. But if you cut up your credit cards, you can't go get productive debt. And there's a lot of people out there like me that say productive debt is a good thing. Buying rental properties and having a good credit score score is something you need to cultivate. So cutting up your credit cards is not a good idea. You might use them once every 30, 40, 60 days for $25 and then pay them off. So we don't want to run up our credit cards. We want to show them active and build up our credit score. Hold off significant saving in your Roth IRAs or health savings accounts until the snowball is finished. Unless you're getting a match at work. For those of you that have a match at work, that's 100% money in the bank. So put in your money, maybe it's a couple grand and the company matches it, okay, that's fine. But do not start saving in your Roth IRAs or acorns or Robinhood or any of those until you're out of debt. Now don't get tricked with the zero percent. A lot of people go, well, it's a zero percent credit card, it's still debt. And if the economy goes to crap and there's bank failures or whatever, you don't want debt. You want to be lean, nimble and have that money in your bank account so you can go out and make more money. Paying off your home mortgage is a whole other topic. I do not put your home mortgage in your debt snowball. When you pay off your home, that may feel great, but it's also a target for a lawsuit. If someone gets if you drive texting and driving and someone sues you and your state doesn't protect your home with a homestead exemption, they're going to come right after your home. Now, I'm not saying being out of debt on your home is a good or bad thing, but it's not supposed to be a part of your snowball. Not typically going to pay off the debt on my home. I want to make sure which is usually the lowest interest rate on the planet. A home mortgage. I'm going to use my money to go out and build wealth rather than just pay off my home mortgage and have that to show for me. Now, for some people, that's the best thing in the world. Again, I know there's financial gurus out there that'll say that one thing or another, I'm the type. Home mortgage, separate topic. Now, in summary, people, you can take your life back. You can build a small business, you can build wealth. You can have a savings account. This debt that is suffocating you and drowning you. I've been there. It's hard, but you can come out of it. It doesn't mean you have to claim bankruptcy. It just means you have to be proactive and maybe start that little side hustle or side gig or small business or second job to get over the hump. And then, people, you're making money. And that's what I teach everywhere I go. I loved it. I've got books and videos and podcasts. If you just Google Mark Kohler, you're going to be able to follow a lot of my content on living the American dream. Please do. Please get out and live your American dream. Be careful what you spend your money on. Be conservative and save for the future. That getting rid of this debt stress and keeping up with the Joneses and having to have the coolest, nicest things all the time, people, it's not worth it. I've done it before. It's not worth it. You can live your American dream and be debt free of crappy debt and use productive debt to make even more money than you dreamed. Hang in there, keep working hard and you'll. You'll come out of this. You'll be okay.