#207 - The 5-Step Plan to Get Out of Debt Fast

If you default on your credit cards, it means your credit score is... If you're paying credit card debt of 21%, you cannot out-invest that. Getting stuck in debt. But the question is, can you get out of it? People want to get out of debt, but they don't even know what debts they have. Have you ever gone outside, opened your letterbox up, pulled out some envelopes, and opened them up, and your heart starts to beat a bit faster as you realize that

you're swimming in credit card debt? I'm Lloyd James Ross, seven-figure investor and entrepreneur, and I've helped thousands of business owners and professionals turn financial stress into success. If you're stuck in old money habits, overwhelmed by investing, or unsure where to start, this is for you. I'll give you the mindset and strategies to take control, grow your wealth, and achieve financial freedom. It's time to make your money work for you. Before

I dive into the steps, here's some frightening statistics. The average person has a debt of $6,400. That's per person. So if you're in a household of two people, that's over $12,000 in debt. The average credit card interest rate is a whopping 21%. Now, just to put that in perspective, Warren Buffett, the best investor who's ever lived, has compounded his money at 19%. So if you're paying credit card debt of 21%, you cannot out-invest

that. Can't, right? Huge. The next one, 50% of people are defaulting on their credit cards, 50%. That's the highest since the global financial recession. Why is that important? Because if you default on your credit cards, it means your credit score is, you're gone, which means you won't be able to go and borrow money to buy a house. You won't be able to borrow money to buy a business. You will actually just handcuff yourself. So

you've got to be very careful. It's a slippery slope. Do not fall down the bottom. 50% are defaulting. Make sure you're not amongst the 50%. Have you ever gone outside, opened your letterbox up, pulled out some envelopes and opened them up and your heart starts to beat a bit faster as you realize that you're swimming in credit card debt. Another statement from another credit card company saying you owe us more money. But you look at your bank account and you realize there's not enough there.

And you slipped off the slope into absolute credit card chaos. It happens to everyone. It's easy to fall into this trap, getting stuck in debt. But the question is, Can you get out of it? How do you get out of it? You know you need to. You know you want to. You know those interest payments every month are causing a lot of financial stress and anguish in your household. But you're not too sure where to start. So there are five steps

to getting out of credit card debt. And I know if you follow these steps, you'll be well on your way to actually commanding your credit card debt instead of it commanding you. Because you don't want to be a slave to your credit cards. You want them to be a slave to you, all right? So here's the five steps to get out of credit card debt. fast. Step number one, you got to write them down. You know, like actually know how many you've got. I had a guy recently, he actually reached

out to me on Instagram, right? I remember I was in service paradise having dinner there in between an event we were hosting. And this guy DMs me on Instagram. And I'm like, Oh, I'm just here having dinner by myself. I'll just have a chat with him. And so sometimes I'll do that. And he said, Lloyd, I'm just swimming in all this credit card debt got $27. I'm like, Hey

man, that sucks. I know you feel it's terrible to be there, right? And I said, well, how many debts have you got and what's the interest rates on them? And he went, I have no idea. I was like, how is it that people wanna get out of debt, but they don't even know what debts they have or what interest rate they have? So the most important first step you gotta take is to sit quietly for 15 minutes, quietly by yourself and write down, this much, this

much, this much, and this much. Write down all the cards and all the debts, okay? So list them. That's the first step, all right? Now, once you've done that, the second step is to identify in that list which one is the most expensive. You might be thinking to yourself, what does that mean, the most expensive, right? And so the debt that's the most expensive is the one with the highest interest

rate. Okay, so you might have a credit card with 20% interest rate, you might have one with 10% interest rate, and you might have an interest-free one, which is not expensive at all for now. So

the idea would be to list the debts. and then put them from top to bottom, the most expensive at the top, and then list them down to the least expensive, okay? Why is that important? Because in the next step, I'm gonna explain why that is important to list them from most expensive to least, okay? Because you gotta do that first because otherwise you don't know which one to attack first, all right? And so list them out. And I have had students before say, well, I don't even know, like how do you

know? And on your credit card statement, it'll show you what the actual interest expense is, okay? So what you can do to figure out the highest interest rate is to even just take, it'll tell you on the statement what the interest rate is. If it doesn't, you can take the repayment and divide it by the balance and it'll give you a bit of an indication of which one's taking the most cashflow from you each and every single month,

all right? So we need to attack that one first because it's attacking you the most. So we wanna get the biggest and most challenging one done first, all right? So step number three is to actually pay off the most expensive. But here's a trick. If you haven't done this before, what you could do potentially, and what I've seen people do before, all right, is actually secure an interest-free card from another card supplier to actually then use that to

pay off another one with a lot of interest. So you can actually get an interest-free card and use that to pay off a high-interest one, in which case you're saving a ton of interest. Now, the interest-free card will be for a period of time. So it's like, hey, interest-free for a year or interest-free for six months. So what you want to do is get the card, use that to pay off the high-interest one, but then you don't want to go and like, spend the

other one again, right? So use that advantage you're creating for yourself and start to use the cash that you're saving to pay off the principal. It's called snowballing. And Dave Ramsey has made snowballing debt very popular. For me, it's common sense. I'm like, should I pay off my debt and Yes! What are you, stupid? Of course you should do that. That's the whole objective, to get rid of your debt. Why would you pay it off, create all these savings, and then go and buy a

car or something or clothes? What the hell is wrong with Of course, when I read that, I'm like, Dave Ramsey says to Snowball, no joke. What else would you do with it? We want to get you out of debt. You don't want to stay in debt. So yes, anytime you're saving money from your expense every month by paying the principal down, snowball it. Use it for the next one. Use it for the next one. Use it. You're anti-compounding, right?

Because right now, if you've got a lot of debt, you're someone else's money tree. and that you don't wanna be someone else's money tree. You wanna build your own, but you gotta get out of this money tree situation yourself, and then you can start planning your own, right? So number three is to use some other card to actually pay that off, and you'll create a bit of a buffer for yourself to start attacking

that principle, right? So that's step number three. Just quickly, if you're ready to take control of your finances, but feel stuck on where to start, I have a solution. My book, Money Buys Happiness, simplifies investing and wealth building with practical steps to help you achieve financial peace. Get your copy via the link in the show notes and let's get your money working for you. Now back to the episode. Step number four, here it is. Buckle up for this one. It's

pretty wild. So complex. Ready? Sell stuff. Sell stuff, right? Had a student of mine, he's like, Lloyd, I've got 16,000 pounds in debt. I said, okay, what's your goal this year? He said, well, in the next 12 months, I'm gonna pay it all down to zero. I'm like, 12 months? Okay. And I said to him, I challenged him and I said, what if you could do it in four weeks? And it was almost like that thought had never entered his head. And

so I challenged him, I said, what if you could do it in four weeks? He said, oh, that's interesting. I've never thought about that. And I left him on the call and he left and he just pondered that and pondered that. And he said to me, he came back to me two weeks later. And he said to me, you know, when you asked me that question, you challenged me to do it in four weeks instead of a year. I said, yeah. He said, I started telling my friends about that. And so we started thinking about ideas. And

I said, isn't that interesting? And what did you discover? And he said, what I discovered was I started looking at ways, more bold ways to actually paid off in the four weeks. And I said, what did you discover? What did you come up with? He said, well, here's what I came up with. I

realized I was driving a really nice car and it had some debt on it, but it also had some equity in it. It means I could have sold it and downgraded it and created some cash. I said, so what'd you do? He said, well, I sold my car. I was like, wow, that's amazing. He said, yeah, and guess how much I paid off. I said, well, he goes, I paid off half of it in just two weeks. So here's the lesson here. If you ask better questions, you'll get better answers. So

my question to you is, what do you have in your house? What do you own? What else is around you that you can sell to actually start paying that debt off faster? Because when companies get into debt, when companies have too much debt and they're sinking, you see this in the news, such and such company is going through asset sales, liquidation sale, right? And so you've got to treat yourself as a company. So a company gets into trouble, it starts selling assets, okay?

When a state goes broke, or a country starts to go broke, it starts to sell off assets. You're no different. So I'd suggest to you, what do you have you can sell? This is where you got to be brutal, right? And it's where you got to start getting rid of things. You know when you go to your wardrobe and it's time to get rid of some of your clothes, you're sifting through the wardrobe and you're like, oh, you don't know what to get rid of because you feel like

the clothes have feelings. Yeah, that's because you're emotionally attached to it. So what you've got to do is for a bit of time, get unemotional, get rid of the thing and pay it off. I had a student of mine, she had four cars, right? She said, I'm tight every month. I'm tight. Like it's time. I can't live in paycheck to paycheck. I said, how many cars have you got? She goes, I've got four. I'm like, Sell them. And she said, I would like to, but my husband just can't

let go of this. He can't let go of this. And it's really interesting to see this. If you have emotional attachment to objects, they can start to create a lot of financial turmoil in your life. So you can ask yourself the question, do you want the thing? And do you want the relationship with the thing that doesn't have any feelings, but you have feelings for it? Do you want that? Or do you want the feeling of financial freedom? Do you want the feeling of financial independence? Do you want to

be stress-free and financially at peace? What would you prefer? Your choice, right? So step four is to sell

stuff and pay it off faster. That's a very important step. Start looking now. Put stuff on Facebook Marketplace. Go take some photos of it. List it on there. Get some inquiries. Go sell it. Go sell it. Go sell it, right? And of course, step number five, it seems like you might not be able to be trusted with debt. So here's the thing. If you know that this is a downfall for you or it's a weak point, that's okay. It's just prevented in future. So what that means is if you've got the cards, cut

them up. and just make a very strong money rule that you don't use debt, right? We don't use debt here, okay? One of my strong money rules is I never borrow money unless I know I can pay it back in full in cash anytime, which has kind of prevented me doing big deals that I could have probably done, but I much prefer to sleep at night soundly, right? So cut them up, and then you can start building cash. And once you can start building cash, then you can start planting your very own

money tree. Imagine what it's going to be like when you've actually planted a money tree, you've taken some cash, you've made some investments in something, and then you've actually had some money come back to you. Then all of a sudden, you've got the opposite of a credit card debt. You've actually got someone paying you money. And that's the position I want you to be in. All right, you thought that was five steps, but... Wait, there's more, not steak knives. I'm gonna give you one bonus step

here, which means this is very important. So sometimes you're so swamped in credit card debt that you literally almost can't get out of it. And I get it. I've had students have that happen to them. And we had to go to DEF CON 5, right? Which is talking to your credit card company about some sort of payment help program that they have available, which are available depending which country you live in and which credit cards, your debts you've got and so forth. there are programs to help you

alleviate the debt. However, understand this, if you do that, it will have an impact on your credit score. So just be careful, don't bite off more than you can chew and don't go down that

path if it's gonna wreck your score, but if you need to get out of jail, get out of jail, right? So have a chat to your credit card company, ask them for ways to negotiate the debt and ask them for ways to help your payment through that because the last thing you wanna do, the last thing you wanna do is go bankrupt. Okay, so go have a chat to them, see what they got an offer, but everything is negotiable, including credit card debt, depending where you live. So

go do that. Hope that step helps you. It's a bonus, go do it. But by all accounts, avoid it. Okay, avoid credit card debt. So if you want to know, and you probably asking yourself, when is it appropriate to get into debt? Is that good debt? Is that bad debt? The answer is yes, there are. There's two different types of debt. And you can use it effectively. How to do that is on another episode. Go check it out. So don't delay. Start implementing these steps today. Sit

with your spouse and say, honey, we've got some problems here. We need to sit down and we need to discuss it. Because what can happen is if you don't communicate as a couple, then things can get out of control. I had a student once recently. That's exactly what happened to him. He said, I've got all this credit card debt, but don't tell my wife. I'm like, ah! That's a big red flag, okay? Not

just in your money game, but in your relationship game. So it's time to take the gloves off, it's time to raise the white flag, go and have a chat with your spouse, sit down and say, honey, I may have done this or this, it's time to get this under control. Will you help me? And they'll come, it's

their problem too, right? So they'll come and say, yep, it's time to do this. So sit down, go through it, list them, write them all down, identify the most expensive, Find some way to get an interest-free card to power something else and snowball it, snowball it, snowball it. Sell stuff, be brutal. And of course, number five, cut them up. Build some cash because then it's time to plant your money tree. All right, so I hope you've enjoyed the episode. If you've gotten value, go

hit the subscribe button. Check out the other episodes. But most importantly, I'd love to know in the comments, pop down below which step you're gonna do next. Thanks for listening to Money Grows on Trees. If you enjoyed the episode, leave a five-star review on Apple Podcasts and Spotify and subscribe to us on

YouTube so you never miss an episode. And if you're serious about building wealth, make sure to check out the links in the show notes and follow me on all social media platforms at LloydJamesRoss for