Badass vs Dumbass
Master your Financial Kung Fu to be one and not the other.
Go to Sifu’s Notebook for 8 Steps to Debt Reduction
Primer: Who are Sifu & Ronin
Episode 3: Ramen vs Poutine
Sifu: Come here #1. Time to get down to business and discuss that large stack of bills in your inbox.
Ronin: Oh, that’s just junk mail, Sifu. I got no time to worry about that biz. My mates are in town! I’m about to take them out, hitting up my favorite Michelin-star Japanese restaurant downtown. You in bro?
Sifu: Hmmmm. Isn’t your credit card broken yet from your binge spending sprees?
Ronin: Yep, maxed out, Sifu! But that’s why I have a brand new one. Got to break that sucker in!
Sifu: Are you on the sauce again, dummkopf? It looks like our talk is about get deadly serious, #1. Sit your ass down, will you. Time to get real dude.
Ronin: What’s the problem, boss. And no Sifu, I promise you – totally sober!
Sifu: And yet you’ve been acting like a drunken monkey. This incessant spending and debt accumulation is going to rapidly bankrupt you. Are you aware that your credit card interest is over 20%? And here you are just commencing your path to financial mastery. Not a good start, Padawan.
Ronin: Oh shiz. Back to instant ramen noodles for four!
Sifu: Exactly #1. Today’s vital lesson is about paying off your debt quickly, and that starts with you putting those credit cards away for now. If you can’t pay off that month end bill outright, you have no business using it! Clearly, your income doesn’t support this crazy spending addiction of yours. You’ve been putting yourself in a debtor’s prison.
Ronin: Me no likey jail-time, boss. I’m way too pretty to go to the Big House. OK, I’m listening.
1. Create a Budget
Sifu: Debt can be a burden, but with the right strategies, you can free yourself sooner than you might think. The first step is creating a budget. Understanding where your money goes is crucial. You need to list all your income sources—salary, side hustles, and any other earnings.
Ronin: Income sources? You mean my single paycheck? Check! That was easy.
Sifu: Now categorize your expenses into fixed and variable. Fixed expenses include rent and utilities, while variable expenses cover things like groceries and entertainment. Tracking your spending helps you see where tweaks are needed.
Ronin: So, I need to add up all the Uber Eats and late-night pizza bills?
Sifu: That and literally everything else you spend your hard-earned money on. Slap that info into your spreadsheet, and Bob’s your uncle!
Ronin: Ok, ok. Got it. Can do. Who the hell is Bob?
2. Prioritize Your Debts
Sifu: Doofus. Moving on! Adjust your budget to ensure you cover your essential expenses first. Then immediately put most of the rest into debt repayment. This brings us to prioritizing your debts. Not all debts are equal; some are more expensive due to higher interest rates, especially your credit card debt.
Ronin: Okay. Can I say an extra side of poutine topped with butter chicken is “essential”? Cuz, it is, right?
Sifu: Nope. Try again. French Canadian and Indian fusion sounds inspiring, but alas it is non-essential.
Ronin: Can’t hurt to ask, eh? Looks like I’m going to lose those extra few pounds at this rate!
Sifu: You’re welcome. You wanted to keep that 6 pack of yours tight anyways, LOL. If you really want to include that delicious dish in your meal plan, I suggest you get a part-time job working for that restaurant, and eat it for free.
Ronin: Genius, boss. I’m salivating right now! Might take you up on that one.
Sifu: Back to bizniz. There are 2 main approaches to paying debt. First, you can use the avalanche method, which targets your debts with the highest interest rates first. Second, you can use the snowball method, which focuses on paying off the smallest debts first. The avalanche method saves more money on interest. The snowball method can give you a psychological boost. Choose your favorite weapon here.
Ronin: I like snowfall fights, so I’m going with the snowball method. Also feels like a series of small victories – that works for me too.
3. Make Extra Payments
Sifu: 100%, if it motivates your ass, do it! Next, making extra payments and paying more than the minimum can significantly reduce your debt faster. You can also use windfalls, like bonuses or tax refunds, to make extra payments. Another strategy is to make biweekly mortgage payments instead of monthly ones, effectively making an extra payment each year.
Ronin: Now you go too far, Sifu! I look forward to tax refunds to fund my Vegas trips. Dude, what is the opposite of YOLO?
4. Cut Unnecessary Expenses
Sifu: Skip Vegas, #1. Not only will your debt get repaid faster, your losing streak at the slots just ended! You’re welcome … again! Cut unnecessary expenses and you’ll free up more money to pay down debt. For starters, how about those unused subscriptions, eating out less, and shopping smarter?
Ronin: No more binge-watching YouTube TV, Hulu, Netflix Premium, Disney+ and HBO Max every night? I might get a proper night’s sleep for once! You trying to save my life, Sifu?
5. Increase Your Income
Sifu: You’re starting to get me, #1. Now, increasing your income can accelerate your debt payoff. Your one job and paycheck is just a start if you want to be a Badass Moneyman. Consider freelancing, taking a part-time job, or selling items you no longer need.
Ronin: Sell my classic Kung Fu collection on VHS? Over my dead body, Master eBay! How about we start smaller, like my collection of rare Beanie Babies?
Sifu: Wow, the sacrifices we have to make. Are you sure you’ll survive such a traumatic event? ROFLMAO
Ronin: No need to laugh so hard, Sifu. What’s easy for one person may be impossible for another. Didn’t you teach me that, master? I may shed a few tears, but I’ll be ok … I think.
6. Consolidate Your Debt
Sifu: Fair enough, Padawan. Another strategy is debt consolidation, which can simplify your payments and potentially lower your interest rates. For example, you can use a personal loan or a reduced rate balance transfer credit card.
Ronin: Consolidation sounds like putting all my debt ducks in a row. Am I right?
7. Negotiate with Creditors
Sifu: It can indeed bring order. Additionally, negotiating with creditors can reduce your interest rates or arrange a more manageable payment plan. Be honest about your situation and ask for help.
Ronin: Like calling them and saying, ‘Hey bro, can we lower this rate? It’s murdering me!’ Def worth a shot.
8. Stay Motivated and Track Your Progress
Sifu: Exactly, #1. Now that we’ve laid out the plan, let’s dive deeper into the mindset you need to cultivate. Remember, paying off debt is not just about the numbers; it’s also about shifting your perspective and developing new habits.
Ronin: Heard. Habits like ignoring bills ain’t cutting the mustard, is it?
Sifu: Precisely. But it’s important to understand that every financial decision you make either brings you closer to your goals or pushes you further away. Think of each choice as a step on a path; you want those steps to lead you towards financial freedom.
Ronin: As opposed to the financial poorhouse! Gotcha, boss. Also, no more workday lunches at my favorite restaurant with my work buds?
Sifu: Well Ronin, it’s about balance. If you absolutely value your work lunch, then keep it, but perhaps once a week. But find other areas to cut back, like daily lattes. The key is to prioritize your spending based on what truly brings you value and joy, while minimizing the less meaningful expenses
Ronin: Word. So, it’s about conscious spending. Think twice, spend once or not at all. No more takeaway lattes – done and DONE! That one, I can master my own at home. I’ll start tomorrow, and make you one too, boss.
Sifu: I guess if it won’t kill me, it’ll make me stronger. I’m game, #1! Can I steal your line, “Think twice, spend once or not at all”. That’s a genius-level saying right there, pal. Told you Sifu is not immune to learning new things.
Ronin: Any time Sifu. Lunch is on you 😉
Sifu: Homemade instant ramen noodles is for lunch, so I got you bro.
Ronin: Doh! So, no more impulse buys then, like that new digital ring now available in brilliant purple?
Sifu: No, Purple Prince – just say NO! No more buying without real thinking first. In fact, sleep on it, and wake up the next day to find out you don’t even care about that thing you wanted yesterday. That method works for me. And speaking of badass-approved technology, one useful tool can be financial apps. Many apps can help you track your spending, set budgets, and even remind you of upcoming bills. Technology can be a powerful ally in your journey.
Ronin: Excellent! I love tech, so maybe this Sifu-approved stuff can feed my addiction, safely?
Sifu: 100%. Now, don’t forget the psychological aspects. It’s important to stay motivated. This process can sometimes feel S-L-O-W, and you might be tempted to give up.
Ronin: This crosses my mind constantly! When you’re staring down a mountain of debt, it’s easy to think, “What’s the point?”
Sifu: True, but that’s why we celebrate the small wins. Each debt you pay off, each extra payment you make, and each unnecessary expense you cut should be viewed as BIG TIME VICTORIES. They are proof of your progress and commitment.
Ronin: So, it’s like training in Kung Fu—each move learned and perfected is a step toward mastery.
Sifu: Couldn’t have said it better, Master Luke. Financial mastery, like Kung Fu, requires patience, discipline, and perseverance. You won’t see immediate results, but over time, the progress will be undeniable, like my fierce round house kick. And remember, you’re not alone on this journey. Many people have faced the same challenges and succeeded. You can, too.
Ronin: Yes sir, no need to remind me of your ability to kick my ass into next week. Undeniable – check! Armed with this knowledge, I feel more confident about turning my debt around already. Time to kick this debt’s ass to the curb!
Sifu: I absolutely believe in you, Padawan – you can do this. So what’s first on the list?
Ronin: Going right this minute to apply for that restaurant job.
Sifu: Nice!
Ronin: POUTINE! Daddy’s coming for ya!
Sifu’s Notebook
How to Pay Off Debt Fast: 8 Tips
1. Create a Budget
The first step to paying off debt is to understand where your money is going. Create a budget that outlines your income and expenses. This will help you identify areas where you can cut back and allocate more money towards debt repayment.
How to Create a Budget
- List Your Income: Include all sources of income, such as your salary, side hustles, and any other earnings.
- List Your Expenses: Categorize your expenses into fixed (rent/mortgage, utilities) and variable (groceries, entertainment).
- Track Your Spending: Use apps or spreadsheets to track your spending and compare it to your budget.
- Adjust as Needed: Make adjustments to your budget to ensure you have enough money to cover your expenses and debt payments.
2. Prioritize Your Debts
Not all debts are created equal. Prioritize your debts based on interest rates and balances. Focus on paying off high-interest debts first, as they cost you more in the long run.
Debt Prioritization Methods
- Avalanche Method: Pay off debts with the highest interest rates first.
- Snowball Method: Pay off the smallest debts first to build momentum.
3. Make Extra Payments
Making extra payments can significantly reduce the time it takes to pay off your debt. Even small additional payments can make a big difference over time.
Tips for Making Extra Payments
- Round Up Payments: Round up your payments to the nearest $50 or $100.
- Use Windfalls: Use bonuses, tax refunds, or any unexpected money to make extra payments.
- Biweekly Payments: Split your monthly payment in half and pay every two weeks. This results in an extra payment each year.
4. Cut Unnecessary Expenses
Identify and cut unnecessary expenses to free up more money for debt repayment. This might mean making some sacrifices, but it will be worth it in the long run.
Ways to Cut Expenses
- Cancel Subscriptions: Cancel subscriptions you don’t use or need.
- Eat Out Less: Cook at home more often instead of dining out.
- Shop Smart: Look for sales, use coupons, and buy generic brands.
- Avoid Impulse Buys: Use the ‘Cooling-off’ period. Wait a day or 2, then decide if you really want/need the item.
5. Increase Your Income
Increasing your income can help you pay off debt faster. Look for opportunities to earn extra money, whether through a side hustle, freelance work, or asking for a raise.
Ideas for Increasing Income
- Freelancing: Offer your skills and services on freelance platforms.
- Part-Time Job: Take on a part-time job or gig work.
- Sell Unused Items: Sell items you no longer need or use.
6. Consolidate Your Debt
Debt consolidation can simplify your payments and potentially lower your interest rates. Consider consolidating your debts into a single loan with a lower interest rate.
Debt Consolidation Options
- Personal Loans: Use a personal loan to pay off multiple debts.
- Balance Transfer Credit Cards: Transfer high-interest credit card balances to a card with a lower interest rate.
- Home Equity Loans: Use the equity in your home to consolidate debt.
7. Negotiate with Creditors
Don’t be afraid to negotiate with your creditors. They may be willing to lower your interest rates or offer a payment plan that fits your budget.
How to Negotiate with Creditors
- Be Honest: Explain your financial situation and why you need help.
- Ask for Lower Rates: Request a lower interest rate or a temporary reduction.
- Explore Payment Plans: Ask about payment plans or hardship programs.
8. Stay Motivated and Track Your Progress
Staying motivated is key to paying off debt quickly. Track your progress and celebrate your milestones along the way.
Tips for Staying Motivated
- Stay Positive: Focus on the progress you’re making, not the remaining debt.
- Set Goals: Set specific, achievable goals for your debt repayment.
- Celebrate Milestones: Reward yourself when you reach milestones, like paying off a debt.
