(upbeat music) Well, welcome back to the show. – I’m here. – I know, you’re back! Thanks—
you couldn’t stay away, I know, I know. – When the Rachel Cruze Show calls, you come. – It is true, people, it is true. (laughs) So, we’re on to Baby Step 2, and Baby Step 2 is paying
off all of your debt, except for your house. And you do this by
using the debt snowball, and that is where you list
out all of your debts, smallest to largest, regardless
of the interest rate, pay minimum payments on everything, and you pay off the smallest debt first. And so we find that people
gain incredible traction, and they really win with this method. And on average, people are
getting completely out of debt, except for their house,
in 18 to 24 months. So, it’s pretty powerful—this whole idea. So, when you started this whole program, I mean, you’re like the Godfather of the Baby Steps and all of the things. So what caused you, first and foremost, to be, like, Yeah, you
need to be debt-free. What’s the point of even being debt-free? Those people watching that are like, “Eh, is it that big of a deal?” What would you say? – Well, I mean, so in
the Bible it says the borrower is slave to the lender. And we had just gone broke in most everything because of debt. And so, just from a risk
management standpoint, that’s where it started.
Because it’s like pain avoidance—because we’d
been through so much crap. – Yeah. – You know, and then the
next thing that happened was, I started realizing you actually— your most powerful wealth-building
tool is your income. And when you don’t give
it to someone else, you can use it to become
an everyday millionaire. You can use it to change your family tree. You can use it to be
outrageously generous, but when you give it all to Countrywide, and Citi Bank and Lexus
in the form of payments, and MasterCard and Visa
and American Express, and so on, you know, you
don’t have any money. And so it’s kind of a math thing— that you’re giving up your power. Your mathematical power to build wealth. – It’s so good, and there
is, there is such freedom— we’ve talked about it on the show— not only mathematically and financially, when you don’t have debt
and you don’t have payments, but emotionally and spiritually. It changes your whole
life, your whole being, when you have no payments, when you don’t owe anyone anything. You do have this sense of freedom that you get to choose things in your life that you otherwise wouldn’t be able to if you had to go to that job, and make that money just to pay the bills. – You know, and I kind of
thought, the first time, my first understanding of the borrower is slave to the lender was the math thing. That when you give all
your money to someone else, you’re kind of owned by them, right? I got that part. But what I didn’t realize,
is slaves don’t have choices. Slaves—it’s tough to have relationships, because people are pulling you around. You’re going to a job you hate every day, putting up with a toxic environment— just to pay your freaking bills. You know, slavery has societal, relational, spiritual, not to mention, mathematical implications. And so, that scripture really
does have a lot of layers. You can just keep peeling them off and it keeps going. – Yeah, absolutely. So when
you look at the math side of doing the debt snowball and paying it off, smallest to largest, I’ve heard the argument
over and over again— well, you should pay off the
highest interest rate first, because mathematically, that’s correct. And we laugh all the time like, well, if you’re doing math, you wouldn’t be in credit card debt, so math doesn’t always
apply to the situation. – But 25 years ago, when you started this, and you fought against that, what made you do smallest to largest? What was kind of the “aha” moment? – Well, what we realized
was the problem is not math. And if the problem is not math,
you can’t fix it with math. The problem is the person in the mirror. And so, what happened was, the first thing I ever did, you know, in terms of interacting with the public, trying to help people,
was one-on-one coaching. And we would have people come
in that were in foreclosure, and they were behind on
their credit card bills. And I would get everything
arranged in their budget to where they could could get caught up and then they would be okay
and avoid their bankruptcy. And it was a one-on-one coaching
session—that’s all we had. And then I would see
them six months later, and I would go, how’s it going? “Oh, we filed bankruptcy.” What? You know, I had all the math done for you. And it wasn’t a math thing—
it was a behavior thing. The stuff that was
going on in their lives, was still going on in their lives, and if you don’t change the person, the math doesn’t change. When people change, numbers
change—that’s what Hogan says. Not when numbers change, people change. It doesn’t go that way. So what we figured out
was, that personal finance, and we say it all the time, is 80% behavior, 20% head knowledge. The problem is not math. The problem is me. I’m the guy. I mean, the problem is
chocolate chip cookies if I’m trying to lose weight, you know? So we figured out that
chocolate chip cookies are not the problem. It’s
the guy eating the cookies. It’s 80% behavior, it’s
20% head knowledge. You know, you cannot work out
enough to lose weight if you eat an elephant. I mean, you just can’t do it. And the same thing is true
here with your money situation, you know—you cannot make enough money to out-earn your stupidity. I tried it. I tried it really. I’m
good at making money, but you have got to control
the person in your mirror. And once we understand that, then we go, well, if we’re gonna solve this, if it’s a psychological,
behavioral problem, then we’re gonna solve it with psychological behavioral
answers and solutions. And so that’s why the debt snowball works. And all these other theories, and all these people who
want to talk about this are just people that don’t want to do it. They don’t want to do the hard work of dealing with the person in your mirror. That’s harder work than trying to find some math thing to fix this. Math thing is not going to fix
it—it’s not gonna fix it. The thing that’s gonna fix it, is when you fix you. And that’s it. – It is, it is so true,
but the hard thing is, is no one likes change, right? You’ve been doing the same
thing over and over again, and you get in this rhythm in life, and to get out of that orbit
and to do something different, it’s hard and it’s intimidating. So what would you say
to someone that’s like, “Oh, I know I need to,
but I don’t even know, like what to do, if I can even do this.” Like, what would you say to someone? – List them smallest to largest, when you pay off the little one, you’ll go (gasps) maybe I can. And then, when the second goes— (gasps) Maybe I can. (gasps) And your hope starts to increase, because your success level increases. You know, the first time
the child rides the bicycle, and you let go of the seat . . . (gasps) Maybe I can. That’s all it is. And it’s a behavior thing, because you’re building
confidence and hope. And you’re saying, this system will work— maybe, finally, I can
get control of my money. – Yep, it’s so good, and I think, when you get to the point in your life, and we say this over and
over again, that you say, “I’m sick and tired of
being sick and tired.” Because I do talk to some
people that are like, “Yeah, I kinda sorta think I wanna, kinda get out of debt, maybe, kind of”. (laughs) I’m like, yeah, that’s
probably not going to happen, because getting out of debt’s hard, right? It takes sacrifice. It
takes intentionality, so what would you say to someone— because a lot of people watching are in the middle of getting out of debt— so what encouragement would you give them? – It’s hard. But it’s worth it. It’s hard, but it’s worth it. You know, putting up with your spouse, at times, is hard. But Sharon and I have been
married 37 years—it’s worth it. I get to play with grandbabies, and my babies, and it’s worth it to pay a price to win. It’s worth it, but it’s hard. If it was easy, everybody’d be rich. – It’s so good. It’s so good. Okay, you guys, that’s it—Baby Step 2. You heard it straight
from the horse’s mouth. Is that a saying? – Could be the mouth. – Is that a saying? (laughs) So good. Okay, well I’m gonna
bring you back on the show later on in the episode to
talk about another Baby Step, so thanks for being here. (upbeat music)