The five things you need to
know about your consumer debt in order to blitz it and
get it free from your life. One of the most frightening
statistics is that over 93% of people who have
some form of consumer debt, a credit card, and
overdraft, a store loan, an IOU, revolving credit
facility, all these different ways that institutions and banks
try to keep you in debt have no idea actually what is going on in their debt world. Because it’s very easy for us
to disconnect from this thing called consumer debt. In a way it’s easier to
just go la, la, la, la. But when you decide to
break free from debt, when you’ve gone, okay, this is enough,
I realise consumer debt is going to destroy my
life, my freedom, my wealth and I’m gonna break free from it forever because I choose me and I’m more important than anything that I could
possibly buy on the credit card, then there are five key
things you must, must know about that debt before you
can even start blitzing it. The very first thing is you’ve
got to know who you owe. So you’ve gotta open those envelopes, you’ve gotta open those emails, you’ve gotta go on a treasure hunt. And I say a treasure hunt because
you’re gonna free yourself when you find these gems. You’ve gotta go, what are all the debts? Who do I owe? And make a list of them. So every single debt that you owe and you might as well also include your neutral and expansion debt on this. List it all down so you
know where you stand because here’s the thing. In order to get to someone else, you need to put a plan in place, you need to get direction, you need to get movement and flow. But you can’t get to that new place, that financial freedom, that free of debt, if you don’t know where you currently are. And that’s also what
keeps many people stuck because they go, Ann, I wanna break free of debt. And I say, “Well, tell me
what’s going on in your life.” Well, I don’t know. And that is so devastating. So, who do you owe? Second question, is how
much do you owe each person? Every credit card, every store card, you list them out and then you say, what it the outstanding balance? So one, who? How much? The third thing you must know
is, what is the interest rate? Super, super important. What is the interest rate
you are being charged on your outstanding balance? And there might even be different charges depending on whether it’s
things that you have bought on that credit card, whether you’ve withdrawn
cash on that credit card. (speaking in foreign language) Whether you’ve done a balance transfer. But you want to understand,
what are those charges? So few people understand the interest rate they’re being charged in their debt, let alone what that even means. And so super important you
understand that interest rate. The fourth element you must know is, what is your contractual minimum repayment that you must pay on that debt? Every single debt you take on has a contracted minimum repayment. Now what is terrifying in most countries, by law the minimum repayment somebody who is in debt must pay is 1% of the outstanding balance plus the interest for that month is the monthly minimum repayment. This is almost nothing. If you are only paying 1% plus
the interest on that side, you are hardly making
any dent in that debt. And that is why, if you’re
only paying minimum repayment you will end up paying between
five and seven times more than the base amount that you borrowed, plus it could take you between
15 and 22 years to clear. Just based on the average interest rates currently being charged
out there in the world. And if you’ve got a bad credit rating and you’ve taking on a
credit card or a loan with a higher interest than average because of you’re out of desperation, that is going to be even more. So super important,
you’ve got to understand the interest rates. So we’ve got, what did you owe? How much you owe? What is the interest rate? What is the minimum repayment? And then, using a simple credit
card repayment calculator which you can find on the internet, you want to work out that if
you only the minimum repayment, how many months is it going to
take you to clear that debt? And that is often a huge eye opener. And these are the five key
bits of information you need to put together a structured
debt blitzing plan. Because with that you’re
going to understand what is your total owing? What is the minimum repayment you must pay just to stay out of
getting it court judgement or getting, you know, stay out of trouble with those that you borrowed from. But how many months it will take you, years it will you if you only
take the minimum repayments? And also give you the
basis on which to calculate which is your priority debt. So now you’ve got that information, you can put together
your debt blitzing plan. And the key element with
a debt blitzing plan is you only focus on one
priority debt at a time and this is super important. You keep paying the minimum repayments on all your other debts, but
you choose a priority debt and you get 10% of all the
income that come into your life and you pay that onto
your debt in addition to the minimum repayment. So which is your priority debt? The priority debt is the debt that you’re going to pay off quickest. That’s why it’s important
to know how many months would it take to clear if you only paid the minimum repayment. So you look at the debt with
the shortest amount of time that it would’ve taken, and
that becomes your priority debt. And I know what people say, but Ann, wouldn’t it be
more logical to pay off and focus on the debt with
the highest interest rate? Well, you would think so. But here’s the bottom line. Money, wealth, is
fundamentally not logical. It’s primarily emotional. And this is why focusing on the debt with the smallest repayment time, really blitzing that and
clearing that from your life, triggers your serotonin,
triggers your dopamine, triggers that; yay, I’m making progress, and will help you stay the
course and give you momentum. Whereas for many people
if they focus on the debt with the highest interest
rate, although logically it’s gonna save them more money, would often take them more time and so they’ll lose
momentum and not get that reward of success. So you put together
that debt blitzing plan, you automate it and you celebrate that you are freeing
yourself from this thing called consumer debt. My name is Ann Wilson, and
if you’re watching this anywhere than over at thewealthchef.com, head on over there. And in the comments below the video I’d love you to share how
much consumer debt you have. And make a commitment to
break it free from your life. Why am I asking you to do this? Because one, you’re gonna
have to go through the steps to work out exactly how
much consumer debt you have, so hopefully it’ll motivate
you to take that action. But two, by just sharing where you’re at you’ll also be able to
de-energize any shame or guilt around it, so that you can just look at it practically
and deal with it in that way instead of hiding it,
because that’s how we keep getting and having this funky
relationship with money. So I dare you to be brave. And if you’ve got no
debt, no consumer debt, share that too with a big celebration cause that’s something
to be super proud of. Keep taking baby steps,
free yourself from debt, focus on building assets. Let money support you to live
your greatest, juiciest life. (air whooshing)