Thursday, March 27, 2014

Light Your Debt on Fire

My friend Anne did an amazing thing last week: she lit her second mortgage on fire. It was a rite of passage that was the result of four years of persistence, prioritization and stretching out of her comfort zone.

I often weave Anne into my writing. Not because she’s fabulously rich, but because she’s fabulously consistent. And we all know from The Tortoise and The Hare fable who wins the financial race: the tortoise. When I met her, she was already living a life of intentionality. Every year, she would choose five birthday goals: three personal, two professional. With great care, she would set out and achieve them.

When I was curating my first prototype Finance Boot Camp, she was an obvious choice. I needed people in that group who were going to declare with honesty what they needed to do with their finances and then do it. I didn't know many details about her finances at the time. I didn't think she was in misery. But I knew she was like many of us, living a little paycheck to paycheck, not earning as much as she was worth and not prioritizing savings and retirement. And then the inevitable happened: her home needed a new roof. She had no savings. She had boxed herself into a corner. Either forgo the badly needed roof, which isn't really an option, or take out a second mortgage.

She hated doing it. She had long been on a mission to pay off her home, and was closer than many because she bought it in her 20’s and hadn't succumbed to the ever enticing “home equity windfall” that so many had. The thought of more debt was dreadful to her, as was the thought of another monthly bill.

In her words from her Facebook post:
"Five years ago I was stuck in a job I hated, $23K in debt, & barely able to make ends meet. I felt horrible. With the support and skills I learned at Finance Gym, I turned it all around. I'm SO much happier today -- on many levels. If finances are a problem, or you simply want to get better at planning, financial accountability and building toward your dream, please consider It works. The proof is in the burn."
Every person who has ever been in a Finance Boot Camp has a story of financial transformation to tell, and I greatly appreciate that she always calls out Finance Gym as the impetus for her financial turn around. But the truth is, Anne has done all of the heavy lifting. She’s the one who gets the kudos.

If you want Anne’s secret formula to financial success, here it is. With great consistency:

  1. Be honest about your financial facts with yourself and select others,
  2. Be honest about your financial feelings with yourself and select others,
  3. Find cheerleaders to help you along when it gets rough (because it will),
  4. Take courageous action in finding work that you love, and that compensates you at a level worthy of your skills and talents,
  5. With every salary increase or windfall, mindfully allocate it to savings, retirement and debt repayment, and
  6. Be measured about your spending (not frugal, which leads to all or nothing behavior.)
Did I mention consistency? Above all else, the thing that has shifted Anne’s financial reality so dramatically is that she’s made her financial life a little bit better every single month. Over time, it’s added up to all of her debt being paid off (other than her first mortgage) and a substantial amount of money in retirement, savings and reserves. (Yes, that’s three different types of savings.)

Congratulations Anne! You’re an inspiration. I look forward to the ceremony when you light your first mortgage on fire!

- Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups.
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