Own Your Debt BELIEFS, METHODS, AND TOOLS For Owning Your Debt Once And For All Written by the MasonPay Team Your Debt-Free Starter Guide 1 MasonPay Debt-Free Starter Guide 1 Beliefs Your Debt-Free Starter Guide 2 Introduction When we set out to make this guide, we knew that we had to take a different angle than most people do. If you look at any resources for people in debt, most are surface-level tips or “hacks” that you already knew before reading it. You skim through, nod your head, and move on. But getting out of debt is hard. If debt was as simple as a few easy hacks, then we’d all be out of debt, right? Just save a little more here, pay a little more there, and you’re debt-free forever! It’s just not that simple. The reason getting out of debt can be so hard is because it’s about more than money. It’s more than a dollar amount or a bunch of interest rates and due dates. If it was just a money issue, debt would only be a problem for those with less money (it’s not!). This guide was intended to challenge and inspire you to look at your debt differently. We want you to walk away from this with something you didn’t have before, whether it’s reflecting on your beliefs about debt or new tools to help you on your journey. We talk about beliefs because they’re the backdrop for the decisions we make. Even with more money and more knowledge, we can still end up in debt because of how we think about money. For most of us, it’s not a conscious decision—it’s the way we were raised or the people we surround ourselves with. So, if it plays a huge role in why people are in debt, why not talk about it? Even if its a little uncomfortable to think about our beliefs, it’s the elephant in the room. Yes, MasonPay is an app. But we started it because we wanted to help people in debt—that is our end game. So, if you take something away from this and never use the app, that’s fine by us. Our job is done. Your Debt-Free Starter Guide 3 Beliefs To make lasting change with your finances, it can take a fundamental shift in our beliefs. Questioning and confronting our beliefs that debt is a normal part of life, or that we are supposed to be in debt—has to happen for any long-term strategy to work. Even if you do get out of debt temporarily, who’s to say you’ll stay debt-free if the way you think about money hasn’t changed? We spend our lifetimes shaping our worldview about debt and finances. It can come from all kinds of places—friends, family, advertising, media outlets. Debt is portrayed as an inevitability, something that everyone is expected to live with. It’s just a byproduct of being a consumer in America, and can even be positioned as a “tool” that can help you get a jumpstart on life. We are expected to keep up with our peers—drive the right car, wear the right clothes, buy the right house. If you can’t afford it, just put it on the card! So what beliefs are we talking about? Here’s some examples that you see all the time—ideas so common that they can be hard to even notice. “Debt is normal.” Debt is an inevitable part of life and everyone has debt. Kind of like eating fast food—you know it’s not good for you, but c’mon! We say: Debt is common, not normal. This isn’t how we were meant to live. Lenders (people that lend us money) want us to think its normal because it benefits them. Every interest payment, late charge, or membership fee you pay is making them richer. If everyone was out of debt and in good financial health, they would have to close up shop. What’s best for them isn’t best for you. Sometimes doing what’s best for you means going against the grain. To quote Dave Ramsey: “Debt is normal. Be weird.” Your Debt-Free Starter Guide 4 “Debt can be used as a tool to get ahead” I just need a little boost now to get some momentum, but will pay it back when I have some more money. Lots of successful business people use debt as a tool. We say: There is no such thing as good debt. Yes, sometimes debt can be a necessary evil. With tuition for private and public colleges rising astronomically year after year, it can be hard to avoid. But willfully accepting large sums of debt without fully understanding your options isn’t always the best decision for you...unless you’re the lender. Using credit cards in place of cash savings is another trap that’s easy to fall into. But it’s hard to really get ahead if you have a tab on the past, especially if it follows you for years to come. Cash is a tool, not debt. Don’t let lenders convince you otherwise. “What difference does it make? I’m not getting out anytime soon” What’s another $100 on my credit card if I’m already in debt for the next 10 years? We say: This is where belief really becomes important. Just search “#debtfreecommunity” on instagram—you’ll see thousands of people committed to paying off their debt, whether it’s $10,000 or over $100,000. The truth is that it doesn’t matter how much you have—it’s where you are on your journey. Someone in $10,000 of debt can feel completely hopeless, while someone with six figures of debt can be on a path, excited about their progress, and inspiring others along the way. It starts with a conscious decision to take control of your debt – understanding where you are now and what it will take to get out. “I just use my cards for the points” I just put my expenses on my cards for the points. It’s actually saving me money. Your Debt-Free Starter Guide 5 We say: Unless you are paying off your balance in full every single month and budgeting for every dollar you’re spending on the card, this probably isn’t true. This is one of the most common justifications for taking out credit cards; there are entire online communities dedicated to getting the most out of their points. A 2015 study conducted by the Boston Fed showed that 35% of American credit card holders pay off their balances in full every month, while the rest carry a revolving balance that’s collecting interest. Yes, it feels good to buy a flight with credit card points. But be honest with yourself: Did you actually save money, or did you spend money that you wouldn’t have otherwise? If you’re enjoying a free flight but carrying monthly balances, then the chances are that the rewards are happening at your expense, not the other way around. “I need to keep up with the Jones’” I want people to know I’m doing well. Life is tough and I have a lot of expenses, but I don’t want live like a bum. I know I’ll be able to pay it back soon. This may be the most common and persistent belief that lands people in credit card debt. It can also be one of the hardest beliefs to undo because it can have very deep roots—the way you were raised, the people you hangout with, the media you consume. It may be hard to confront the reality of your financial situation and what you can actually afford. Embracing your own personal goals (not someone else’s) and seeing money as a tool to help you achieve them re-focuses the conversation. Instead of spending to keep up, you’re spending (or not spending) to move closer to where you want to be. Your Debt-Free Starter Guide 6 So, who do your beliefs serve? Do your beliefs about debt serve you, or serve your lender? As long as you don’t mind being in debt, your bank or lender won’t stop you—you’re paying their bills. You’re keeping them in business. But just imagine all of those payments going towards something that really matters to you, whether that be in your own life, family, friends, or community. Your Debt-Free Starter Guide 7 MasonPay Debt-Free Starter Guide 2 Methods Your Debt-Free Starter Guide 8 Methods When it comes to how you’re paying off debt, it’s important that you understand your options before you commit to a strategy. Depending on the size of your debt, the difference between methods can really add up—years of time, and hundreds if not thousands of dollars in interest. There’s not a lot of resources out there for those in debt. Financial advisors have no incentive to help, blogs can be hit or miss, and most products for people in debt are downright predatory. Financial technology doesn’t make it any easier—just look at what’s out there. Investing apps, savings apps, loan apps, and more investing apps. There’s a reason why such tight knit debt-free communities exist in places like Instagram; people band together to help each other make it through.