FPU Lesson 4 – Dumping Debt

The fourth week of FPU attacks the biggest problem most of us have when it comes to winning financially. Out-of-control debt. Below are my notes from the lesson, including the key points that I highlight from the video when leading the class, and some supplemental material that I think could help the class go further on this topic.

Lesson 4, Dumping Debt

Key Points

Consumer debt has only become accepted as normal in America over the last 40 years. The credit card has only been in existence since 1950. It wasn’t until after 1970 that their use became widespread. Your ‘need’ for a good credit score is a recent invention. The Sears catalog used to warn customers against buying on credit, and now it’s their biggest money-making department.

Don’t believe myths about debt. It isn’t part of a healthy financial plan. Debt is a product being sold. Remember that whenever they offer a financing option. You’re being sold a product that is tremendously profitable for them. You don’t have to have a car payment. “90 days same-as-cash” isn’t actually the same as cash. Your FICO score has nothing to do with your financial stability. You can live a perfectly normal life without ever touching debt.

Remember the importance of gazelle intensity. It’s very easy in our culture to wander into a crippling amount of debt. Between stupid loans and consolidations, you can suddenly wake up and find yourself under a mountain of payments. Escaping from that kind of mess takes focus, sacrifice, and intensity. The same motivation a gazelle has when it’s running for its life.

Challenge

Chop some plastic. The first step to getting out of debt is to STOP borrowing more money. This is the week we break out the scissors and ask the class if they’d like to cut up some credit cards.

Go Deeper

If you want a more honest picture of how debt and wealth really works, check out these resources:

• The Millionaire Next Door by Thomas Stanley

• The Truth About Money Lies by Russ Crosson

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Next week, Lesson 5 – Buyer Beware.