Hi, my name is Bob Brooks today I want to talk to you about habits you need to get out of debt. Now there's a truism when it comes to money, a truism really when it comes to life, it goes like this, our results are a reflection of our habits. If you want to change the result, change the habits. You know, you we talked about the financial habits that that lead to financial success on these educational videos, we talked about, you know, saving and investing and tracking all the things that you want to do to have a successful financial future. But if you have bad habits, habits, such as living outside of your means not saving money, not tracking your money, all these things that lead to results that you don't want, it typically goes to debt. That's how debt gets created.

And you continue to practice those bad habits and you continue to collect debt and then you have a problem. And you got to look at the days consumer. Have we really learned our lesson about debt about consumer debt. I mean, we had the financial crisis, which was a big wake up call, let's look at a study by card hub.com. That will really tell us kind of what's going on here. We're on pace to end 2015 with a increase in credit card debt at $68.5 billion, an unbelievable staggering figure that says America has not changed their habits.

Now, if we do this again, repeat this in 2016. This would be over a $1 trillion dollars in credit card debt $1 trillion, it would be up there with student loan debt. Now I hate to use dated material in these in these educational videos. But I think this goes to prove a point is that America still has not gone to good habits. It's almost it's it's almost as if we're building back up to that financial crisis again, because this these this study also shows It also shows that we're on pace to in 2015, with an average household credit card debt of $8,000. The last time that happened was at the top of the financial crisis.

Does this seem like we've really learned anything because what happened is you we built up all this debt and irresponsible spending in credit card debt, it peaked in 2007 2008. And then through defaults, it started coming down. And then then some people started changing their habits. But then again, it starts coming right back up again, we're back where we were, in a financial crisis did not even change the habits of consumers in America. And of course, the The unfortunate thing is, is that as credit card debt has increased, their consumers are paying higher interest rates. This has been a boon for the credit card industry.

And this is the kind of situation that we're seeing right now. Now, what ends up happening, and this is why I think people are stuck. I call it the avoidance strategy for getting into more debt and it goes like this is that you have these habits, they're not really working for you, but they feel good, you know their habits, they're in your comfort zone, you continue to practice those habits over and over, you start accumulating a little bit of debt, you get comfortable with that, then you accumulate some more without in your in your rationalizing all the entire time, I'm going to get this paid off, I'm going to get this paid off. But I need I need to do this, and I'm living with that outside of my means. And that debt continues to expand and expand, you get more credit cards, you get more loans, and then you get maxed out, and you get so discouraged, and you avoid looking at it to avoid dealing with it.

And you get to this point to where you live in existence of paying minimum payments. And it just beats you down. I've had more people walk into my office and say, you know, there's probably nothing you can do for me. And I need to see if you can if you can put a game plan together for me I got to tell you something, it when it comes down to it's not being informed because if you knew the steps that you had to take you changed your habits you You can correct a debt problem, it is a season. It's not an eternity, it's a season. And I've never come across a debt problem that cannot be fixed.

And so it's just about getting educated and changing those habits. And saying once and for all enough is enough, I'm gonna get out of this. Now, let's talk about the four critical habits it takes to getting out of debt. And I want to point to these habits because this is some of these are kind of global. And I'm going to break them down here in a minute and go through each one of them. But the first one is being intentional.

You've got to have a strong will to get out of debt. And let me explain to you why. Just think about it for a second. you've practiced these habits, gotten these results, year after year, after you've gotten good at these habits that are not supporting you. They're comfortable. If you're going to change those habits, you're going to get out of your comfort zone.

That's tough to do. It's tough to get out of your comfort zone when you're used to going through habits over and over and over. It's hard to Enter into or can be hard to enter into personal growth, to do things differently, to do things better, to forego some things that used to give you pleasure that now you're, you're looking at bigger things you're the intention is to get out of debt once and for all. And it can be a tough change. So you have an iron will, when it comes to wanting to get out of debt. And being extremely intentional about it.

Number two, you got to stay organized. This is it. This is I see this all the time we're talking to people. I'll ask them, Well, tell me about the debt. Tell me how much you owe to what credit card company to what interest rate Are you paying to what payment? Well, I have to get back with you because I'm not really sure.

You can't You can't be that uninformed. You have to stay organized. You have to have a system put together we'll talk about this. To be able to track it. You have to know exactly where your debt is you have to proceed the progress of that debt going down. Number three anticipation.

This is a critical element as well, because here's the reality, you've got, you've got X amount of dollars coming in, if you want to get out of debt, you got to pay a higher than the minimum payments. So you have to find that money. So you have to have a good cash flow management system to where you can find the money to pay for the extra money to go into paying the debt off. Now why I say anticipate because expenses come up some things you just can't anticipate the water heater goes out, you didn't see it coming. But you know that you have to put brakes on the car, you know that you have to put tires in the car, whatever it might be, you need to be able to anticipate those expenses because if you're not planning for them, guess where they go, go to accumulate more debt, which is what we don't want to do.

So it has to be the habit of anticipation then the habit of tracking you got to be able to track the success of what you're doing of your new habits of your of the new techniques and strategies and processes you're going through. And the The end result is it working so that you know that you have to tweak it maybe now strategy to change your habit. We'll try to do here. And this is just to give you an idea of how this works, we're trying to establish four new habits that you want to master. Now, these are the habits we just talked about. And I'm going to put them into action by showing you a cash flow management system, because this is at the heart of it.

If you can't find the extra money through a good cash flow management system, then you're not going to be able to get out of debt. minimum payments take forever. That's why credit card companies make you pay minimum payments, they want that they want you to stay in debt. That's the business of credit. So it's important to have a good system now, I'm not going to go into detail on this the system on this video but if you go watch, I don't believe in budgets. I take my boundary planning system which is my cash flow system and I go through a detail by detail step by step and take you through that.

So encourage you to go watch that. So the first thing we want to do habit one, hold a weekly meeting to organize and focus on your system. This is the habit of being intentional. This is the one thing you have to be intentional about. weekend week out one day a week for about an hour you are going to meet. And you're going to go over this and make sure that your system is set up, you're going to you're going to establish through that how you're going to transfer expenses from credit card statements from bank accounts into your system, you're going to select the system and really work that system to where it's set up to get that information into it.

Now when I say by again, a system that could be Quicken, as a good as a popular software system, or it could be your own Excel spreadsheet. Now I tell you what, I use an Excel spreadsheet, because what I find myself doing with Quicken is running the reports and just kind of glancing over the reports and kind of check the box Oh, I looked at everything and everything looks great instead of getting really detail into it. And that which is that's what the Excel spreadsheet I have to look at. Nothing's manually nothing is automatically downloading I have to look at the expenses and I have to manually download them. So I'm very, very in tune with down to the smallest expense, what's being what's being spent? So you set up this system to how long do you run this new habits?

Well, I suggest you run it for three months, 90 days, one quarter. And we're talking about four different habits over the period of a year. Now the biggest mistake that I see people make and they'll make it they make it every January 1, they set out this big adventurous list of new goals and resolutions and they just attack it. And what they don't realize is that they have to change habits to make this work. And so they get overwhelmed and they in a data guy, you know, I'm behind I don't want to do this. And then they that's why New Year's resolutions resolutions only go for about 30 days.

And people forget about when you think about what what were your New Year's resolutions last year, can you even remember them? So this is important to establish one at a time. That's what we're building is a lifelong skill just after the first one 90 days, you're going to see a drastic improvement just after the first 90 days, because it's important to be very intentional about setting that meeting. And why I stress that is because if you get behind in the process, if you get behind, and then you get real behind, there's the chance the probability that you're going to give up, instead, it just didn't work. And so that's why you want to stay very intentional with the process and looking at it and stay getting in tune with it and downloading those expenses into your system. habit number two, so we've got habit number one set, we're intentional about meeting intentional about running the system.

Habit number two is start tracking and categorizing your spending each week and this is important as well. This is what very little percentage of America does is track and categorize their spending. Now basically what you want to know is how much you're spending. What's your run rate every month. Where's that money going? Most people have no idea.

I was talking to somebody my office not too long ago and she was real concerned about he's in retirement was concerned about maybe running out of money. And I said, Well, I was looking at her situation. And I, from what I could tell she was not even spinning what she was bringing in from from just first glance, but I asked her, I said, you know, what, what are you? What are you spending each month? She's like, no, no. I said, Well, how do you know that you have a problem if you don't know.

So it's important to be able to track and categorize. So what you want to do is you want to set it and I go over this in that teaching video. The one that says I don't believe in budgets, you set up all your categories, and you assign $1 amount to those categories. So you know, if you're planning on say your electricity bill is $250. So electricity $250 you spend $249, let's say for that month, so you put that into the category and you can see that that matches up. If you spend more than the category you gotta find where that money is going to come from at this process.

And I and once again, I detail it step by step in that video, this process that you go through really helps you find the extra money because what it what it shows you, where you spend your money is where you value. We talk a lot about this in that in that video. It's all about value based spending. So you may value eating out. But you now say, but you know what eating out is going to go down in my value list. getting out of debt is going to go up here, that discretionary spending all that's going to go down getting out of debt, it's a season I'm going to get knocked out, and that's where that extra money is going to go.

So this is the habit of organized organization. Number three, this is the habit of anticipation start anticipating and planning for future costs. What I always recommend for people to do is set up a separate page and just list all the different expenses that they think could come up so they're not caught by surprise. So list you know that the new brakes for the car home repair that you know you can put out for about two or three more months but probably not advisable to do so beyond that. So how are you going to prepare for because remember, the whole idea is not to get caught by surprise when we get caught by surprise, and it will happen. It's just the way life is, when we caught by surprise, we're not ready for it and we're not ready for it, we go back and increase debt because that's how we pay for it.

So the whole idea is not to increase the debt, it's to decrease the debt. So you want to become great at anticipation, then had a four track your progress. This is the habit of tracking. And you want to know that your systems working, you want to know that you're successfully finding extra money and you know what it may be, it may be that you have to go get a part time job for a season to get out of this debt. But if you're intentional about it, that's not going to be a problem, and will be something you can easily do because the motivation behind it will push you to do it. But tracking that debt, watching the debt balances go down.

That's extremely important. And I talked about one of my other videos about how to go about about the best way to get out of debt, and how to organize that. That's why these teaching videos they all go together. They're very it's very important to watch So that you can see the tie in. And the themes that tie all these in are the same as well. One of the things too, I want to mention that I didn't with habit one is that if you're looking for a system, you want to try the Excel spreadsheet, I'll tell you what I'm going to do.

If you go if you send me an email at Bob at prudent money.com, I'll send you a copy of this Excel spreadsheets, it's free, with instructions on how to use it, it's worked for me and I think it would work for you as well. habits you need to get out of debt. The thing you got to remember when it comes to getting out of debt, and this is why I think that the American consumer today, unfortunately, is not going to do this because it takes personal growth that takes changing bad habits, habits, it didn't support you in developing developing them into habits that do support your habits that will help you lead a great financial life but it takes you out of your comfort zone. But the good news about that is that you have personal growth, develop habits that will ensure financial success.