Resistance is the enemy within.

—Steven Pressfield, The War of Art1

In a cartoon published by The New Yorker, a handsomely dressed man and a pearl-wearing woman are sitting at their chic kitchen table staring at one another before dinner. The man slowly leans over to the beautiful woman and says, “Love you, love us, and I'm comfortable with our debt level.”

Debt has snuck its way into the lives of millions of Millennial. The problem, of course, is that it never wants to sneak out. Debt is like the unannounced visitor who shows up and wants to crash on your couch “just for a few days.”

If you want to escape debt, there is only one way to do it, and you must to it right. If you don't, debt will outstay its welcome. Something tells me it already has.

Luckily, you only face a binary choice with debt: Keep it in your life or eliminate it. There are thousands of success stories about intelligent, motivated, and hard-working people who have taken the necessary steps to pay off thousands of dollars of debt and claim back their financial future. My goal is for you to become one of those people.

Why Debt Sucks

Debt offers a homily of hollowness. You cannot quite understand this when you are using debt; its intoxicating grip blinds you. Signing up for new credit cards is effortless. Applying for a large student loan is now pedestrian. But debt only tightens its grip when you want to eliminate it. You will find yourself wishing you could wave a magic wand and have your debt instantly forgiven. Unfortunately, that is not going to happen (how sweet would that be though?). The only way to kick debt out of your life is to focus on your future and prepare.

Debt sucks; it really does. When you start the process of paying off credit card debt or student loans, you will come up with every plausible scenario why you shoudn't pay the debt back as quickly as possible. What if something happens? Is my emergency fund big enough? Does it matter if I pay it down quickly?

That voice in your head is called “resistance,” and it is the force that works against you in your money makeover. In this book, you will learn to fight resistance and defeat it. Instead of avoiding the steps to become debt free, you are going to lean in and do exactly what needs to be done. As you make progress and start to pay off small balances of debt, your resolve will become stronger. And when you get close to the point of having no debt at all, or crossing the threshold from red to black, you will become ecstatic. The moment you cross that line will be one that you remember for the rest of your life.

The reason I am so passionate about personal finance is that I get to watch thousands of people cross the debt-free finish line. My goal is to help as many people as I can cross that line. Once you do, the future is wide open. You understand that you have the power to do whatever you want in life. The momentum of that progress changes lives. I know it will change yours too.

Before we get too far, there is something that you have to do: Break up with your debt. Say goodbye to it once and for all. Delete its number. No late-night texts. No drunken calls. No Facebook stalking. It. Is. Over.

This is not going to be easy, but neither is a meaningful makeover. I know you are anxious to get started, so let's get educated on why debt likes to hang around in the first place. That will help you understand how and why you should lead a debt-free life.

Interest: The Silent Killer

Why is debt so bad? The answer lies in the fine print.

When people purchase with credit, they fail to calculate the total cost of purchase (TCP), which is often much higher than the initial sticker price. The primary driver of this difference is interest, which has a tendency to catch people off guard.

Let's examine the basics. Whether you are using credit cards, taking out a student loan, financing a new car, or buying a house, the same process is occurring. A lender (the guy with the cash) is allowing the borrower (the guy without the cash) to use the lender's money today based on a promise that the borrower will pay back the money in the future.

This means that the lender has to delay consumption or defer other investment opportunities. In exchange for using the lender's money, the lender charges an interest rate to the borrower. This interest rate is intended to compensate the lender for both the risk that the borrower might not repay the loan and for the lender's delayed consumption. Sounds fair, right?

Each type of debt has three major variables: The first is the size of the loan, or principal. This can vary from hundreds of dollars into the trillions. The second is the loan's maturity, or length of the loan. Loan maturity can vary significantly, with short-term loans only lasting days or months and long-term loans lasting one year or more. The third is the riskiness of the borrower. Some borrowers have excellent track records for paying back debt and others do not. As a result, the lender charges the borrower an interest rate based on the unique blend of principal, loan maturity, and riskiness. The critical point to keep in mind is that not all debt is created equal.

Some debt is high risk (a borrower who has defaulted on previous loans) for the lender, and therefore the lender charges a premium to borrow their money. When the interest for this loan kicks in, the total cost of purchase begins to increase drastically.

Take a look at the following table for varying interest rate averages on typical types of credit.2


As you can see, the highest interest rates are often associated with credit cards, followed by student loans, consumer loans, and mortgages. Interest rates are silent killers because most borrowers tend to forget that interest rates are even there until the size of their loan has gotten out of control.

Let's look at Lisa, a graduate student, as an example. She needs a new computer for her classes and decides to purchase the latest MacBook Pro for $2,000. Because Lisa doesn't have any income, she decides to keep the small amount of cash she does have for daily expenses. So she purchases the new computer with her credit card, which has an average interest rate of 13 percent.

Once Lisa starts her semester she becomes engrossed in her schoolwork and realizes she doesn't have time for a part-time job, like she planned, to pay off her computer. The first month's credit card bill goes unpaid, then the second month, and then the third. Busy with assignments, Lisa decides to defer paying her credit card bill entirely until after the school year is over.

Instead of the MacBook Pro costing Lisa the initial purchase price of $2,000, $260 of interest accrued, now making the computer a $2,260 purchase!

Let's also assume that Lisa has to finance her two-year master's program. Once she graduates and enters the working world, life gets a little messy and she defers payment on her credit card and student loans for several years. Take a look at Lisa's computer and student loan costs now.

Lisa delays paying for her purchase immediately, and as a result interest on her purchase begins to accrue and eventually skyrockets the cost of the initial purchase. If you do not make the conscious choice to eliminate debt quickly, it can balloon out of control.


By starting the money makeover, you will save yourself time, money, and heartache. Paying off your debt as quickly as possible is a winning strategy. You have already decided to turn professional with your money. It is time to finally get debt free, which begins with eliminating your credit card debt.

Part 1: Credit Cards

I Owe You: A Money Problem

In 2017, credit card users racked up a total of $1.021 trillion in outstanding revolving credit, the highest in US history.3 As these numbers continue to climb, industry experts are concerned that this level of debt has infected wealth generation. Instead of young professionals purchasing productive income-producing assets and investments, which is needed to generate wealth, those with higher debt levels are using their discretionary cash to service their debt by making principal and interest payments. This impedes the start of their wealth accumulation.

In an interview with MarketWatch, Matt Schulz, a senior industry analyst at CreditCards.com, highlights the importance of the milestone. “This record should serve as a wake-up call to Americans to focus on their credit card debt. Even if you feel your debt is manageable right now, know that you could be one unexpected emergency away from real trouble.”4

Americans have a debt problem, and credit card companies are willing enablers. Lenders focus on the strength of their marketing, with household names such as Amex, Capital One, Citigroup, and J.P. Morgan spending a combined $850 million on advertising alone.5 Their strategy for customer acquisition has paid off; more than 70 percent of Americans have at least one credit card, and roughly half of all Millennials have at least three cards.6 Nearly 83 percent of these Millennials carry a revolving credit card debt with balances ranging from $1,000 to $4,999.7

The revolving debt is a major problem as two thirds of Millennials have less than $1,000 in their savings accounts.8 That means when the unexpected expense hits—the car breaks down, the pet gets sick, the computer goes on the fritz—credit card users will find themselves in a major bind. With their debt outpacing their savings, Millennials will have to borrow more to cover the cost, and the cycle of debt will continue.

The culture of debt is challenging to escape because people often rationalize the use of credit cards. People tell themselves that they are different from everyone else when it comes to credit cards. They can make the monthly payments on time. They understand the value of money and managing credit. But they usually end up in credit card debt.

In 2016, American Express made nearly $34 billion in revenue.9 Part of that revenue comes from profits they make on people spending more than they earn. Their business model is built on the assumption that people will not manage their household cash flow appropriately, and for many households, the excessive use of credit cards continues to validate this assumption.

I am about to give you the secret on how to beat credit card companies, which will save you thousands of dollars in interest payments, late fees, and annual fees. This may even add years to your life (study still in progress). If you adopt this secret, you will be well on your way to becoming rich.

The secret is: Do not play their game.

The media does a terrific job of giving people thousands of reasons why they should use credit cards. In turn, I can give you 141 million people who are in credit card debt (just in the US alone).10 If you plan your monthly cash flow, build up savings, and do not use credit cards, life will still be good.

In fact, you will be well on your way to the rich life. Don't use credit cards and your life will improve drastically. I guarantee it.

By using credit cards, you are able to self-talk your way into spending more than you should. Credit cards do a remarkable job of reducing the friction of a purchase, or as economists call it, “the pain of the transaction.” This reduced friction causes amnesia that causes people to keep spending, and that is the key to the credit card industry's success.

Take the following quiz and see if you fall into the trap of relying too much on credit cards for your daily spending. Give it a try by downloading a spreadsheet with blank answers at MillennialMoneyMakeover.com.

Reflection Questions Sample Answers
Do I buy items even when I do not have enough cash to make the purchase? Yes, especially when I want to buy something I haven't budgeted for.
Do I say, “I'll find a way to pay for this later?” I always try to find a way to defer payment because cash is scarce.
Do I buy more expensive products with my credit card than with cash or a debit card? When I use my credit card, I always seem to run up charges out of nowhere.
Do I begin my social outing with “I got this!” even when I know I do not? Unfortunately, yes. I get caught up in the moment too often.
Do I pay with credit cards in a social setting because everyone else is paying that way too? It seems easier that way, right? But I end up paying way more than I want.
Do I always pay my full credit card balance each month? No. Some months go unpaid. That seems to begin my credit card debt spiral.
How many credit cards do I have? I have four!

Take some time to think about your answers, and don't get stressed out as you answer. This is just a starting point to help you realize you don't need to use credit cards. Instead, you are going to learn that using cash or a debit card will significantly mitigate overspending.

The Balancing Act

Managing multiple credits cards is like juggling on a tight-rope—and Millennials can be adrenaline junkies. However, credit cards are not to be taken lightly because once they enter your financial ecosystem, they are difficult to eliminate. You might have initially thought that you only needed one credit card, but something tells me it didn't stop there.

Your first credit card was probably used as a financial crutch to fuel your lifestyle. Then you started relying on it, and that is where things got derailed. Now you get annoyed at minimum payments, interest fees, and annual fees as they erode your already limited discretionary income. Suddenly, the rewards don't seem worth the effort, and you start shopping around for better cards with more perks. This leads to more credit card applications. Before you know it, you have two, three, or four credit cards—all with varying balances.

To avoid the balancing act altogether, the best strategy is to get rid of one credit card at a time. Pick your favorite and say goodbye to the rest. The disadvantages of having multiple credit cards include:

  • Difficulty in managing payment schedules and due dates
  • Paying the wrong amount per card, which leads to late fees
  • Overconsumption with numerous cards, which leads to higher debt
  • Opening a new card to solve another financial problem11

Once you decide to stop using credit cards, it is essential to examine why you signed up for multiple credit cards in the first place. There may be various influencers in your life; identify them and remove them.

Perhaps hanging out with a specific group of friends is causing you to overspend (these are your Joneses). Maybe your choice of apartments left you house rich and cash poor (perhaps you need to move). Maybe you are spending too much on travel (find local events). Whatever the reason, it is crucial to pinpoint the “why” behind signing up for multiple credit cards. Go to MillennialMoneyMakeover.com to download the following spreadsheet and fill in your own answers.

Reason Sample Answers
First reason My credit cards fueled my weekend warrior lifestyle.
Second reason My shopping got out of control.
Third reason My rent was too high and did not leave me with enough money to go out to eat or do anything social.

Now that you have identified why you have too many credit cards, it is time to have an intervention. Admit to yourself that you have a problem. I am sure it was a fun ride while it lasted, but it's time to get rid of your credit cards once and for all. No more excuses!

Eliminating credit card debt may take some realignment of priorities. You should be realistic with yourself; this is going to take some time. Now that you identified the three main reasons for why you signed up for credit cards, you need to eliminate those variables. This might mean having some tough conversations with yourself and others, but that means you are getting closer to financial freedom.

The hard part of any balancing act is the dismount. Now that you know juggling multiple credit cards is a recipe for financial disaster, it is time to cut up your cards.

The act is over.

Seven Steps to Paying Off Credit Card Debt

Debt has crept into the daily ebb and flow of American life. In 2017, the average household that carried credit card debt had a balance of $15,654.12 The absurdity of that situation is our reality. As Millennials, we wake up in a house we don't own, put on clothes purchased with credit, and drive to work in financed cars. This presents a problem that we need to acknowledge.

Missing monthly payments, making costly impulse purchases, and spending more in general are all consumer behaviors that credit card companies count on to snare consumers. These habits lead to the cycle of credit card entanglement. It is not until the heady elixir of easy money wears off that most people start facing the reality of their predicament.

But once you are ready for the detoxification, use the following step-by-step strategy to help you pay off credit card debt fast.

Step 1. Acknowledge Your Credit Card Debt

As with most interventions, the first step toward behavioral change is an acknowledgment that a problem exists. Your debt comes from a pattern of overspending or poor financial planning. So far, you reviewed the three main reasons why you opened your credit cards in the first place; make sure that you are eliminating these variables from your life.

Next, construct a full inventory of your purchasing habits and analyze your consumption. Take a look at your last three months of credit card statements and print them out (yes, you need to do this). Use a highlighter and mark each purchase that you didn't need. After you are done highlighting those purchases, total all of your highlighted purchases and write down that total. Something tells me it is higher than you initially thought.

Once you know this number, go through the following self-assessment:

  • What purchases led you to use your credit cards?
  • Did you use your credit cards in specific situations?
  • Did you use your credit card impulsively or because of poor planning?
  • Did monthly subscriptions get the better of you?

Now that you have examined your spending you can take refuge in the fact that this was past spending. Your past does not define today. You have made the critical decision to acknowledge the problem and slash your credit card debt.

Step 2. List Your Credit Card Debts in Ascending Order

Pull out all of your credit cards and lay them on a table. Sort them by balance, starting with the smallest balance first and working your way toward the largest balance. This process helps you visualize how many cards you are using and gives you a keen sense of what you are up against.

Once you have all of your credit cards laid out in the correct order, fill in the following chart, which will provide a visual of what debts to attack first. You can download a blank spreadsheet at MillennialMoneyMakeover.com. Remember to list your credit cards in ascending order based on the card's total balance.


The smallest balance on your list is what you are going to attack and eliminate first. Write down the amount and post it in a prominent place. Look at it repeatedly. That number is your first target.

Step 3. Create a Flash Budget

Now that you know what credit card to pay off first, you can start building what I like to call a flash budget. Start by analyzing your monthly income and expenses, and list all sources of income. Once that is complete, create another list of your fixed expenses, or expenses that are not going to change from month to month (rent, car payments, insurance, and so on). Once you have your fixed costs summarized, list your monthly variable costs. Variable costs are costs that fluctuate based on the level of activity (going out to eat, drinks, clothes, and so on).

Finally, subtract expenses from your income. This reveals your margin of error. Let's say you have $1,000 left over after you subtract expenses from your income. That $1,000 should go toward paying off the lowest credit card balance.

Reworking your budget to meet your current debt repayment needs might take some adjusting. For now, you can focus on either increasing your earnings or cutting your costs. Once you have created your flash budget, it will be important to develop a much more refined budget for long-term success (see Chapter 3).

Your budget will serve as an unbiased performance evaluator, which will hold you accountable for every purchase.

Step 4. Snowball Your Success

One of the most critical aspects of getting rid of debt is a behavioral modification. The positive psychological impact of gaining incremental success by paying down your smallest debt first is crucial.

Conventional wisdom will tell you otherwise. This view advocates paying off your debts beginning with the highest interest rates first. Talking heads and television personalities love preaching this drivel as gospel. They argue that paying off the credit cards with the highest APR reduces the overall cost of credit cards in the long term. From a purely economic perspective, they are correct.

But as we know, personal finance is about much more than numbers. Although this approach makes the most economic sense, paying off debt quickly doesn't happen in a vacuum. Debt repayment is more about behavioral change than pure economics. Researchers at Northwestern University's Kellogg School of Management found that consumers who tackle small balances first are more likely to eliminate their overall debt.13 By paying off your smallest balances first, you create momentum. This leads to higher confidence to tackle the larger balances in your debt portfolio. Plus, watching the lines on your repayment spreadsheet disappear is magical.

Step 5. Pay With Cash

Once you begin the positive cycle of paying off your smaller credit card balances, you should focus next on how you are going to fund your day-to-day purchases. Because you fell prey to the frictionless form of credit card payment, you should start using cash for daily transactions.

There are many benefits to paying with cash. First, cash gives you a tangible and visible pulse on how well you are sticking to your budget. Second, making payments with cash will force you to pause and contemplate the magnitude of each purchase.

It may seem counterintuitive, but increasing the pain of the transaction is better for your financial health. Paying for expenses with cash gives you a clear view of your monthly cash flow. This small change will stem your spending.

Step 6. Celebrate Your Wins

As with any significant accomplishment, it is important to acknowledge your small victories along the way. Each time you pay off a credit card balance, celebrate your success (using the cash from Step 5) and reward yourself. Go to the movies, go out to dinner, go to a sporting event, or go to an art class. As you approach your final payment, the rewards will become less frequent because your balances increase. But realize the ultimate prize of becoming debt free is just on the horizon.

Step 7. Share Your Success

As you develop new spending habits, it will become important to reflect on your experience. The process of sharing your success with family and friends allows you to prime yourself for successful habits and cultivate a sense of accomplishment. In addition, reflecting and internalizing your daily financial wins improves your success rate. This routine helps you ensnare the credit card spending you are fighting to contain and may unknowingly help someone else along the way.

How to Talk with Credit Card Representatives

What you learn in this section will pay for this book. In fact, you are going to reap a huge return on your investment. The only caveat is that you will need to pick up the phone and do a little work.

Most credit cards come with an annual fee and high penalties for missing payments. These fees are a terrific way for credit card companies to increase their annual revenue in an already lucrative business. Often, card companies automatically lump the annual fee onto your bill without your knowledge. Stop for a moment and look at your credit card statements. Do you see the fee?

Once you find the fee, it's time to give your credit card company a call. I want you to chat with a credit card representative and get your annual fee waived. I know you think this will be awkward. But the reality is that you have the upper hand. Credit card companies place a tremendous value on keeping customers because the average American household pays hundreds of dollars in interest each year. Credit card companies are inclined to credit back an annual fee or interest charge because they think it will be a one-time event. Little do they know that you are going to eliminate your credit card debt altogether and be done with them for good!

Remember: If you get freaked out during this process, all you have to do is hang up. If things don't work out with the first call, you can always call back. Keep calling until the fee is reversed. Use the following script to help guide you through the call.

Me: Hello, I was calling to discuss the annual fee for my [fill in the blank] credit card.
Rep: Good day, Mr. Richardson. Let me see here. Yes, your annual fee is $20.
Me: Thank you for taking the time to look that up. Can you please go ahead and credit that back to my card? I don't want to pay an annual fee for my credit card.
Rep: Oh, I am sorry, Mr. Richardson. I am not able to do that in our system.
Me: Look, I just started the Millennial Money Makeover challenge, and I am consciously working on paying off my credit card balances as quickly as possible. The charge you are looking at occurred in a hectic month. Can you please credit it back into my account?
Rep: Let me take a look at your account. Can you hold?
Me: Yes, of course.
Rep: Mr. Richardson, I have great news. I spoke with my manager and we have credited back your annual fee. You should see it come through in the next couple of days.
Me: Thank you very much.
Rep: Is there anything else that I can help you with today?
Me: That is all. Have a great day!

I know what you are thinking: This can't possibly work. However, if you are forcefully polite, you can get your annual fees waived. It simply involves taking a few minutes to call your credit card company and begin the conversation. Once you have the call, it only takes two to three business days for the charges to be credited back to your account. That's money back in your pocket!

But wait, we aren't done yet. As we learned earlier, the power of reaching milestones toward a larger goal can spur success. Keep that in mind here, too. After you see your annual fee credited back to your account, it will be time to get back on the phone. If you had an interest payment in the past twelve months, get the most recent interest charge credited back to your account too (simply substitute “interest fee” for “annual fee” in the script provided). Keep the momentum going and build your confidence.

Remember: Credit card debt is something that you control. Financial experts such as Ramit Sethi, author of I Will Teach You to Be Rich, have evangelized this hack of taking control of your credit card interest payments and annual fees because it really does work. It puts money back into your pocket while simultaneously boosting your confidence. Accepting this responsibility is key to your money makeover.

How to Dominate Credit Cards

In today's economy, it seems like having a credit card is a must. Truthfully, there are only a couple of situations in which you need a credit card. For those rare occasions, you might as well have a good one.

There is a right way to use credit cards and it is not hard, if you can avoid the temptation of overspending. I advise having only one emergency credit card. But once you have built up your emergency saving fund (see Chapter 4), the sole purpose of this credit card should be for vendors who do not accept cash.

Until then, here are five ways to dominate credit cards:

Get a Credit Card With Awesome Rewards

If you must have a credit card, make sure you have one that works to your advantage. There are countless options to choose from, so do your homework and get one with a low APR and a high reward-to-expense ratio.

Credit card companies offer a variety of different rewards as incentive to use their cards, including cash back and travel points. I recommend the travel rewards because they can offer the highest return. Although 1 to 5 percent cash back sounds like a great deal upfront, the real winnings come when you can purchase flights or book free hotel rooms.

Always Pay Your Full Balance

This sounds like a no-brainer, but this is the exact reason why credit card companies exist. Credit cards companies thrive off of human fallibility, that is, late payments and financed purchases.

If you are opening up a rewards credit card, set aside some cash for the credit card before you open it. Think of this as a hedge against your future cash flows. Every time you make a credit card purchase, transfer money from your checking account to the credit card. In other words, pay for the purchase every time you use your credit card! This prevents forgotten purchases and missed due dates, and ensures the integrity of the pain of the transaction.

Monitor Your Credit Utilization

As you start to conquer your credit cards, it is important to eliminate them from your life one by one. That means closing each account as you pay off the card. The ill informed will advise against this because it can negatively affect your credit utilization in the short term. Let's dive into why.

Your credit score is comprised of several components, one of which is your credit utilization ratio. This ratio influences part of your FICO credit score, which analyzes your credit worthiness to lenders. In short, your credit utilization is the amount of credit that you use, calculated as a percent of your total credit limit. For example:

  • Card A has a $1,000 balance with a $5,000 limit.
  • Card B has a $4,000 balance with a $10,000 limit.
  • Card C has a $0 balance with a $5,000 limit.

In this scenario, your credit utilization is the total $5,000 of credit card balances divided by the $20,000 of available credit card limits, or 25 percent. If you close Credit Card C because you just recently paid it off, then your credit card utilization jumps to 33 percent ($5,000/$15,000). This higher credit utilization is viewed as a negative by lenders because you are using a considerable portion of your credit available, which increases your risk of default. The reality is that this does not matter in the long run.

As you eliminate debt from your life and close credit cards, your credit utilization will decrease. But once you are to the point of using one credit card, all you have to do is call the credit card company (yes, again) and ask them to raise the credit limit on that one card. This will increase your credit utilization score.

Damaging your credit score can increase the cost of big-ticket items because lenders will demand a higher interest rate when you borrow money. If you are about to buy a house or take out a student loan, then it will be important to consider your credit utilization. You can optimize control over your debt by making automatic payments to the credit card you choose to keep (see Chapter 6).

Negotiate a Lower APR

Credit card companies are basically legalized loan sharks. If you don't make your payments, they come a-knocking. And when they do, they can demand exorbitant interest on unpaid portions of your debt.

An annual percentage rate (APR) is the annual rate that is charged for borrowing money and is expressed as a single percentage, which represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.14 The higher the APR, the worst it is for you, the borrower.

Call your credit card company and ask them to decrease your credit card's APR. Yes, you can do this. For some reason, most people don't and end up paying far more than they need to. This costs them big.

Keep a Lockbox

When you are done using credit cards and setting up your automatic deposits, it will be important to keep all of your credit cards stored in a central location. This is your lockbox, which can be a physical or virtual location.

Keep your lock box well accounted for. With the rampant degree of credit card fraud and identity theft taking place every day, you do not want your information getting into the wrong hands. Storing your cards in one location will make the maintenance hassle-free.

Let me be clear: I recommend having one credit card. Use resources such as NerdWallet.com, CreditCards.com, and ConsumerReports.org to shop for the best credit cards available. These sites do a fantastic job with their credit card comparison tools, which can help you find the best credit card for you. When you find the one credit card you want to use, stick with it and don't open any others.

Although I advocate having no credit card debt, as technology improves and our economy moves toward more digital payments, some businesses will not accept cash. Only use your credit card in these rare circumstances.

Keep Your Momentum

Once the momentum of paying off your credit cards begins to build, you will get hooked on the idea of becoming debt free. Watching your debt number approach zero will become addicting. You will slowly begin to taste the autonomy produced by living debt free.

As marathon runners say, the race truly begins at mile 20. When you get closer to crossing from red to black, dig in and pick up your speed. Once you eliminate credit card debt from your diet, it is time to keep the momentum going and move on to any other debt you may have, such as student loans or consumer debt.

Getting to zero is worth every second of the struggle. Ride the wave of momentum in your makeover money.

Part 2: Student Loans

Student Loans: An Educated Beast

In a satirical article by The Onion entitled “Teary-Eyed Student Loan Officers Proudly Watch As $200,000 Asset Graduates from College,” loan officers from Sallie Mae are described as being hyper emotional at an undergraduate graduation ceremony from Emory University in Atlanta, Georgia. Loan officers were quoted as saying, “It's been absolutely amazing to watch our revenue stream grow right before our eyes.” The officer's optimism was captured even further when describing their hope that “one day they may be able to see their source of profit go to law school.”15 The article captures the painful realities that engulf today's student loan crisis.

Student loans have become a hot topic for Millennials because most Millennials have either felt the weight of student loans or know of someone who is struggling to pay them off. Chronic student loans are a financial epidemic.

As of the writing of this book, the nation's student loan balance has risen to $1.3 trillion, up from $447 billion only ten years ago.16 Ballooning student debt is getting out of control as people continue to invest in the belief that a four-year college is automatically the right path for everyone. The average student loan debt is at a historic high and has increased at a pace of 6 percent faster than inflation over the past decade.17 As the cost of education continues to soar, so too do correlated student loans.

Education is a gift that has traditionally stamped the ticket to success. But the socioeconomic propulsion it once provided seems to be fading. The American educational success sequence—studying hard, making good grades, attending a top college, and landing a great job—is beginning to crumble. The great jobs promised in the halls of higher education are starting to disappear. This is due to a fundamental misalignment between our current education system and the rapidly evolving job market.

Don't get me wrong; student loans still provide a tremendous benefit to those who need to finance their education. Sometimes there is simply no choice. Student loans offer an avenue for determined students who want immediate access to the very best education. What we will address in this section is the spillover effect of rising loans. Although formal education can offer tremendous value, student loans often leave borrowers with years of nagging debt, stifling the dream they once set out to achieve.

My job is to help you reach those dreams and passions as fast as possible. By paying off your student loans, you will expedite your path to financial success.

The Story of Gradible

As you just read, student loan repayments have ballooned into an everyday problem for millions of Millennials. For Gradible cofounder Pete Wylie, the difficulty of helping people pay off their student loans has turned into a daily passion. In the summer of 2012, Wylie, along with cofounders Lee Smallwood and Grant Biles, brainstormed the idea behind their startup Gradible, a business dedicated to helping young professionals pay off their student loans.

After the initial concept was born, Gradible gained entry into the prestigious New York City–based seed-stage accelerator AngelPad. Founded by former Googler Thomas Korte, AngelPad is a growth lab for early-stage high-tech startups. This kind of workplace was precisely what Gradible needed to formulate the best way to help US graduates pay off their student loans.

Initially, Gradible helped recent graduates with student loan debt match up with employers who needed freelance work. The concept was that once the work was complete, employers would make payments directly to the student's outstanding debt. Grabile users loved this approach, and 87 percent of users preferred having their student loans reduced directly instead of being paid in cash. While working on this idea, it became apparent to the Gradible team that there was a massive opportunity to educate those who had student loans about the programs available to help pay off their debt. Gradible quickly pivoted to this new, and later successful, strategy.

In the fall of 2016, Gradible was acquired for an undisclosed amount by CommonBond, a leading financial technology company in the higher education space.18 After the acquisition, Wylie joined the CommonBond team as the vice president of finance and continues to work with students to alleviate their student loan debt.

Interested to hear about what insights and suggestions Wylie would give to prospective students, I asked what recommendations he could provide. Wylie was adamant about several things he learned during his time at Gradible. In particular, he suggests considering the following three items before signing a large student loan:

  1. Consider cost of attendance. Most people are blinded by prestigious names and acceptance letters. Sit down and honestly analyze how expensive the total cost of attendance will be and weigh that against your outcomes for employment.
  2. Make sure you graduate. When you look at the numbers, there is a significant correlation between graduation rates and difficulty in student loans repayment. Make sure you graduate to reap the rewards of your credentials.
  3. Understand that majors matter. Although you shouldn't always think about a college major in purely economic terms, you would be wise to factor it into your decision. Instead of majoring in philosophy alone, why not double major in philosophy and economics? Varied majors and diversification of knowledge will help you gain employment and solve real-world problems after graduation.

Wylie also wants people to consider all of their options and use their surrounding resources. If you already have student loan debt, consider using apps, websites, and businesses dedicated to helping you with your loan. Use all the tools at your disposal and be resourceful. The Gradibles of the world are waiting to help you.

Three Things No One Wants to Hear

The evidence is clear; you owe it to yourself to pay off your student loans as fast as possible. The fallacy that most people talk themselves into is that long-term debt equals long-term payments. This is false. For most student loans, interest starts to accrue right after graduation; for others, it starts when they are still in school. When this occurs, a $30,000 loan can quickly morph into $35,000. And then $40,000. And then $45,000.

This can happen within a matter of a few years, there by increasing your total cost of education. With the average 2017 college graduate carrying a student loan debt of $37,172, interest can get out of hand quickly. To aggressively pay off your student loans, you might have to make some changes to your lifestyle. Here are three hard suggestions to hear if you have student loans.

1. Move in With Your Parents

I know you hate hearing this, but living with your parents will profoundly reduce your cash outflow. During my coaching, I found that there is serious resistance to moving back in with parents. Get over it, because your highest fixed cost after graduation will be rent. Do not pay it if you do not have to.

How will you even ask your parents?

I suggest sitting down with them, or at least the nice one, and explain that you are completing your money makeover and trying to pay off your student loans fast. The catch is that you want to move back into your old room.

If you cannot live with your parents, try living with relatives or someone else willing to lend a helping hand. Everyone understands that student loans are onerous. If you are working hard, people are usually willing to help.

2. Sell Your Nice Car

If you are driving around in a new car and you have student loans, sell the car and use the cash to pay down the loan. Technically this goes for anything of value that you own.

In all honesty, this is a no-brainer. The reason this can seem difficult is that it forces you to realize there is a major gap between where you are and where you want to be. The economic fallacy you have in your head and the reality of your current financial state do not align. Not to worry; they will soon.

3. Establish a Buddy System

Humans are social creatures. If you are looking to combat the pain of student loans, chances are one of your friends is struggling with the same predicament. You both won't have much money to spend when you are putting all of your extra cash toward paying off your student loans, so lean into that commonality with a friend.

Instead of participating in expensive activities, scour for free or cheap stuff together. Join a book club (start a Millennial Money Makeover book club). Go on runs. Paint. Write. Study. Exercise.

Paying Off Student Loans the SMART Way

Student loans are the red-headed stepchild of credit cards. They are often much more annoying and nobody wants to deal with them, until now.

Before we dive into paying off student loans, let me make something very clear: If you still have credit card debt, go back to Part 1 of this chapter and attack your credit cards first. Once those are eliminated, then you can start chipping away at your student loans. If you don't have credit card debt or have already paid it off, congratulations! Now it's time to move on to eliminating your student loans.

As a highly educated individual with a bachelor's, master's, doctorate, or whatever degree you possess, you should be SMART about paying back your student loans. By following the steps listed below, you will be able to pay off your student loans insanely fast.

Small Balances First

Student loans can be daunting to pay off because their sheer size is overwhelming. Acting like your student loans do not exist is a practice of self-denial. Self-preservation calls for you to address the problem.

By not paying off student loans quickly, the overall cost of the loans can dramatically increase over time as interest accumulates. This means paying off a ballooning student loan can take more of your hard-earned money out of your pocket.

You have to optimize your behavior when it comes to paying off your loans. Harness the power of behavioral modification based on the research from Northwestern University's Kellogg School of Management, which recommends you focus on paying the smallest loan first. This method increases your chance of overall success.19 Ignore your larger loans for now and keep them at bay while you focus on eliminating your smallest loan. This will give you the momentum you need to go from red to black.

Fill in the following chart with all of your student loans in ascending order (the smallest balance first). You can download a blank version at MillennialMoneyMakeover.com.

Student Loan Lender Balance
1. Citizens Bank $3,000
2. Wells Fargo $8,000
3. Discover $10,000
4. Sallie Mae $17,000

Pay More than the Minimum

Now that you zeroed in on your smallest loan, gather all of your resources to pay the monthly minimum. Look underneath the couch for change, sell your extra clothes, or forgo a night out with friends.

Now that you are focused on eliminating your smallest loan first, what do you do about your other loans? Because most of your cash flow is concentrated on paying off your smallest loan, you still can't lose sight of your other larger loans (if you have any). For those loans, keep paying the monthly minimum to make sure they don't balloon out of control. By paying the monthly minimum, you can effectively keep them in check.

Always Find More Money

It is time to unleash your inner entrepreneur. You need to find a way to do two things in your life: cut expenses and increase your income. Having exhausted the former, you should start focusing on how to increase your income. This is where your entrepreneurial spirit comes in. There are countless ways to earn extra money in today's shared economy, and with your intelligence and education, you will be able to find something immediately. Go to MillennialMoneyMakeover.com for ideas on how to make some extra money.

Take the time to develop a strategy and think about how you are going to pull in some extra dough. Once you start earning this extra money, throw it at your student loans and watch them melt away.

Reward Yourself

Celebrating your wins is a vital part of creating new habits. Each time you achieve a major milestone in your student loan payments, you need to reward yourself. Yes, you have my permission to splurge a little bit. When it comes to paying off your student loans, you will forgo many things that you would otherwise be spending your money on, such as clothes, vacations, or nights out.

Develop a ritual when you pay off a student loan. Whether that is having friends over for dinner, dining at your favorite restaurant, or popping a bottle of champagne, the more cadenced you make the reward, the better.

Timeline From Red To Black

This entire chapter is dedicated to the progress of going from red to black. By definition, you are in the red because you have student loan debt. Now that you have all of your student loans listed out, you should have a clear view of your minimum monthly payments. Build a flash budget by analyzing your income and expenses over the next several months (similar to what you put together in Part 1 of this chapter). Decide how much you can put toward your student loans. If you have already paid off your credit card debt, try putting the same amount each month toward your student loans and keep the ball rolling.

Once you have calculated how much you can put toward your monthly payments, it will be time to determine how long it will take for you to repay your student loans. Will it be three months, twelve months, or twenty-four months? After you have your date, mark it on your calendar. This is your blackout date—the day you cross from red to black.

While paying off your student loans the SMART way, it is important to embrace the process. After graduation, many people sulk about their student loans. Once they begin working full time, their student loan payments seems like an anchor weighing them down. It is important to remain grateful and positive about all that you learned while in school. Realize that paying off your student loans quickly is a temporary discomfort for a lifetime of knowledge.

Because you are taking the time to consciously decide to eliminate your student loans (not waiting five, ten, or fifteen years) you are adopting the makeover attitude. This attitude will launch you from red to black. The makeover journey is not solely about the money; it's about attitude. Adopt the money makeover mindset and success will quickly follow.

Three Alternatives to Higher Education

Highly motivated people often get sucked into the concept that they need to attend a prestigious and expensive school to make lots of money or find their calling. In this section, I present the case for why that is a flawed assumption.

If you want to be a doctor, you need to attend medical school. If you're going to be a dentist, then go to dental school. But some other professions might not require the conventional education plan. I urge you to consider the actual value of an advanced degree based on your career choice. The following three alternative plans can help you avoid ensnaring yourself in unnecessary long-term debt.

1. The altMBA Experience

Our educational system is broken.

Thought leaders around the country are trying to figure out ways to reduce the financial burden of our traditional educational system—a system that hampers students' post-graduation aspirations due to their massive student loans and relatively low skill set. The call for change is getting louder.

Seth Godin, bestselling author and entrepreneur, has set out on a course to correct higher education, specifically in business. That is why he started the altMBA, a new wave of disruption in the education space and one that can potentially serve as a model for the future. This one-month program gives working professionals a streamlined and immersive experience with one hundred like-minded peers.

There are no textbooks. There are no lectures. There are no $40,000 tuition payments.

The application process is rigorous, as is the experience. Students receive coaching sessions, participate in team discussions, receive a curated reading list, and they ship thirteen projects in one month. Students receive continuous assignments of “doing” throughout the program and, at the end, have something to show for their experience: a portfolio of completed projects that is instrumental in landing graduates new jobs or furthering their current careers.

And the cost according to Godin is, “A lot. $3,000. Not $2,950 or some clever amount. And it's not just the money, it's the time you'll be spending as well.”20

Because “doing” is core to the curriculum, students complete a variety of real-world projects that give them the experience needed for post graduation success. Godin believes that students are far more capable than they know, and he pushes them toward greatness. Godin created this new program in 2012 to challenge the status quo, and things seem to be working. The program has produced more than 1,500 graduates, many from companies you may have heard of: Google, Nike, Microsoft, Johnson & Johnson, and Fidelity Investments.

2. The Dirty Experience

Mike Rowe bites goat balls.

As the host of his hit television show Dirty Jobs, Rowe did a lot of things he never imaged. During its eight seasons and nine-year reign on the Discovery Channel, Rowe met hundreds of skilled labors and craftsmen from all across the United States. While on the road, Rowe noticed a curious trend. At a time when the economy was tanking, people kept telling him about a shortage of skilled labor. Mike bit at the opportunity (pun intended) and in 2008 set up the mikeroweWORKS Foundation, which brings to light a discussion about “the country's dysfunctional relationship with work, highlighting the widening skills gap, and challenging the persistent belief that a four-year degree is automatically the best path for the most people.”21

Rowe argues that there is a massive shortage of highly skilled labor in the market but high demand for these types of workers. He advocates trade school and community college as a means to jumpstart your career and to become a master of a trade. Through his foundation, Rowe has given out more than $3 million in education for trade schools around the United States.22

The path to success is not a one-size-fits-all model. The rich use this to their advantage and look for opportunities in unsuspecting places. In fact, they look to work and invest in areas where the competition is low and the returns are high. Rowe is highlighting a major opportunity here.

Whether it is mastering a new trade or craft, look for a new sweet spot. There are thousands of opportunities in our current economy; it is up to you to find yours.

3. The Self-Taught Experience

With one email, his life was changed forever. It wasn't an eloquent essay, but a short and concise statement of fact, sprinkled with some old-fashioned ruckus making.

In July of 2008, Josh Kaufman, a financial analyst at the time, launched himself into Internet lore when his website, PersonalMBA.com, went from a hundred readers per month to thousands of readers from all over the globe.23 This spike in traffic happened literally overnight.

Kaufman recounts the day he sent an email to author and entrepreneur Seth Godin informing Godin of his website dedicated to business self-education. Kaufman was trying to avoid the high cost of graduate business school and adopted the mindset that a self-taught curriculum might be the better, and less expensive, solution. So he did what any good Millennial does: He started a blog. Kaufman began reading, writing, and sharing his newly developed curriculum, mostly as a means to keep himself accountable.

One day, Kaufman was reading Seth Godin's daily blog post and noticed that Godin was interested in exactly what Kaufman was working on—a website that would act as a resource for anyone interested in learning more about business. Kaufman scrambled to find Godin's email, and then Kaufman mustered up the courage to send a brief and informative email to Godin about his new business blog.

Within minutes, Godin sent out the link to Kaufman's website to his millions of readers. Kaufman's life was changed forever. PersonalMBA.com went from relative obscurity to Internet sensation. The real-world business education Kaufman was looking for came straight at him, and he seized the moment.

With the newfound traffic, Kaufman went on to secure a book deal and write The Personal MBA: Master the Art of Business, which later went on to become an international bestseller. Kaufman managed to avoid the high cost of graduate student loans altogether. His tuition was paid through time, energy, and hard work. The Personal MBA still retains an avid following and remains an excellent resource for anyone aiming to master business.

As you can see from these stories, education comes in many forms. There are countless ways to avoid the high cost of formal education. If you have already completed your advanced degree, or are currently enrolled, the lessons from Seth Godin, Mike Rowe, and Josh Kaufman apply to any point in your life.

Take this moment to reboot your thoughts about education. Learning doesn't stop after class is over. Life will present you with countless moments of self-improvement. Make your mind clearer and sharper by pursuing your education, even after class ends.

Publicly Declare Your Intent

Now that you have all of this knowledge on how to pay off your debt, it is time to make your commitment of being debt free public. By announcing your intention to the world, you make yourself socially accountable. That proclamation can be incredibly powerful. The pressure to perform, and to avoid social embarrassment, will drive you toward success.

I want you to declare your money makeover publicly, now.

For all of you extroverts, tell the social group that will hold you the most accountable that you have entered the Millennial Money Makeover. For you introverts, I want you to take out a sticky note and write, “Millennial Money Makeover: Challenge Accepted.” Place this note on your mirror, phone, journal, or refrigerator. Just make sure it is prominently displayed.

A great way to find the support you need is to get social. Find the Facebook, Reddit, Instagram, or Twitter community dedicated to the love of debt-free living, building up savings, and investing. Be strategic and join those communities as soon as possible. They will provide affirmation that you are on the right track.

Once you declare your intent, a social transformation begins. Getting family and friends involved with your money makeover might spark some unexpected and exciting conversations. Perhaps some of your loved ones will confess they too have been thinking about getting their finances in order.

If you can find someone to team up with, do it! The buddy system produces tremendous benefits, so try and find a friend, girlfriend, boyfriend, or family member who understands what you are trying to accomplish. Ask them to support you along the journey and hold you accountable.

There are thousands of people in the Millennial Money Makeover community. All you have to do is start participating in the conversation. Your curious quotient will begin to increase the more you learn about money. This is when you need to put your pursuit in overdrive.

Developing Your Debt-Free Timeline

After being around highly successful venture capitalists, bankers, and business leaders, I have learned a consistent maxim: Planning is directly correlated with long-term success. Those who take the time to contemplate what they want to achieve and give themselves the necessary time and resources are always more prepared in the long run. In the world of personal finance, mapping out your strategic path to wealth can be the difference between success and failure.

Selecting goals and developing a path to reach your goals forces you to visualize the future and anticipate roadblocks. It is essential to plot out exactly how you are going to achieve your goal of becoming debt free.

When you are putting pen to paper, remember that many people overestimate what they can do in one day but underestimate what they can accomplish in one year. Give yourself at least twelve months to become debt free. Some people will finish their transformation faster, others slower. What matters is that you assign yourself clear objectives and timelines.

The clock has already started; your money makeover is already underway.

“A goal without a plan is just a wish.”

—Antoine de Saint-Exupery24

The good news is that you have already taken the first step: interest in this book. This book spoke to you on some fundamental level. That little voice inside your head told you to pick it up and start your makeover. Whether you are looking to pay off credit card debt, consumer loans, or student loans, give yourself a reasonable timeline but stay aggressive.

The sooner you are debt free, the closer you are to crossing from red into black.


Action Items

Hopefully, this chapter has taught you at least one important piece of information: Debt sucks. To eventually cross from red to black you need to eliminate all forms of debt from your life. Get rid of it once and for all. Fight the resistance to pay off debt slowly and be super aggressive. You will thank yourself later.

When you are paying off debt, remember to follow these steps and get your debt snowball rolling today.

  1. Commit to getting rid of all your debts.
  2. Pay off your credit card debt starting with the smallest balance first.
  3. Eliminate your student loans and other consumer debts.
  4. Share your success with the world and keep your momentum going.
  5. Stick to your debt-free timeline and action plan.

If you have credit cards or student loans, eliminating these from your life will lift a weight off of your shoulders. No longer will you remain encumbered to their principal and interest payments. Instead, you will be able to use your money to start building up a savings cushion and begin investing. In the next chapter, you will learn how to construct a budget that will set you up for long-term success. Building a passion budget will change your life and provide you with a blueprint, paving the way to a rich life.

Becoming debt free and crossing from red into black is a liberating experience. As you get closer to that line, I encourage you to share your success with as many people as possible. You will be an inspiration to others slogging their way through debt.

Once you cross the debt-free line, you will remember your life in two parts: before being in debt and after. After is better.

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