The Path of Least Resistance

As a kid, I was fascinated by the section in science class where they showed images of how rivers changed shape over time. As sediment is carried and eventually dropped, the speed and direction of the water flow shifts, carving a different path into the earth. The water constantly follows the path of least resistance.

Human behavior is much the same way. Whenever we have an array of options in front of us, we're likely to select the path of least resistance. We can get out of bed, drive to the gym, and get a workout in......or just stay in bed for another hour. The path of least resistance. We can prepare lunch the night before work.....or we can just grab a sandwich at the deli next to our office. The path of least resistance.

This is one of the many reasons I suggest clients cancel their credit cards. This suggestion is often met with eye-rolling and a staunch defense that includes something like "I'm always responsible with it." These comments are typically combined with defenses revolving around the benefit of points, the fact they pay them off every month, the perception they are safer, and the fact they are building credit.

One problem. Eventually, the path of least resistance will come into play. Two families in my life are living this reality as we speak. I've suggested for years that both these families cancel their credit cards. One family doesn't even use them....hasn't for years. It's "just in case," and that's what I'm afraid of.

As I always say, credit cards seem like our friend.....until they become our worst nightmare. Fast forward a few years, and both families are facing financial challenges. It's a combination of medical, auto, house, and job-related situations. Both of these families handle their money relatively well. They've made good decisions and are going in the right direction. One problem, though. They still have active credit cards. Just like the sediment in rivers, financial challenges will cause us to seek the path of least resistance. After all, pain hurts. Stress sucks. Tension puts a strain on relationships. There's a simple way around all that. It's the path of least resistance. Out comes the credit card.

We're going to use it just this one time, though. Well, maybe just the things we need. Then it shifts to putting everything on there because seeing our savings dwindling is scary. But just this month. Next month we'll get on top of things and back to normal. Except the path of least resistance didn't actually make this better. It just dropped more sediment, causing us to push deeper into the path of least resistance. Fast forward a few months, and our reality looks much different. We went from the family who said, "credit cards are great if we use them responsibly," to another statistic. Tens of thousands of dollars in expensive debt, in the snap of your fingers.

My heart breaks for what these families are now dealing with.

One Bite at a Time

In November 2008, on the heels of just finding out we would soon be forced to move to a new state because of my job situation, my new fiancee (of three days) and I were sitting with $236,000 of debt and a whole lot of stress. To clarify, she had $0 of debt and I had $236,000. Beautiful, I know. Thus began a journey that would forever change our lives.

We didn't know how to pay off $236,000 of debt, so we did the only thing we could think of. We paid off what we could this month. Then we did the same thing next month. Then again the following month. Some months we paid off a ton, while in others, it was far less. But we were committed to making progress.

It reminds me of a famous quote from Desmond Tutu. "There is only one way to eat an elephant: one bite at a time." We couldn't pay off $236,000 in one swoop, so we just took one bite at a time. 4.5 years later, the debt was gone. That final payment happened more than 11 years ago, and that achievement still boggles my mind.

Today, we published the 250th episode of the Meaning Over Money Podcast. That's 71 hours of content, free to the world, which will be archived and available online forever. Wow! Reflecting on that journey feels a lot like my debt payoff story. It's hard to fathom how we did it, but it was really just one bite at a time. Two episodes per week, every week, without fail, for nearly 2.5 years. We've never missed an episode. Every Monday and Wednesday since March 2021.

We didn't just wake up one day and decide to produce 71 hours of content. Rather, we woke up and produced 14 minutes of content, then 18 minutes, then 15 minutes, then 19 minutes. Over and over and over. We didn't do anything special. We just had a very clear mission: record 10-20 minutes of concise, relevant, engaging, and useful content for the people we wished to serve.

This is the power Desmond Tutu's words. We can accomplish anything, no matter the scale, if we simply take one bite at a time. It won't happen overnight, but luckily it doesn't have to. I hope you take your bite today!

Beware of Survivorship Bias

I had a fun dinner last night with some of the employees who work for my client. One of them asked me about our most recent podcast, which took us down the finance rabbit hole. One of the young men commented on how debt is good, citing its prevalent use as a common trait amongst wealthy people. The dots were connected that using debt fuels success. In some ways, he's right. Using debt can propel success. On the flip side, however, just as using debt can accelerate success, it can also accelerate failure. But we don't talk about that much in our culture. Why?

It reminds me of a story I once heard about WWII. After the battle, the bomber planes returned to base riddled with bullet holes. Most prominently, the wings and tail looked like Swiss cheese. After assessing the damage, the experts recommended they add more armor to these areas of the plane. After all, these were the hot spots getting obliterated by enemy fire. Then, one man stepped in and proclaimed they should do the opposite. Instead of armoring the areas of the plane most hit, they should armor the areas of the plane least hit. Why? Because the only planes they had access to were the survivors. What did the missing planes look like? If the surviving planes had limited damage to the engine and cockpit, that could be the tell. The experts had become biased due to having just one particular data set (the survivors), not considering a whole other data set missing. They got fixated on what they could see, and forgot about what they couldn't see.

Back to wealthy people and debt. Yes, many wealthy people attribute some of their success to using debt. There's truth in this. However, it's only part of the story. These are the survivors. These are the ones who made it back to base. What about the others? As much as the winners are talking about winning, most losers aren't publicly talking about losing. It can be embarrassing and uncomfortable. So we get a cultural echo chamber where the only people we hear from are the survivors.

Asked another way, how often have you heard someone in your life talk about how much they lost at the casino? Not many. Same with the stock market. How many people in your world do you know that openly talk about getting absolutely thrashed by that hot stock tip they received from some co-worker or neighbor? It's rare. The silence is deafening. We only hear from the survivors.

You may have heard the stories of people who used debt and won. They are more than happy to boast about their spoils. On the other hand, I have met with dozens upon dozens of families who didn't succeed. They used debt.....and lost. They didn't survive. These are some of the saddest situations I can think of. And they are suffering in silence.

Beware of survivorship bias.

Choose Freedom

Today, we Americans celebrate July 4th, our Independence Day. It's always been one of my favorite holidays, as it represents the best of what summer has to offer. As I've gotten older and seen more of the world, the concept of freedom has also grown on my conscience. We often take it for granted, and shame on us for doing so.

But as I think about freedom, I see all the various ways we humans trap ourselves and limit our own freedom. While we live in a free country, many of us have curated a life that's anything but free. We continue to elevate our lifestyle and financial commitments, locking ourselves into a certain income expectation. We make choices to incur mass amounts of debt, which bleeds our income each month. As our financial obligations rise, our margin to spend our values decreases. As our monthly needs grow, our ability to shift careers, pursue meaning, and follow our calling shrinks. One decision, after another, after another. As we increase our standard of living, we're slowly and oftentimes unknowingly reducing our freedom.

I can't even count the number of people I've spoken to who have fantastic incomes, jealousy-inducing lifestyles, and social media-worthy lives, who feel desperately trapped. They look like they have the world at their fingertips, yet they have less freedom than the unassuming middle-class family a few doors down from me. It's an embarrassing, scary, and frustrating place to be. Many of you can relate to this. Either because you used to be there, or because you're there right now.

Some people choose stuff, others choose freedom.

Some people choose status, others choose freedom.

Some people choose the instant gratification of debt, others choose freedom.

Some people choose more, others choose freedom.

Choose freedom. Always choose freedom. And the beautiful part is, every day is a new day to choose.

Debt Ceiling, Through a Different Lens

A few people recently asked me about the U.S. Federal Government debt ceiling situation. It’s definitely a hot-button issue in the news cycle, and many people have vastly different opinions about it. I find it helps to reframe the discussion and look at it as if the US government were just a family, using the same ratios as the government is dealing with. With that context, here we go!

This couple has an annual household income of $269,000. It’s a pretty good income, for sure! However, their annual spending for needs and wants is closer to $361,000. Since they are $92,000 short and don’t have savings to pull from, they only have one viable option: put in on a credit card. They’ve been living off the credit card for many years now, having accumulated approximately $3.18M of credit card debt. Yikes! They know this probably isn’t the best approach, so they intend to do better in the future. But they always have enough money to pay the monthly payments, so they aren’t going to let it cramp their style right now.

Recognizing the need to have boundaries with their finances, they agreed they would never exceed $3.25M of credit card debt. They even shook on it and pinky swore! Never mind they’ve had this same discussion every few years for decades. They want to do better, but let’s face it, their annual spending is important! They don’t really see any other options right now than to borrow it, so they concede that’s what they need to do.

However, it’s causing a lot of tension in the marriage. Both spouses know they should do better but can’t agree on what to cut. One spouse wants to cut x, but the second spouse won’t budge on that category. The second spouse thinks they should cut y, but the first spouse is unwilling to let it go. Hence, they are at a stalemate. They certainly can’t stop making monthly payments on the debt (that would be irresponsible and reckless), so ultimately they will probably agree to increase their negotiated credit card debt ceiling. After all, they will definitely figure it out in the future…..or so they tell themselves. Thus, the madness continues.

Can you imagine if your friends, co-workers, or family laid that situation out over a dinner party? At best, you’d roll your eyes, and at worst, you’d tell them to get their crap together. But this is the exact situation we find ourselves in as a country. $2.69 trillion of annual tax revenues, $3.61 trillion of annual spending, and a $31.8 trillion debt balance. Last year alone we fell short of our budget by $920 billion dollars……which was funded by debt. Pure madness!!

We as families deserve better than this, and we as citizens deserve better from our leaders. While we can’t control what Congress does, we can control what happens under our own roofs. Let’s practice and model a better way. Maybe they will catch on someday……

A Friendly Reminder

This is just a friendly reminder that using credit cards in no way makes our life better. In fact, it brings a litany of negatives that range from minor inconveniences to utter destruction. This is an opinion I’ve had for more than a decade, and each week I get more convicted in it.

I have two clients that have made significant financial progress in the last few years. By “significant”, I’m referring to life-changing, trajectory-altering, “holy cow I can’t believe that just happened” significant. It’s worth noting both of these families made this progress after ceasing to use credit cards. It wasn’t a coincidence. Getting rid of credit cards is the gateway to finally gaining full clarity, control, and transparency of our finances. It’s an unpopular opinion, but I’ll die on that hill.

Then, something happened. Both of these families recently decided, for different reasons, to start using credit cards again. Nothing major. Just a few purchases here and a few purchases there. They’ll pay it off in a few weeks after xyz happens. Nothing wrong with getting some cash back. It’s “more secure” than using debit. They won’t pay any interest because they have the money to pay it off. You know, all the common tropes. It seems so innocent. No big deal. But in a matter of just a few months, a few things happened:

• They lost clarity in their monthly budget because using a credit card separates the purchase from the payment. Timing gets altered and it’s hard to keep track.

• They lost touch with what they were spending money on, as the credit card payment includes a myriad of different items all lumped together.

• They felt stressed out, anxious, and frustrated. Our meetings were different. They went from excited and optimistic to stressed out and nervous. You could cut the tension with a knife.

• The strong momentum they had previously experienced had slowed to a crawl as they had to re-focus their energies on getting clarity, control, and a zero balance.

These people aren’t dumb. They aren’t irresponsible. They aren’t negligent. In fact, they are some of the brightest and most successful people I know. They are well-known figures in their respective communities. They simply fell for the trap so many of us do. Their decision to start using credit cards again is like the person who hits the gym hard and eats healthy, gets extremely fit, then decides to stop going to the gym and eating healthy because they’re pretty healthy and don’t need to worry about it.

I know this is a controversial opinion, but they deserve better…..and you deserve better.

"Never Again!!!!!"

One of my clients just paid off a ton of credit card debt. It’s a debt they’ve had off and on for the better part of two decades. Now, after about a year of intense work and dedication, it’s gone! When I asked them how it felt to have it finally paid off, they didn’t react with excitement or enthusiasm. Instead, they looked disgusted. “Never again!!!", exclaimed the wife. It was as if years of frustration were let loose in that moment.

“Never again.” That moment represented a lot of different things to that couple. For me, it felt like a turning point. History has repeated itself multiple times for them over the years. Debt, pay off, debt, pay off. This time, however, feels different. They know better is waiting for them. They now have the tools to move past the debt and never let it haunt them again. They have a bigger purpose and the hunger to pursue it.

This idea applies to many areas of our life, money included. Sometimes we’re not ready until we’re ready. If we’re not ready, there’s almost nothing we can do to get it right. But if we are ready, there’s almost nothing that can stop us. If it goes the way I think it will, this will be the launching point of many good things to come for their family. I will always remember my “never again” moments (there were several), and I suspect they will, too.

Three important things happen when we reach this moment:

1) We prove to ourselves that anything is possible.

2) We prove to ourselves it’s never too late.

3) We model for others a better way. If we can do it, so can they.

It changes our lives, as well as the lives of other people around us. How cool is that?!?! Powerful stuff! Let’s get to work.

The Great Reset

15 years ago, my life was completely upended. As I walked into the office one morning, instead of walking to my desk, I was led into a conference room where all my colleagues were sitting. It was explained to us that our company was being shut down and everyone would be fired. In that moment, I watched my intentionally-created life dissolve before my eyes. I loved my job, my co-workers were like family, I was a newer homeowner, I found a wonderful church, and I had been engaged to Sarah for just a handful of days. Oh yeah, and I had a ton of debt. Normal debt. “Good” debt. Responsible debt. Affordable debt. Except now that I was facing possible unemployment, those debt payments didn’t seem so innocent and “good” anymore.

I was ultimately blessed with an opportunity to move to Iowa where I could continue my work…..and keep a paycheck. I didn’t want to move to Iowa, though. Remember my intentionally-created life? Awesome job, friends, house, church, and new fiancé from that city. Poof! Because of the position I had put myself in, I didn’t have a lot of options. After discussing all this with Sarah that night, we made the difficult decision to move to Iowa, humbly and gratefully accept the job, and start afresh. We called it our “great reset.”

Over the coming months and years, we would transform the way our life was structured, how we viewed and handled money, and of course, pay off a ton of debt. $236,000 over the course of 4.5 years as I painfully and proudly remember. Ouch! It wasn’t fun at the moment, but as I reflect back on it years later, it’s cool to think about how we used that singular terrible moment as an opportunity to reset our entire lives.

I was recently having lunch with a friend who is in a similar position. Fortunately for him, his life isn’t crumbling around him, though. Instead, he and his family are relocating to a different city. But he too is viewing this as an opportunity to reset. They sold their house, will be moving into a short-term housing situation, and hope to buy the house they want within the next few years. In the meantime, however, they are taking the opportunity to use their equity to pay off a bunch of debt, streamline their budget/cashflow, and build up positive momentum for the season ahead. They are using this relocation, and all the change that naturally comes from it, to reset their financial life.

These are golden opportunities that don’t present themselves often. For many, it can be hard to make financial progress. Budgets are tight, lifestyles have grown cushier, the debt feels heavy, some past decisions are hard to unwind, and the idea of making big shifts is scary. My encouragement to you is to take advantage of any opportunity you get to create your own reset. Gaining positive momentum in any given month can be challenging, so these resets can propel you years into the future if done well. My friend is happy and optimistic after just a few weeks of movement…..just wait until they get 6-12 months in! I have a feeling they will look back on this moment with gratitude and fondness. The point where everything changed!

When "Skin in the Game" is Anything But

One of my favorite topics to engage in with teens and parents alike is the idea of getting through college debt-free. As you can imagine, this can be on the controversial side of the conversational spectrum. However, it’s something I believe in deeply, and I have countless examples of clients, friends, and youth group kids successfully navigating that journey. It’s one of my favorite wins to acknowledge and celebrate.

Whenever these conversations come up with parents, I get all types of responses. Please understand that I respect every parent’s opinion on the topic. They are the parents of their children and they have the right (and obligation) to lead the best they can. I will absolutely support people with whatever decisions they make with their families. In these conversations, there’s one comment I hear more than any other. They explain that their kids will take out student loans because they want their kids to “have skin in the game.” This is spoken through the lens that paying for their children’s college is an entitled approach in which their kids are not motivated to do the right thing, whereas the student acquiring student loan debt helps to align interests.

I’m all for having “skin in the game.” In fact, it’s one of the hallmarks of my coaching when walking families through the college planning process. That said, here’s what I always try to explain to parents about student loans. Having your kids sign up for student loans is the furthest thing from skin in the game as you can get. Why? Because when an 18-year-old is going to college with student loans, all that’s required of them is to sign a few pieces of paper…..then go have fun. There’s no real sacrifice, and worse, no real awareness or accountability along the way.

The student loans actually remove skin from the game. To college students, student loan debt feels like magical money falling from the sky. It enables them to go to college, pay rent, get three square meals per day, and maybe even a little pocket money……..just because. No amount of work or sacrifice goes into this. It’s the easiest form of money they will experience in their entire lives.

It isn’t until later that the reality of this debt starts to set in. By later, I mean AFTER they finish the thing they were supposed to have skin in. I call this, “the moment.” The moment when the degree is in hand, they’ve been settled into their first job for a handful of months, and are in the process of transitioning into a full adult existence…..then the letter arrives in the mail. Many of you know the letter I’m talking about! It’s the letter that comes approximately six months following graduation, communicating the commencement of student loan payments. This letter can be sobering. I owe how much!?!? My monthly payments are what?!?! For how many years?!?! This is the moment where many emotions can come flooding in. Guilt, frustration, defeat, resentment, worry, and anger.

All the while, they thought things were alright. College was being paid for, the money was always available, and they lived a solid college career. Yeah, they knew they would have some student loan debt after they graduated. But this much!?! This is the moment. I’ve walked alongside far too many people who had recently experienced this moment. Almost without fail, I hear the same thing from them. “I wish I would have known this is what it would end up being. If I had, I would have made some different decisions.” Ouch.

Parents, skin in the game is good. No, it’s awesome! Congrats to you for wanting that for your children. My appeal to you is to not use student loan debt as that skin.

* Please pass this along to any parents who need this encouragement today. We can shift the futures of the next generation, one family at a time!

It's (Not) Just an Exercise

Today is one of my favorite days of the year. No, not because it’s NBA playoff time (though that helps!). It’s the final session of my high school money class. During our time together, we’re going to do one of my favorite exercises, which is meant to help them understand what young adult life looks like. Until now, they have very little income, very few bills, and very little need to be fully intentional with their finances. That will surely change within the next handful of years. In the exercise, I give them a theoretical young adult monthly income, a handful of known monthly expenses, and ask them to create a full monthly budget for the life they want to live. The energy is always high, they complete the exercise with optimism, and it ends up being a referendum on their values/interests.

Then, it gets fun (for me, at least). After completing this budget, I ask them to draw pieces of paper from a hat. Each piece of paper has a dollar figure on it, representing the monthly debt payments they’ve put into their life through the choices they’ve made. Student loans, car loans, and credit cards. I explain to them that many decisions will be made between now and when they start this theoretical budget. For every decision they make, there’s a consequence (positive or negative), and these consequences will impact our life (financial and otherwise) for years to come.

The next step of the exercise is for them to do the same budget process as before, but this time factor in the monthly debt payment they pulled out of the hat. This is where the mood changes. I can see the stress on their faces build as they try to make the numbers work with this new reality of debt. Many of their wants/hobbies get removed, their giving shrinks, and they must find ways to get creative with housing and other basic needs. Needless to say, the tone shifts from optimistic to frustrated and overwhelmed.

While this is an innocent exercise for them, it’s the reality for millions of adults. Many of us have made decisions that resulted in negative consequences for years/decades to come. Myself included! While we can’t go back and magically undo any of them, each day presents an opportunity to make different decisions for our future selves. More importantly, we all have younger people in our lives who still have a chance to avoid many of the painful outcomes we’ve experienced. Let’s encourage and equip them! They deserve it.

"I Did It!!!"

One of the main topics I teach in our high school money class is how it’s possible for every single person to graduate from college debt-free. Not surprisingly, this is a very controversial idea. Our culture teaches us that we are either a have or a have-not, and our student loan fate rests in which one we are. I think this toxic belief is one of the primary reasons why much of our society is crippled with a ton of student loan debt.

Since I’ve been teaching these ideas for more than 10 years, I’ve accumulated many stories…..both good and bad. Here’s one that’s all too common. Many years ago, a young lady in my class was stunned and excited to hear that she could potentially go to college debt-free. She asked if I would meet with her and her mom to discuss it further. Of course, I’d love to do that! She comes back to class a week later, looking a bit down. When I asked her how she was doing, she replied, “I told my mom about what we talked about last week. She said you are a liar and it’s not possible to go to college without debt.” Needless to say, the family declined my invitation to discuss ideas on how to make it happen. Fast forward a handful of years and this young lady graduated college with $65,000 of student loan debt.

Now, I’ll share a different kind of story. Several years ago, there was a young man who attended the class. He, too, got excited about the idea of not having student loan debt. He really internalized the idea that he could go to college debt-free. He explained to me that his family already told him they wouldn’t be helping him in any way. It was 100% on him to pay for his college and living expenses. Yet, he was intent on graduating college…..and doing it without debt. He chose the same college as the young lady above. I haven’t seen or talked to this young man since he graduated high school. Last week, I received a random text from him that read, “I did it!!!!!” I had no idea what he was talking about, so I asked him to clarify. He went on to explain how he will be graduating college next month…..with zero debt! He was beyond proud of this accomplishment, and even more excited for what his future holds. He did it, indeed!

Same class, same college choice, similar backgrounds…..vastly different outcomes. The difference? One believed it could be done and the other didn’t. You could argue he put in the work and she didn’t, but that’s not exactly fair. He did indeed put in the work…..he worked so hard. But she’s the type of person who would have put in the work as well……had she believed the mission was possible.

Our mind is a crazy thing. The stories we tell ourselves have the power to propel…..and the power to sabotage. It’s amazing what can happen when we believe.

"What If I Don't Have $20,000?"

A few days ago, I wrote about a concept I call the “pile of cash test.” In it, I explained how a client of mine used this test to alter their decision from buying a $35,000 car with debt to buying a $20,000 car with cash. I received a lot of feedback from that piece, but a handful of people were quick to ask the question, “what if I don’t have $20,000?” One person was sincere in their question, but several were insinuating it is a dumb idea because debt is the only realistic way to buy a vehicle.

I thought it would be worthwhile to answer the question. If you don’t have $20,000, yes, I’m suggesting you don’t buy a $20,000 car. The point isn’t to figure out the best way to buy a $x vehicle, but rather to figure out what vehicle we can buy with $x of available cash. This idea brings a lot of criticism, I know.

First, I’m not suggesting we buy a pile of junk. Many people do that, to their demise. I’m an advocate for buying a reliable car that will require as little ongoing maintenance work as possible. Yes, a car is going to have issues and require maintenance. But it’s amazing how many people will make $800 monthly payments for 7 years just to avoid the occasional $1,000 repair bill. This is a very common justification for expensive, debt-fueled purchase decisions.

Data shows the average household in America spends $400 per month on vehicle loan payments. But there’s a catch! That’s the average per household…..including all the households with no car payments. I decided to do a little data digging of my own. Of the last 75 families I’ve met with, at the beginning of our coaching relationship they had an average monthly car payment of $320/month. So it was a bit lower than the national average. This is where it gets interesting. 51% of these families had ZERO car debt. Zilch! Wait, it is possible to go without car debt!?!? If you take those families out of the equation, that means the average household monthly car payment for those who had car debt was $650/month! Yikes!

This immediately brings two interesting points to the surface:

1) Many people do choose to live without car debt. Doing so, which often requires sacrifice and humility, opens up so many doors with that excess cash. More than half of the people I meet with have made this possible…..even before starting their coaching relationship with me. I can testify how much freedom and momentum these families have as a result of these decisions.

2) For the people who choose to live with car debt, it’s crushing them! I regularly see $1,000+ payments for single vehicles and households with $1,500+ of combined car payments. This puts a stranglehold on their excess income and prevents them from doing things that truly matter to them.

I think you deserve better than to use your precious resources to constantly fund a car payment. For some of you, true freedom may lie just on the other side of a few sacrificial decisions. I promise you it’s worth it!

Pile of Cash Test

Several years ago, I was meeting with a coaching client who wanted to buy a new vehicle. When the conversation heated up, it quickly went in the direction of buying a very nice, very new, $35,000 vehicle (this was back when $35,000 was a lot for a new vehicle). They were dead-set on using a car loan to make this happen. When I attempted to convince them to make a cheaper choice and pay with cash instead of locking themselves into another sequence of expense payments, I made the argument that using debt is altering their decision-making process. In short, they wouldn’t be buying this much of a vehicle if they weren’t using debt. They aggressively disagreed with my thesis. In their opinion, they were simply using debt as a tool to make the best mathematical decision. According to them, they would make the exact same decision with cash, but they are outsmarting the system by doing it this way.

This is the moment I issued my always-favorite “pile of cash” test. I challenged them to go to the bank, withdraw the money, and set it on their table. If they could look at all this money and honestly tell themselves they would exchange it for this vehicle if the “smarter” option of financing it wasn’t on the table, then go ahead and use debt for the purchase. So they did! They went into their bank, awkwardly asked for $35,000+ in cash, and walked out several pounds heavier (looking like a suspicious drug deal was about to go down).

What happened next, you ask? When they looked at the cash and thought about it, they realized there was no way they could justify using this much money to buy the vehicle. The entire idea of debt was psychologically impairing their judgment. A few days later, they purchased a used $20,000 vehicle with cash, put $15,000 back in the bank, and felt at peace with their decision. I hear them tell this story often….it was a big turning point in their story.

It’s funny how we play little psychological tricks on ourselves when it comes to money. Many of them are small and silly, but sometimes, like this couple, they can profoundly impact us on our journey.

We Ruin Them Young

Last night at youth group, we opened registrations for the money class I teach each year. This will be the 9th year hosting the class, and we’ve taken 175 high school students through it over the first eight years. Walking alongside these kids is always one of the highlights of my year. One of my favorite parts about the class is a scholarship program we developed in conjunction with it, where students who go through it have the opportunity to apply for a scholarship when they are seniors. To date, we’ve granted $48,000 in scholarships thanks to a number of generous financial partners who have chosen to bless our youth in this way.

After announcing the class, a few students approached me with questions, comments, and stories. I’ve done this long enough to know these stories will be told, but they never cease to amaze me. One student shared that she, at 17 years old, already has a $350/month car payment. Another student shared about her college plans, which will result in more than $100,000 of student loan debt. That’s her number, not mine. That’s a literal number she, her parents, and the college have discussed and somehow have gotten comfortable with. This is for a bachelor’s degree, mind you. Both of these kids, even before exiting minor status, have already made significant, life-altering financial decisions. Rather, I should say their parents allowed them (at best) or encouraged them (at worst) to make these choices.

These young adults don’t know what they don’t know. They are making decisions today that won’t present their true impact until years down the road. These are the scenarios that may someday result in resentment and anger toward their parents. The parents likely mean well, and the kids trust their parents, but I’ve seen this story play out enough times to know where they’re heading. I regularly meet with clients who have to process these situations from earlier in life and hopefully offer forgiveness to their parents. These deep wounds come up meeting, after meeting, after meeting. Many of these parents don’t even know there is deep-seated anger. After all, they were trying to help their kids and sincerely believed they were serving them well.

As I try to close out today’s post, I’m not sure what the takeaway is. Maybe it’s that we adults and parents just need to do better. Whether we have kids or not, there are young people looking at us. What we do and what we say has the potential to make a profound impact on their life. Let’s use that influence for good.

Just Use Meth Responsibly

Heroin is absolutely terrible! It’s addictive and quickly leads to negative consequences in all areas of our life. It impacts our health, marriage, work, and overall well-being. It’s responsible for many bad choices, ruined marriages, and broken families. Using it seems fine for a while, sometimes even fun, but then an unexpected moment happens where it quickly becomes a nightmare. Our life can go from relatively normal to absolute devastation in a matter of months. Its destructive qualities are profound.

None of this would be a problem if you would just use it responsibly, dummy! Yeah, I know it’s killing millions of people and marriages, but that’s not my responsibility. People just need to use it the right way. They get what they deserve if they decide to abuse it. Yeah, there are risks in using it, but the positives far outweigh the negatives. Everyone uses it, so of course I’m going to use it. It’s normal. We just need to do a better job teaching people how to use it properly. Just don’t be stupid with it! You’re an idiot if you don’t use it.

That sounds absolutely absurd, doesn’t it? Now, replace “meth” with “credit cards” and re-read the two paragraphs above. It still sounds absurd to me. We need to end the madness. Will you help me end the madness? Together, we can help shift this insane culture for the next generation.

Credit Card Myths: Travel Edition

If you know me at any level, whether that be personally or someone who consumes some of our content, you’ll know that I’m anti-credit card. I have several reasons for despising credit cards, spanning the spectrum of principles, ethics, psychology, control, and simplicity, to name a few. I won’t rehash all the reasons in this post. Every time I discuss the topic of credit cards, I know all the arguments people will use against me. The most popular defense of credit cards is the benefit of points, cash back, and miles. If you’re interested, I did a podcast episode about why most people (yes, probably even you) are actually losing money with their points.

Another common pushback I receive about my position on credit cards is the necessity of having one to travel. Flights, hotels, rental cars, and retailers…..all of these require a credit card, right? What kind of idiot travels without a credit card? Well, me. My wife and I just got back from a 10-day trip that included Qatar and multiple cities in Thailand. No credit card. As always, we had cash, our primary debit card, and our travel debit card. That’s it! To be honest, there’s not a lot to argue about. It works great. It worked as well on this trip as the other 30+ countries I’ve been to. It’s a myth. We don’t NEED a credit card to travel.

There are a few nuances. Take hotels, for example. Most hotels require a damage deposit to protect themselves in the event you decide to throw a raver or rip the TV off the wall. Each hotel is different, as evidenced by the three we stayed at. One put a temporary $200 hold on our travel debit card, one required a refundable $100 cash deposit, and the third didn’t require anything. All of our flights go on a debit card. That’s an absolute non-issue. As for rental cars, it’s hit and miss. Any time I need to rent a car, I’ll check with the company beforehand to ensure they don’t require a debit card. Some do, but most don’t. I just choose one that doesn’t.

Life is always simpler without a credit card, and travel life is no different. We have a sum of money in our travel fund to spend on travel. When we use an ATM to take out local currency, it comes out of our account. When we swipe our debit card at retailers, it comes out of our account. When we grab an Uber, it comes out of our account. At any point on the trip, we can see exactly how much we have left to spend. It’s easy, it’s simple, and it’s freeing. We have zero financial stress coming back to America, as we only spent the money we had in our travel checking account. Nothing will haunt us, we won’t be paying for this trip for the next few months (or years), and we don’t have to worry about anything other than trying to catch up with life when we return. I’ve worked with hundreds of families over the years and I can confirm the post-trip stress caused by credit card use can be brutal.

There are so many myths surrounding the topic of credit cards. Hopefully today’s thoughts about one of them will at least give you something to think about. Happy travels!

The Joneses Don’t Know They Are The Joneses

Most of us know the saying, “keeping up with the Joneses.” It’s become the motto of modern-day American materialism, referring to the never-ending pursuit to keep up with the spending lifestyles of our neighbors, friends, and colleagues. The house we live in, the car we drive, the school our kids go to, where we go on vacation, the clubs we belong to……the list goes on and on. This phenomenon is a significant contributor to people’s decisions. We all like to say and pretend it doesn’t impact us, but I’ve spent enough time with clients to know we’re being naive if we think that way.

Here’s how powerful of a force The Joneses are in our lives. When we buy a house, we’re not just committing to a certain down payment and monthly mortgage payment. When we select our house, or more specifically, our neighborhood, we’re committing to a lifestyle. This singular decision about what street or neighborhood to move to has the potential to fundamentally change the way we live our lives. That’s a terrifying thought, but it’s as true as the sky is blue.

I want to share a story. It’s a story of four families. These four families are amongst a larger group of friends and neighbors. Through various odd circumstances and connections, I’ve had the privilege of spending time with these families in one way or another. Through conversations with the first couple, it becomes clear the pressure of keeping up with their neighbors adds a level of stress to their marriage. Then when I talk to another couple, they admitted some of their credit card debt is attributed to expensive meals and trips with their neighbors. Then when I interact with the third couple, they get frustrated by “having” to go to certain events (accompanied by a high cost). Lastly, the fourth couple admitted to making a few questionable vehicle purchases out of fear of negative judgment.

Here’s the kicker. Each of these families gets frustrated by trying to keep up with The Joneses (i.e. their neighbors), but to their neighbor, THEY are The Joneses. By trying to keep up with each other, they in turn become the thing each other is trying to keep up with. It’s irony at its finest.

Here’s the good news: every family has the power to hop off the Joneses train. It’s scary to be the first family to jump off, but doing so may give the second family the courage to do it as well. Once the second family does, it allows the entire Joneses structure to crumble.

Think about your own circle. Do you need to be the first of the Joneses to jump off the train?

The New Student Loan (Forgiveness) Crisis

We have a student loan crisis brewing in America. No, not the $1.75 trillion (and growing) of collective student loan debt that’s hindered the future of two generations. That crisis is well-documented, and tragic. The crisis I’m talking about today has more to do with the recent student loan forgiveness program.

Let’s rewind a bit, shall we? In March 2020, as COVID wrecked everything we knew as “normal”, the Federal government enacted a freeze on all student loan payments (and interest accrual). This has since been extended eight times, and payments are scheduled to commence on 9/1/2023 (barring another extension).

In the meantime, the Biden Administration launched a program to forgive $10,000 of outstanding Federal student loan debt (or $20,000 if you had Pell Grants) so long as your income is less than $125,000 (or a combined $250,000 if married). Millions of Americans immediately applied in late 2022 when the online application went live. Then just as fast as it launched, it was paused. Several lawsuits were brought against the Federal government, claiming the government didn’t have the authority to issue widespread forgiveness in the way it was executed. This sudden turn of events emotionally crushed many, causing widespread anger and dissension. But this isn’t the crisis, either.

Unbeknownst to most people, this same student loan forgiveness program applied to people who actually paid off their loans since the freeze began in March 2020. So instead of applying to have their loans forgiven, they were applying to get a refund for the qualified $10,000 or $20,000 sums. It’s difficult to discern how many people qualified for refunds, but statistics show approximately 9 million people paid on their loans since the freeze began. Many of my clients fell into this group, as they took advantage of the freeze to finally free themselves of the burden of their debt by aggressively paying them off. Amazing work!

This is where things get weird. Instead of going through the Federal government and waiting for their approval (which was obviously paused with the lawsuits), their respective loan servicers were the ones processing these requests. Lo and behold, checks started arriving. Hundreds of thousands of Americans (or perhaps millions?) have been receiving refund checks for their student loans. According to the texts, calls, and DMs I’ve been receiving, these checks are still arriving in people’s mailboxes.

Here’s the crisis. Many of these people have excitedly received these checks, then quickly spent them. After all, $10,000-$20,000 is a LOT of money. But here’s the new reality: if the lawsuit succeeds and the loan forgiveness program dies, these checks will turn into new debt. I’ve had multiple clients reach out and tell me when they log into their student loan account, they now have an outstanding balance that mirrors the checks they received. And just like that, after all that work, discipline, and sacrifice, many borrowers find themselves unknowingly back in debt.

If this is you, or perhaps someone you know, here’s what I recommend:

• Don’t spend it. This isn’t your money (yet).

• Don’t send it back. If the forgiveness goes through, you’ll be glad you already have this money. There’s no telling how hard it will be to get your money down the road if you have to re-apply for it.

• Put it somewhere safe….and leave it there. A savings account or high-yield savings account should do the trick. Just set it aside, and leave it alone.

Once all this mess gets sorted out in the courts, you’ll hopefully have a clear road map on how to handle your situation…..one way or another. But please don’t sabotage your financial life in the meantime. You worked so hard to get here. Don’t let this blessing turn into a curse.

It’s Never Too Late

Last weekend, a friend approached me and said he had news wanted to share with me. Immediately, his eyes welled up as he started talking. He excitedly shared with me how he and his wife had just become debt free and set into motion a dream they had talked about for so long.

Any time someone shares a big win, I celebrate with them. However, this one felt different. I worked with them nearly a decade ago…..with very little success. And that experience came on the heels of very little success for the prior several decades. Literally decades of wishing, wanting, and not seeing it materialize. But not this time! This time they did it!

It’s never too late. This couple could have given up decades ago, conceding the system was rigged against them. I’m so glad they didn’t. In that moment, I could see so many regrets, mistakes, and failings wipe away from him. It’s like they dissolved right there in an instant.

It’s never too late to do the thing you’ve constantly failed at, were too scared to try, or kept putting off for any number of reasons. It’s never too late!

It's the Same 10 Miles Either Way

I was recently meeting with a client who drives a very average car. Seven years old, 120,000 miles, nothing fancy. When I asked him why he hadn’t made the choice to buy something nicer (because that’s what most people naturally do), he responded, “it’s the same 10 miles either way. Driving this car lets me do all the other things I want to do when I’m not driving those 10 miles.”

There’s so much truth in his dry but poignant response. Regardless of what vehicle he drives, he still has the same commute, on the same roads, over the same period of time, each and every day. Now it’s true people won’t admire his vehicle and give him a virtual pat on the back for being “successful”, but he gains something so much more powerful.

His singular decision to drive with humility has unlocked so many opportunities for him. There are only two ways to drive a newer, fancier vehicle: 1) large monthly payments over the course of several years, or 2) a large chunk of up-front cash. Both have consequences….inescapable consequences.

For this particular family, their choice has resulted in better family vacations, contributions to their children’s college fund, the wife staying at home with the kids (one of her aspirations), an appropriately funded retirement, and limited financial stress/tension.

Sure it’s the same 10 miles each day, but to this family, their counter-cultural decision changes everything!