The #1 Way To Pay Off Debt
We all have debt! It’s just part of life. In fact, the average American household has more than $137,000 in debt. This is between student loans, mortgages, cars, credit cards, and the like.
But consumer debt is recently a new thing. Interesting thought right? We all treat it like it is just part of life, but rewind even 100 years ago and there was no such thing as a credit card. The only way you had debt was via a loan or mortgage from a private banker or private lender. Even mortgage debt was frowned upon (which is where the word comes from. “mort” means death.) This tells how people felt about being in debt.
On the other scope, investors have used debt for centuries. Banks wouldn’t exist if it weren’t for debt. That’s also an interesting thought. When you deposit money into a bank, it appears like debt on their balance sheets and they’ll “borrow” your deposit to go make money with it. So not all debt is bad. It depends on what it is used for.
Today I am going to address bad debt. The types of debt I will not address is debt on your business and debt on your investments.
Quickly, I will address two types of debt that fall into their own category.
- Consumer mortgage debt. Don’t every pay a mortgage off early. Use a 1st position Home Equity Line of Credit to refi your equity out of the home and just pay interest until you sell.
- Never pay off vehicle loans. A car is one of the worst depreciating liabilities in existence. Lease if you can, through a business and write it off on your taxes.
Vehicles and mortgages are not included in this plan.
What I am going to educate you on is called The Sacred Account Debt Buyout. This is for all consumer debt other than vehicles and mortgages. Think of all of the debts you owe. Wouldn’t it be great if someone would just buy them out for you? They just acquire all of your debt and you had $0 in debt any longer. It probably won’t happen, but I can teach you how to do it for yourself.
Let’s discuss the cause of debt. You have debt because at one point you did not have money and had to borrow someone else’s. That’s the only reason anyone ever has bad debt. So if we want to solve the debt problem you have, we first need to solve the problem that caused it. Makes sense right? The problem being the fact that you were or are still insolvent to some degree. If we were to pay off ALL of your debt and did not solve that problem first, you would end up right back in debt. Which is what happens to people all the time.
So, how do you get solvent? Decide to. Make more money. Make more than you spend. Save the free cash flow. Isn’t that simple? Now you’re solvent and we can begin to handle the debt.
Don’t try to pay it off before you’re solvent. In fact, look at paying off debt as an investment. It has a rate of return (the interest you save by paying it off), it has cash flow (the payment you free up by eliminating it), and it has a required minimum investment (the outstanding balance that must be paid). If you’re not ready to invest yet, you’re also not ready to pay off debt yet since debt paydown is in fact an investment.
Okay now that we have laid that foundation, let’s talk about the Sacred Account Debt Buyout.
Step 1 of this plan is for you to line up all of your debts from the smallest balance to the largest balance. Basically, like Dave Ramsey teaches.
Step 2 of this plan is to make only your minimum payments. Do not pay an extra penny to any of the debts. Regardless of who you owe and what they’re charging.
Step 3 is to take any excess money you have and put it into a Sacred Account. Why not just apply it right to the debt first? It’s called opportunity cost. If you paid off all your debt with your money, you’d be debt free, but now the money would be gone and could not be used for a possible better opportunity. Remember, we are thinking like an investor here not an insolvent consumer. So all of your extra monthly money goes into your Sacred Account. The Sacred Account pays a 6–8% annual gross dividend that will continue to grow even when you withdraw your money. You’ll see how this plays out here in a second.
Step 4 is as soon as your Sacred Account balance is as big as your smallest debt, you will borrow from your Sacred Account and use the money to wipe out your entire smallest balance all at once. This seems simple, but a few things just happened here. Again, your Sacred Account is earning 6–8% annual gross dividends. When you borrow the money out of the Sacred Account they keep paying you 6–8%. Which means you are being paid to pay off your debt. You’ve also just paid off an entire debt, saving the future interest and also freeing up cash flow.
Step 5 is to pay your Sacred Account back with the cash flow freed up from the debt you paid off. When you borrow from your Sacred Account you will pay 5% annual simple interest on the amount you borrowed. Which is fine because you’re earning 6%. But by paying yourself back, you also reduce that 5% interest down to 3–4% interest, widening your profit margin. Also by paying yourself back with the old payment, that money instantly becomes available for use again like a line of credit.
Repeat step 1–4 until all of your debt is gone.
Here is the result.
Let’s say you were putting $1000/mo into your Sacred Account to do this and you paid off all of your debt in 10 years.
In 10 years you would be Debt Free, have no monthly payments, save tens of thousands (if not hundreds) in interest AND have $122,910 in your Sacred Account!
OR, you could do it the way everyone else does it and not do the Sacred Account because “nobody else does it that way”. We will call this the sheep method. If you do the sheep method, you may get out of debt sooner, but you would not have ANY money saved.
What would you choose? Out of debt with $122,000 saved up or out of debt and broke (and probably headed back into debt because you’re broke)?
This method simply works!
A few things we can do for our clients to speed things up more. If you have debt, but you’ve maintained a good credit score and have less than 45% utilization rates on your credit profile, we can refinance $50-$100,000 of your debt to 0% interest so that all of your payments goes to principal for 12–18 months and in some cases even longer. This is just a cherry on top of the Sacred Account buyout.
So, if you’re 1 of many Americans trying to pay off debt, I want you to know that my firm, Wealth DynamX can help you do it in a way where you profit and walk away with financial solvency and more money saved than you ever have.
Not to mention, now that you’re debt free you’re also ready to invest. And as it turns out you have six figures lying around in your Sacred Account to invest with.
If you’d like to see if you can qualify for the Sacred Account Debt Buyout, click here.
If you’re a follower and have not read my book “The Blueprint to Financial Freedom” yet, that is the place to start. This book covers the specifics for each level in the various chapters, and you can grab the book for free as my gift.
Click here to get a copy!
The Blueprint to Financial Freedom by Jerry Fetta
To Purpose, Wealth & Freedom,
Jerry Fetta
Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on over 45 podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.
Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.
Learn more at www.WealthDynamX.com
(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)
