Paying off debt starts with your mindset
Don’t be fooled by debt: making plans is just as important for someone who’s £40,000 in the red as it is for someone starting a business.
If you don’t know where you’re going, you won’t get there. You wouldn’t start driving without a destination in mind; if you don’t have rules for your children, their behaviour won’t conform to what’s appreciated or respected in society. Money is exactly the same.
If you don’t have any rules or boundaries about money, it will do what it wants. If you don’t do things like setting a weekly WAM amount and sticking to it, you are going to get in debt, or take longer to come out of it.
Money is very powerful because it’s emotional. It’s all about changing your mindset and saying OK, I’ve not had any criteria in the past but that doesn’t mean I can’t start now. It’s what you decide you’re going to do, not your environment, that will shape your future. If someone else has been able to achieve something in life, there’s no reason you can’t too. If someone else has paid off £40,000 of debt, then why can’t you?
Step 1: you’ve got to be organised and take responsibility
If you start a new diet, you’ll go through your cupboards and make sure you don’t only have chocolate, beer and wine to eat and drink. You don’t need to cut them out completely, but you’d think ‘Maybe I should get something healthier in there, some vegetables and rice, chicken and fish’.
Most people understand this when it comes to food, but the principles are exactly the same with money. If you want to go from being in debt to being prosperous and having money, then organisation is first. Having control of your money is more important than having it.
If you’re in debt, then you need to know clearly what you owe, what you own, what’s coming in and what’s going out. You must, without question, make sure that’s what’s coming in is greater than what’s going out; that there’s a surplus at the end of the month.
I define that surplus as being at least 12.5%. If it’s not, you have to make sacrifices. I sit down with people who say they can’t cut anything out of their budget, but then we go through their expenses and they’ve just got a new iPhone contract for £50 a month and they’ve got Sky TV costing them £60 per month. Everything’s relative: find things you can cut back on and reduce your dependency – spending gives you a dopamine boost, gives you satisfaction, but you can get that boost from other things, like being in control and re-shaping your future.
Of course, we all need things we can enjoy as well! But sometimes you have to make drastic change. The thing is, nobody’s going to bail you out; it’s on you. If you go to a doctor and he says you’ll die within 4 weeks unless you change, you’ll find a way to change. My outcome isn’t to make you feel good short-term, it’s to make you feel good long-term, to get your dopamine boost from other means. If you look at your overheads and you can’t get to 12.5% surplus, you have to make sometimes harsh decisions to reduce things. If you’re in a house you can’t afford, then there’s no other choice but to downsize.
If you do what you’ve always done, you’ll get what you’ve always got
You have to make decisions from a different place.
Often, when we make decisions we’re in a bad state of mind. If you’ve been out all weekend having lots of alcohol and sugar, your brain will be less sharp on Sunday morning than if you’ve been exercising. That’s simply science, the exercise will get endorphins flowing through your body.
The key is to make decisions from a great state of mind. Make yourself feel good, go for a run or walk, drink more water. It’s your physical being linking with your mental being.
How do you want to spend the rest of your life? Do you still want to be continually worried about money? What’s worse, the pain of the worry or the pleasure of the purchases? If the pleasure is still greater than the pain of the debt, then you’re probably not ready to change. You’ve got to really want to change.
As people, inertia is strong. Changing your mindset isn’t an easy thing to accomplish in any walk of life, let alone with money.
You’ve got to change your habits. It’s our habits that make us and our habits that break us. Things we do consistently over time get us the outcomes we want. You have to do things consistently to create a new habit, to train your mindset, to programme it to change.
For me, I focus on four things that help me get into the right mindset:
- I work out first thing in the morning because then I know it’s done and in the bank – otherwise, life gets in the way.
- I like meditation, taking time out and simply relaxing with your mind cleared of all thoughts.
- I read inspiring, motivating and uplifting real-life stories of how people have done something incredible, or people who’ve done what I’m looking to do.
- Avoiding drama. You can’t always do that of course! But I try to avoid watching too much news or the soaps, which will programme you with negative information and make it harder to achieve your goals.
Those are my tips, and I recommend trying them if you haven’t already – remember, if you do what you’ve always done, you’ll get what you’ve always got. But if these don’t suit you, then find your own activities that put you in the right frame of mind.
When you do, you’ve taken the first step to getting out of debt.