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Top 5 Debt Management Books To Live The Life Of Your Dreams
Are you drowning in debt? Does it all feel overwhelming? Maybe you don’t know where to start on fixing the problem? I have put together some of the best books that I’ve read to keep my debts in check. I know I’ve written about this in the past, but I remember getting more overdraft fees in a month than I received in a paycheck.
Of course, I was foolish and didn’t know better because it was what my own parents did. I don’t want you to have to go through the same mistakes that I did when I first started. Are you ready to take your financial future into your hands? Well, these 5 books will help you to tackle all of your debt challenges.
So, let us dive right in!
The Total Money Makeover
If you’re looking to get out of debt and you haven’t listened to or heard of Dave Ramsey, this book will change your life. While I don’t have all of the same beliefs about investing that Dave Ramsey does, I will say that he has some of the best systems in place to help you get yourself out of debt and stay debt-free.
I’m going to give you five key lessons that I took away from the book and how you can implement them today. The book is made up of 7 baby steps that you can take to become financially sound. I won’t be able to touch in-depth on everything. Still, if you can just utilize a few of these important lessons, you’ll have taken a massive step in the right direction.
Lesson #1 Build an Emergency Fund
I remember growing up, my grandpa used to tell me. “Hey, Booker. Do you know what is worse than a flat tire? Getting a flat tire in the middle of winter.” There is nothing more accurate than that. I was the guy that was in a parking lot in the middle of winter, changing a tire that went flat. I hated my life.
When you don’t have an emergency fund, every day is like having a problem in the middle of winter. When little things go wrong, they seem like a mountain to overcome. You get a flat? How are you going to pay for the two tires, a credit card? What happens if your furnace goes out?
The thing is, by having just $1,000 in an emergency fund, you don’t need to charge your life away to a credit card to fix an emergency. You can tackle the small things without drowning in stress and worry. First things first, build an emergency fund.
Lesson #2 Pay off Debt
The best way to quickly pay down and pay off your debt is through the debt snowball, which we talked about here. This is a critical method that Dave Ramsay uses to help individuals to get out of debt and get financially secure.
When you aren’t drowning in debt, it makes it easier to sleep at night and enjoy life. When you have a ton of debt, you realize that you are just one paycheck away from broke. By using the debt snowball, you can get your debt under control and take back your life.
Lesson #3 Build a Safety Net
When you’ve managed to pay off your debts, you need to start saving more. You want to carry 3 – 6 months of expenses in a savings account or something that is quickly accessible if you need it.
This is for your protection. If you or your spouse or partner lose their job, this will help you make sure that you are safe while looking for a new job, building your own business, or doing what makes you happy. This alleviates the financial pressure that hangs on your shoulder when you don’t have it.
Lesson #4 Invest in your Future
In all reality, you need to invest now for your future. Dave Ramsay says you should be investing 15% of your assets in Roth IRAs and pre-tax retirement plans. This allows you to start building your future with before and after-tax investment strategies to help you in your retirement years.
Lesson #5 Pay off your Home
This one may seem impossible to you. I use to stare at my mortgage payment and not really believe that it was possible to do. Here is the deal, there are ways to do this that most people don’t know about. I’ll go in-depth on quickly paying your mortgage down, but you really should never be on a 30-year mortgage.
If you are 35 and buy a home, you will be paying off your home until you retire. Not only that, your interest will equal the value of your home, if not more, by the time it is paid off. If you purchase a home for $250,000 and you pay another $250,000 in interest, you have just spent a total of $500,000 for your home. Imagine if you cut that interest to a third and invested the remaining amount. How would that change your life? The banks are using your interest to maximize their revenues. We need to stop giving them so much power.
I Will Teach You To Be Rich
When I read through “I Will Teach You to Be Rich,” I was worried that it was some sort of gimmick. The title was eye-catching and I honestly wanted to know more. The fact is, there was a wealth of information that I hadn’t really come across in any other book. It is the perfect compliment for the Digital Nomad and Traveling Families out there to help set their life up on autopilot.
If you’re looking to FIRE (Financial Independence and Retire Early), then this is a great book to have in your repertoire. Here are 5 key lessons that I helped to change my life and will change yours as well.
Lesson #1 Choose the right bank for your needs
Banks can kill your path to wealth. Whether from overdraft fees to ATM fees, if you don’t have the right banks in place for your lifestyle, you could be spending a ton of cash on expenses that bring you no value. For those who travel worldwide or even around our country, you really need to look at banks that offer reimbursed ATM fees.
By having this simple step, you’re putting $2.50 to $10 back in your pocket any time you need cash. You don’t need to worry about where you’re stopping to get some money out or if you send money. Start with opening up the right bank account.
Lesson #2 Credit Creativity – Maximize your Credit Card Benefits
The key lesson here is that the only reason to have a credit card is if you pay it off every month and earn rewards for using it. The worst mistake you can make is to run up a ton of credit card debt and pay a high-interest rate. If you don’t have the self-discipline to manage the assets, you should never get a credit card. Period.
If you can manage your spending and yourself, then credit cards are a creative way to pay yourself a bonus. First, you can either get a cashback card or something with travel rewards. These are great options because you can either take the cashback as a bonus at the end of the year or use the travel points to take you and your family on a fantastic adventure.
Lesson #3 Build a Conscious Spending Plan
This is where it all begins. When you’re paying yourself first and setting up your life correctly, you can create a Conscious Spending Plan. This means that you can spend money on the things that bring you the greatest joy without feeling guilty about it.
The first thing you’ll want to do is get set up on a budget tracking program. The two I would recommend are YNAB (You Need A Budget) and Simplifi. Both of these are incredibly affordable and Simplifi really lets you have the ability to connect all of your accounts in one place. If you’re looking for a free option, check out Mint by Inuit.
Lesson #4 Automate your Life
The fact about paying bills and investing is that it can be challenging to do both. It means taking action. One of the critical pieces to the puzzle that Ramit Sethi talks about is to automate everything.
Find out when your bills are due, and then set up automatic bill pay. Figure out when you’re paid and then automatically send money to your IRA’s. If you have a 401k plan at work, set it up to have it automatically pulled from your paycheck before you ever see it.
The less mental energy you spend thinking about investing and saving, the easier it will be to stick to the plan. Automate everything.
Lesson #5 Start Investing
Let us be honest; most of us either don’t know where to start or are too scared to take the leap. If you ever want to get to the point that you have enough wealth to retire, you need to get your money working for you. How do you do that?
You do that through investing. This is in your 401k and IRA’s. It is okay if you don’t even know where to start. Ramit goes in-depth into how to save in Chapter 5, but we’ve already talked about it throughout the blog.
Stick to what you know when you invest. Look at low-cost, broad-based index funds to get started. You just need to get started.
Your Money or Your Life
Your Money or Your Life is excellent for the uninitiated. Though the book isn’t 100% focused on debt, it is an excellent book about working through your financial well-being and getting your life under control.
Sometimes it is more challenging than we think. Many of us move through life one day at a time without really thinking about our futures. The great thing about this book is that some principals really force you to reexamine your life and figure out your spending habits.
Lesson #1 Chart your income and expenses and see how your life changes
Here is the thing, this is probably one of the hardest things to do. You are forced to come face to face with your spending habits, which isn’t always a good thing. Have you ever sat down and evaluated the income that you have coming in, as well as the outflow of your cash, seeing where your most significant expenses are?
Tracking your income and mapping out your expenses, it will make you more conscious of the money that you’re spending. By building a chart that goes month after month, you will become more aware of where each penny is being spent year after year. Do you think you will be more conscious of your spending at that point? Hint: You will!
Lesson #2 Work on Wellness
One of the key lessons from the author was around spending time taking care of yourself. We need a balance in all things in our life. Whether it is our physical, mental, or emotional health.
You should be making sure that you are taking advantage of your doctor visits before your health actually becomes a problem. This way, you can make adjustments early rather than letting things spiral out of control.
Lesson #3 Wealth equates to Wellness
Kind of a strange thought that your wealth equates to wellness, but what the author is really stating is that your life energy is spent when you’re earning income. When we trade our time for money, the time we can’t get back, we’re essentially selling our life force one hour at a time.
Are you making what you’re worth? The belief here is that you’re actually making far less than you realize. Treat your wealth like you would treat something or someone you really care about because it is your blood, sweat, and tears that you’re giving up for it.
Lesson #4 Three Questions to Change your life
Here are the three questions that the author mentions that you should ask yourself.
- Did I receive fulfillment in proportion to the hours of life energy spent?
- Is this expenditure in alignment with my goals and life purpose?
- How might this expenditure change if I didn’t have to work for a living? (more, less, same) \
If you find that you’re not receiving the fulfillment you should from your purchases, maybe it is time to re-evaluate your spending habits.
Lesson #5 Find your FI (Financial Independence) Number
There is a simple equation to figure out when you’ve reached Financial Independence, which is why I really love real estate. You can quickly figure out what your FI number is by using this simple solution.
When your passive income equals your expenses, you’re in FI. The authors are big fans of fixed bonds. I’m a massive fan of real estate and investing. It is pretty easy to know when you’re at the point of absolute financial freedom with real estate. Then you don’t even need to take away from your investments.
The Automatic Millionaire
The Automatic Millionaire was written by David Bach and is actually a pretty simple concept regarding saving and building wealth. We face the problem of living paycheck to paycheck as Americans because we have all of our income spent before receiving our pay.
What if we were to flip the script? I know many of you are thinking that you can’t afford to because you’re so far in debt. Well, we need to change your thinking before we can change your life.
Lesson #1 Pay Yourself First
This is the hardest thing to do for most people. We are not used to saving anything out of our income. But if you don’t want to be dead broke, you need to start paying yourself first. The main goal would be to start saving 20% of your overall income.
This isn’t something that you need to do today. Today, you need to start with 1%. So long as you can start paying yourself first, you will be able to automate it. It is also a ripple effect that you’ll start taking more action after you’ve taken that small, initial first step. We want to get to the point where we are saving 20% each month.
Lesson #2 “The Latte Factor”
This is an exciting concept as many folks I talk to don’t even think about this. Now, I know the adage of, “I’m not giving up my Starbucks, Renae.” Hey, I get it. This is more than just a latte, though.
This takes into consideration any of the small things that you are buying. How much do you spend on eating out? Are you stopping at the store every day? How much are your daily coffees?
The truth is, our spending can become overwhelming. If we can make changes now and switch to investing it, that amount will grow exponentially. Figure out what your vise is and try to pivot and invest those assets instead.
Lesson #3 Automate Your Investments And Savings
Look, this can be difficult to do, especially if you’re not very tech-savvy. Suppose you want to be focused on doing this the simplest way possible. In that case, you must automatically divvy your pay amongst your various accounts when it hits your checking account. This way, you never have to think about where your money is coming from or where it is going.
This means you’re free to do what you want with your cash account and know that everything else is handled. This is the true meaning of set it and forget it.
Lesson #4 Automatically Fund Your Rainy Day Account
Saving for that initial emergency fund is hard for many people. I remember the first time I got to $1,000 in my savings account, and I felt super-rich. In truth, I wasn’t, but it was tough not to go out and spend it on some new video games or a cutting-edge new TV.
When you automatically set up your emergency fund to manage itself, you don’t have to think about those assets. I honestly believe for the emergency fund, you should put it in an account that takes 3 – 4 days to access so that you can’t make an impulse buy. Have your cash automatically filter to the account you’re saving it in and realize it is there when you need it.
Lesson #5 Fund your dream account automatically
How many of you have ever sat down and thought about your dreams and their importance. How many of you have put pencil to pad and written out your goals. Do you want to take that trip overseas? Maybe sail across the world for a year?
Set up an account to automatically fund itself. It doesn’t need to be a considerable percentage of your overall income. Just take a little bit at first, maybe 1%, and make sure that it starts moving into that account. This way, you don’t feel it when you’re saving, and you can let it grow naturally.
The Power of Habit
So, this one isn’t going to be specifically about debt. The truth is, everything you’ve read above is enough to get you started down the road to debt recovery. If you’ve gotten through all four of those books, I really believe you will have mastered debt.
This book is more about habits and how to break the bad ones and replace them with good ones. The truth is, running up debt is really a form of bad habits. If you want to change your life, change your practices.
Lesson #1 The Habit Loop
The crazy thing about habits is that you can identify them pretty quickly. They are made up of three parts.
- A cue
- A routine
- A reward
An example I can give is pretty personal. When I started reading this book initially, I was often working out every day after work. I use to go from 5:30 until about 7:00 p.m. Every time I left the gym, I was starving.
It started with passing by Wendy’s on the way home. The first couple of times I stopped, I told myself that I didn’t have time to cook, and I had worked hard and deserved it. Then before I realized it, it became a weekly thing. Then multiple times a week.
This is something I recommend you don’t do. It became a trigger that I had an overwhelming desire to stop and get food every time I passed that Wendy’s. I had to completely change my routine and decided to start coming home from a different route, and I rewarded myself with healthier eating.
Lesson #2 The Best Way To Secure Your Future Is To Build A Routine
Since we talked about debt freedom, I wanted to steal one of the lessons to match this book. Really, the best way to find success is through a routine. This is why the information in The Automatic Millionaire above is so vital.
Suppose you automate everything and set it up to routinely handle your expenses and income. In that case, you don’t have to worry about building bad habits because you’ve already set your good habits up and put them in place. Some of the world’s best companies are that way because they’ve built specific types of routines and put processes in place to handle everything.
Lesson #3 Plan For The Pain
It doesn’t matter what is presented to you. You need a plan for how to conquer it. This was one of the book’s key lessons, and it is also hugely important in getting out of debt. Have you put a plan in place for when you really want to go to that favorite restaurant, and you’ve already maxed out your monthly budget?
What are you going to do when you’ve spent all of the money you set aside, yet your kids still want that nifty toy? If you build out the plan to manage this, you’ll know how to respond before you’re even asked.
The point is, we need to make the process as simple as possible. When it is painful, you need a plan to get you through it. Don’t worry, you’ve got this.
Lesson #4 The Small Victory Game
We really touched on this concept in the debt snowball article. In this book, the author talks about it in the sense of Keystone Habits. What this means is as follows, there are certain habits that, when you’ve built them, can help you make other habits on top of it. These are your keystone habits and can help you win the small victory game.
So how does this work with debt freedom? Well, when you pay off a small credit card, that is your first win. You now have more spendable income that you can use to tackle your next debt. When that is paid off, you can tackle the next and so on. Eventually, all of your debt is paid off, and you can take a deep breath because you’re now free from the crushing debt many Americans face.
Take those small victories and turn them into keystone habits you can grow with.
Lesson #5 Connect with People Creating the Same Habit
If you really want to get out of debt, the best way to do it is to get around other like-minded individuals. Charles Duhigg wrote, “Belief is easier when it occurs within a community.” That is our goal here. Find a group of individuals who want what you want and share ideas.
The more you live and breathe your goals and financial plan, the easier it will be to cement in your mind. Create a mastermind. Follow a community of like-minded individuals. Just take the first step and surround yourself with people who want what you want.
Final Thoughts
We have touched on five excellent books. There is so much more information in each of these that they are well worth the read. We went over some critical principles in this article that can help you on your debt freedom journey. We touched on the essential steps you need to take to get out of debt. We also compared how your income is connected with your life energy. We taught about the power of automating your assets. These will help you in your journey, and I’m excited to see how things end up for you.
I want you to find success and happiness. This was the whole reason for my blog, to begin with. As always, let me know if any of this was helpful and what your favorite part was. Feel free to leave any comments below!
Stay Happy.
Disclaimer: Start Smart Finish Happy does not provide tax, investment, or financial services and advice. The information is presented without considering the investment objectives, risk tolerance, or financial circumstances of any specific investor. It might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.