No time like a dragging pandemic and a nail-biter of an election season to spark your enthusiasm and basic need for some financial literacy as a primary goal or resolution. I applaud your choice. According to Dave Ramsey’s blog, only 20% of Americans would qualify as financially literate. To be in the richest 20% of the US population, you need a household net worth of nearly $500,000.
A person’s net worth is determined by taking everything you own and applying a dollar amount to it’s value. For example, if you had to sell your car today, what could you sell it for? After adding up all your cash, accounts, and value of assets, you then subtract all your debts. So, in order to have a “net worth,” you’ll need to have assets valued at more than the amount of money you owe. That includes student loans!
The fastest way to gain net worth is to pay off all debts. How quickly can you pay off all your debts? Set aside your mortgage on this question. Will it take your more than five (5) years to eliminate that debt?
Consider the cheaper, better options for getting out of debt quickly, to jumpstart your upward path toward having a net worth. This is key to financial literacy. There are powerful tools available to quickly dig you out from under your debt. Yet, there is so much stigma and pressure on the internet and even in your own family that would limit your opportunities to save yourself quickly and move on with your life. Check out the chart below to see what I mean.
Currently, there are two chapters of the Bankruptcy Code in which you can file to eliminate your debt. You can make a payment plan over 60 months, or five (5) years under Chapter 13 of the Bankruptcy Code.
A Chapter 13 Bankruptcy offers a payment plan that is much like a debt consolidation loan, with 0% interest. What’s better is that if you can’t afford to repay all your debts, this pay plan also has the ability to perform like a debt settlement plan by paying a percentage between 0% to not more than 100% of the total amount you owe. Looking at the chart above, you see that you could save more than $25,000.00 in interest alone, by using bankruptcy.
The benefits of a payment plan bankruptcy include:
Imagine if you took those $500.00 payments and instead, built up a savings account.
If you quickly eliminated your debts in a Chapter 7 liquidation bankruptcy because you simply have no net worth and therefore, nothing to lose, you would have saved $56,000.00 over the same time as the person who chose to repay all their debts. (Using the chart above) So, what’s stopping you from doing this?
It’s your beliefs. It’s what other people would think about you. There is a price to pay for everything and your price is $25,000.00, apparently. I don’t know about you, but I don’t think my pride or dignity is worth that price. I know this because I’ve been through bankruptcy and I know that you too, will survive. When you think like the wealthy do, then you’ll look at this from a numbers position and make your decision as if your financial life were a small corporation because it is. What if everything you knew about money and financial literacy was wrong? When would you want to know?
Spend any time on the internet these days and everyone seems to be talking and no one is listening. You’re being told what to eat, what to wear, how to dress and what prescription drugs to take. When do you even have time to think for yourself? What breaks my heart the most is when people fall to societal pressure to be something “in order to,” do, be or have something else in exchange. In order to be accepted by my family, I’m going to college, you might think. Who’s life are you living?
I’ve been through enough counseling to tell you that we all have what is called “core shame.” My core shame is “I’m not worthy.” I know many of you feel the same way. This means that we stand in our way. I had to sit for the California Bar Exam six times before I passed and became a lawyer. I shivered in nervousness next to the Harvards’, Yales’ and Princetons’ in the room. I didn’t go to any law school that you would know of, but I have the same bar card as more than 200,000 other California lawyers. I certainly spent a lot less in law school tuition too.
Know yourself so well that you know exactly what your life’s passion and purpose is rather than simply finding a job and hanging on as tight as you can until the trends shift and you are forced to migrate yet again, to where to work takes you.