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?️ Welcome back to Budget School, everyone! It's time to dive into Day 2, and today, we're going to tackle the topic of debt. We know you didn't learn this stuff in school, so we decided to make our own school. This is all about getting back to basics and giving you a fresh start. So, let's get started!

What Is Debt?
? Debt is simply any money you owe to any person for any reason. This includes things like car loans, credit cards, student loans, bank loans, personal loans from family or friends, bank lines of credit, HELOCs (equity lines of credit), medical bills, taxes owed to the IRS, and even those sneaky store credit cards or payment plans for gadgets and gizmos.
? Pro Tip: Pay back personal loans to family and friends – they've been there for you, and it's the right thing to do.

Your Credit Score: The Love for Debt
❤️ Your credit score is often seen as the "I love debt" score. The higher your score, the more debt you have and the more debt loves you back. It's a cycle that keeps you hooked on borrowing.
? Key Insight: Credit scores were invented in the 1950s, and they're designed to keep you in debt. Your great-grandparents didn't have credit cards, and they managed just fine!

Debt-to-Income Ratio: Are You Working for Debt?
? The debt-to-income ratio is all about how much of your income you're working to pay off debt. Consider it as how many hours you're working to pay for past expenses.
? Moderate debt-to-income ratio ranges from 20% to 36%. It's essential to ensure that your debt isn't consuming too much of your income, leaving little for your future.

The Minimum Payment Trap
? Credit card companies are clever marketers. They want you to pay just the minimum so they can secure their steady income stream.
? Tip: Cutting up and closing credit cards is a smart move. Credit card companies expect you to add more debt over time.

Acceptable Debt vs. Petty Debt
? "Acceptable" debts are tied to valuable assets like mortgages and car loans. They can be seen as investments.
?️ Petty debts, like store credit cards, are unnecessary and keep you in a never-ending cycle of small payments with high interest.
? Wealthy Money Management: Rich people use debt to further their assets, not to hold them back. They make their money work for them.

Debunking the Myth
? Rich people may have debt, but it's debt with a purpose – to build wealth, not just to collect points or rewards.
? Stop stressing about credit card points and start making your money work for you in investments like a high-yield money market account.
? Final Thought: Building wealth the right way is less stressful and more rewarding than chasing credit card points.
? Age of credit doesn't matter; focus on paying off debt.
? You may think credit cards offer free money with no strings attached, but there's interest, stress, and anxiety attached.
? You don't need a credit card for emergencies; you can create an emergency fund and become your own bank.
? Be cautious with 0% interest offers and read the fine print. Most people don't pay them off in time, and it's a bummer. Don't even give it a chance. ?‍♂️

How To Take Control of Your Debt:
- Step 1: Stop borrowing and cut up your credit cards.
- Step 2: List your debts smallest to largest.
- Step 3: Ask to reduce interest rates on loans.
- Step 4: Calculate your maximum payment on payday for the smallest debt.
- Step 5: Daydream about life without minimum payments.

Next Steps > > >
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