Dave On Hyperinflation

Dave On Hyperinflation

Chris is concerned about hyperinflation. What would be Dave’s plan if that starts?

QUESTION: Chris on Twitter is concerned about hyperinflation. What would be Dave’s plan if that starts?

ANSWER: Bullets and water.

Hyperinflation means that what it takes $100 to buy today, in two months, it would take $1,000 to buy it. So if a tank of gas was $20, two months later, you go to buy a tank of gas, it’d be $200. Two months later, it’d be $800. That’s hyperinflation. Basically, that means that the currency—people lose such faith in the currency because they’ve lost faith in our government and in our way of life because at the end of the day, money, as my friend Rabbi Lapin says, is spiritual. It’s spiritual because it’s based on trust. It’s not based on actual value.

The reason I’m willing to take a green piece of paper with a “100” scribbled on it by the government is because I know I can trade it to you for something that you have in goods or services. If I lose faith that I can trade it to you for goods or services, then I would no longer accept that as payment.

In other words, what causes hyperinflation is people have lost trust in the currency—and not a vague thing where they’re all sitting around the kitchen table talking politics and they’re mad at the world and have a conspiracy theory. I’m talking about the whole society begins to melt down on its trust to the point that there is no one willing to accept these paper dollars.

Hyperinflation is actually what put Hitler into power as much as anything. Pre-Nazi Germany—the Nazis, the fascists—came to power because literally, people were taking a wheelbarrow of cash in to buy a loaf of bread because people had lost faith in the currency. We also saw a similar thing at one point in Argentina in terms of hyperinflation. But that has happened very rarely in any economy. For a while, the peso in Mexico went crazy but not to the point, quite, of hyperinflation, but it really had unbelievable devaluation of the currency, which is hyperinflation.

I don’t honestly predict that in the U.S. at this stage of the game. Do we have serious moronic things and overspending going on in Washington that needs to stop and over-borrowing? Yes. And at some point, is there a tipping point if we don’t grow some backbones in some of our leaders who actually look at this and say, “This is stupid. We can’t borrow our way out of debt. We can’t just keep taking yet another credit card out on the nation”? Yeah, we’ve got to stop that, but is it to the point that I think it’s going to cause our way of life to end? No, I do not, and that’s what you’re saying when you say hyperinflation. You basically say that the grand experiment that is the United States of America has failed—not hypothetically, not in your conspiracy-theory mind, not in your philosophical opinion, but in actual practical, tactical fact, it’s over. No one can function anymore in the economy because it’s in such meltdown mode.

If that’s the case, then you could have hyperinflation. But until then, you can’t have hyperinflation and everything else going good because hyperinflation is based on a loss of trust in the value of the currency.

What would be your plan if that starts? Your only option—and it’s questionable whether this will work—is to own property—physical, hard assets—because paper assets will disappear. Physical, hard assets do not include gold because gold has never been used in a hyperinflation economy. Gold has never been used as a medium of exchange in a failed economy since the Roman Empire, so that’s all mythology sold to you by the gold-coin people on midnight cable TV right after a walk-in bathtub and a self-insert catheter ad. I mean, really, you’ve got to think about where you’re getting your financial advice here.

Gold is not the answer, but real estate might be, and I say might be because you might lose private property rights. We have a group of people now who are so upset in this country about the inequality of wealth that they would be leaning toward communism, which would be the fact that you would not be allowed to own anything. There’d be no private property. If the melted-down government were replaced by fascism—by communism, Marxists—because that’s fair—everybody gets a trophy although it’s a small trophy and one that’s not painted well, but we all get one under communism—then they would take away your property.

That happened in the Russian Revolution when the Marxists took over—killed everybody. And they slaughtered people, by the way, when that happened. If you haven’t read the history on that, it’s rather interesting. These wonderful communist people with flowers in their hair chop people’s heads off.

Basically, under that kind of a scenario, anything you own is taken away from you because the state becomes the owner of everything. You’re now in China. You’re now in Russia and so on. If that’s how we’re going to live because of hyperinflation, then there’s not anything you can hedge against that except a ticket out of here to somewhere else, and I don’t know where that would be if the U.S. economy goes to that point.

I think that’s a bunch of hooey is what it amounts to. Even though there’s fear in the news about hyperinflation, there’s crap in the news every day. Have you not noticed? I was looking at the websites the other day of some of the news channels. Have you noticed that their websites look a lot like The National Enquirer now? What used to be mainline major news media—when you look at their websites, they have links through to something that got washed up on the beach. “Sea monster on beach,” you know? And they’ve got every other link is to some sexual innuendo. A Playboy model on the cover of something or so-and-so’s nude pictures. And that’s on every site now. It’s like you’re looking at The National Enquirer. “Alien found in Nebraska,” you know, and all this crap. What used to be called serious media now has that on their website as their main links. I guess there’s enough of a market for that because the culture has been so dumbed down that we now believe what’s printed in The National Enquirer. We’re that shallow and stupid.

The hyperinflation goes right there between the alien, the link through to the Playboy pictures, and the sea monster that was washed up on the beach. The hyperinflation is right there with that. It goes right there in that category. In other words, I really don’t think there’s any credibility to that offering by the “news media.” I don’t think hyperinflation is on our doorstep. But that is not to say that I think that the people in Washington are doing a good job. I think the liberal spending is completely out of control. Anyone who tries to stop that spending is a racist now. Anyone who tries to stop that spending is ignorant, and they’re the problem with our economy.

No, you’re the problem with our economy. If you’re a Democrat or you’re a Republican or you’re a progressive or you’re a liberal or you’re a so-called conservative and you believe that continuing to spend at our current rate is an okay thing, you’re the problem with our economy. It’s amazing to me that the same people who tell you that the sea monster is on the beach are the people who are saying we need to stop spending are racist and are the problem with our economy. Sea monster beware.

8 Tips for Working From Home

8 Tips for Working From Home

8 Tips for Working From Home

9 MINUTE READ

As of mid April 2020, about 95% of Americans—or 306 million people—were placed under a stay-at-home order to stop the spread of the coronavirus.1 And we’re not the only ones. All across the world, political and business leaders are asking people to stay put. This means that, in a matter of days, we’ve been thrown into the largest work-from-home experiment in the history of the world!

But you know what’s exciting? Disruption is an opportunity for innovation. Human beings are incredibly adaptable, and we have wonderful technology and tools on our hands to figure this thing out.

It’s critical that you stay as productive as possible during this time—for your own career, for your company, and for our larger economy. You were created to contribute. Here are eight tips for working from home, whether you’ve been doing this for years or for just a few weeks.

1. Create a schedule.

No one really knows how long the coronavirus shutdown will last. For now, you need to think of this as your new normal and get into a regular routine. Wake up at the same time every morning, get dressed, show up, and work hard—just like you would when you go into the office. Don’t get caught without pants like this guy!

If you have kids, especially little ones, then writing and posting a physical schedule is a must. Look at the day (or week) ahead and plan out meetings, schoolwork, screen time for the kids and even chores that need to get done. Involve your kids in the planning process—it will really help them buy in and participate. Post the schedule on some poster board or on a whiteboard where everyone can see it.

 

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Also, make sure to power down at the end of the day. You don’t have a physical commute that separates you from the office, so create a ritual to help you disconnect—like walking the dog, going on a short drive, or working out.

2. Set clear boundaries with your family or roommates.

Unless you live alone, you’re sharing your home and your office with other people. If you’re not clear about your expectations and respectful of what everyone else needs, you’ll start to feel tension rise up! If you live with other adults, then you should be able to set clear expectations in just one or two conversations. But if you’re married or have kids, it’s a good idea to have a regular check-in to make sure you’re all on the same page.

Ask your roommates (or family) to be respectful when you’re digging into a project or on a conference call. Or put a “do not disturb” sign on your door when you need your kids to leave you alone. They’ll adapt! But like kids do, they’ll test the boundary, so you need to be prepared to enforce it.

Most schools have moved to online classes, and all of a sudden, you’ve found yourself in a position of having to homeschool and get your own job done! If you’re married, work with your spouse to help manage the kids and their workload.

3. Take your personality into account.

Some of you introverts are having the time of your life working from home, and some of the extroverts out there are panicking about not having human interaction for the foreseeable future. If this is a new thing for you, it’ll take some getting used to. Don’t feel guilty because your routine looks a little different from your coworker’s, or even your spouse’s.

Reflect on how it’s going and check in with yourself from time to time. Are you easily distracted? Do you need to move around and be active? Are you able to sit down and just knock out work hour after hour? Be patient with yourself as you settle into the rhythm. Everyone has an “off” day now and then, and that doesn’t change when you’re working remotely.

4. Understand what technology you’ll need.

Now’s the time to make friends with your IT department. You’ll probably run into a few snags as you figure out technology from home, and that’s okay. Ask your leader about the software you’ll need and make sure you’re able to access it. You don’t want to waste time at home because you don’t have the tools you need to get the job done.

If you have kids, you might need to limit their screen time or Wi-Fi use if you’re going to need a lot of bandwidth. For example, if you’re leading a video call, it’s okay to ask your teenager to pause that show they’re binging on Netflix.

5. Create a workspace.

Sorry, folks, but sitting in bed in your pajamas doesn’t qualify as a workspace.

Having a space for your home office will help you stay focused and get into work mode. It also helps you create a physical boundary to separate you from roommates or family. If you don’t have a home office, you might need to claim the dining room table or a desk in your bedroom. Make it personalized and keep it clean.

Settle in and get comfortable. Maybe you’re missing your standing desk at the office—so why not order an inexpensive computer stand to mimic that environment? Sitting on the couch hunched over your computer can lead to tech neck—poor posture from craning your neck over a phone or computer screen that causes tension, headaches and back problems. Take care of yourself by paying attention to your posture and taking breaks to stretch and walk around.

6. Step up the communication.

Your success as a remote worker boils down to one thing: your ability to communicate with your leader and team. And if you’re in leadership, then it’s even more critical for you to communicate well as you manage your team remotely. You don’t have the luxury of leaning over to ask your desk mate a question about a project. You have to actually pay attention to emails (i.e. read the entire thing!)

John Felkins, one of our Entreleadership business coaches, has some wonderful advice on how to stay in touch as you work from home:

  1. Overcommunicate.
  2. Connect.
  3. Clarify expectations.

 

At the same time, don’t let the digital communication overwhelm your productivity. Unless your position requires you to be on call, feel free to unplug from notifications when you need to focus. Just communicate to your teammates about when you’ll be available again.

7. Take breaks.

When you work remotely, it’s easy to blur the lines between life and work. Some people tend to work extra-long hours, and others might be tempted to slack off. Neither extreme is healthy. By scheduling breaks throughout your day, you give yourself something to look forward to (so you can stay focused and work hard now) or force yourself to slow down and rest.

Here are a few ideas on breaks:

  • Take a lunch. Stop, power down your computer, eat, savor your food, and rest.
  • Get outside. If possible, step outside and get some fresh air for 10 to 15 minutes a few times a day. Or work from your back porch. Why not soak up some vitamin D while you’re answering emails?
  • Connect with someone. Disconnect from the digital world and actually have a conversation with a human being. Hug your kids. Ask your roommate how their day is going. If you live alone, call your friend or family member to chat.
  • Read a book. Instead of watching TV, why not try reading a good book? It’s often the perfect mental break you need to return to your work feeling more creative.
  • Exercise. Even if your gym is shut down and you can’t get outside, you can find thousands of online classes for an in-home workout.

8. Have some fun!

Let’s be honest: Working from home has its perks. You should enjoy them. For many of us, this is a season, and sooner or later we’ll return to meal prepping and morning commutes. Take advantage of the slower pace. Play with your dog. Have breakfast as a family. Set up a puzzle on your kitchen table that you can solve together. Or maybe it’s time to pick up that hobby you’ve always wanted to try.

Also, make sure to have fun with your coworkers. Since you’re not seeing each other nearly as often, it’s easy to feel isolated. Share fun pictures and updates from your life in addition to the “business as usual” communication. It will help you strengthen your relationships and feel unified.

The Best Perk of Working From Home

The number one advantage of working from home is that it allows you to develop self-discipline and perseverance. Sure, it offers a lot of freedom and flexibility. But at the end of the day, your character—not your environment—determines who you are as a person. How do you act when your manager isn’t around? How do you respond when your routine turns upside down?

Let’s rise to the challenge of remote work during this season of Covid-19. If we do this thing right, we’ll come out on the other side scrappier, more efficient and more creative.

About Ken Coleman

Ken Coleman is the host of the nationally syndicated radio show The Ken Coleman Show and the #1 bestselling author of The Proximity Principle.

Pulling from his own personal struggles, missed opportunities and career successes, Coleman will help you discover what you were born to do and provide practical steps to make your dream job a reality.

Listen to The Ken Coleman Show on YouTube, SiriusXM, your local radio station, or wherever you listen to podcasts—and connect with Ken at kencoleman.com.

How to Make a Career Change Midlife

How to Make a Career Change Midlife

How to Make a Career Change Midlife

11 MINUTE READ

Does it ever feel like culture’s definition of career success belongs only to the hip young entrepreneurs and 30-under-30 listers? Let’s change that right now. The truth is, you can change careers midlife.

You should do work that brings you joy until you take your last breath. That doesn’t mean you need a full-time career when you’re a great-grandparent, but there’s no reason you can’t do what you’re passionate about just because you hit a certain age. And this idea that you have to be stuck in the same job forever with no hope of making a change—well, that’s just false.

I know this is more intimidating for folks midlife because it’s hard to imagine sitting in a classroom again learning a new skill or leaving the place you’ve called home for 10+ years. But if you follow these seven steps, you’ll see that changing careers midlife isn’t as intimidating—or difficult—as you think.

1. Change your mindset.

Your mind is powerful. It can convince you a lie is true and talk you out of doing things your heart longs to do. That’s why, before you do anything else, you have to change your mindset and overcome the fear that’s holding you back.

 

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The biggest lie I hear from people who want to change careers midlife is that at this point in their life, as much as they might want to, it’s not worth it to begin a new career. They feel like they don’t have enough years left, or that they don’t have the time to make a big life change because of family responsibilities or other commitments.

But if you’re going to make any positive changes in your life, you need to change that mindset today.

With the time you do have, you can make progress daily—even if you’re only able to take one small step at a time. Anything worth doing or having is going to take time and is going to require fighting against the fear trying to stop you. Try my technique for fighting fear:

  • Name the fear. Get specific! Do some careful self-assessment to pinpoint your exact fear. Fear of failure, fear of financial instability, fear of embarrassment—just call it what it is.
  • Write it down. There’s actually a lot of power in looking at the fear on paper, in black and white. Stare it down and say out loud: “Fear is a liar.”
  • Replace it with the truth. Truth is essential to silencing fear. Ask yourself: If this is what the lie is saying, then what is the truth? For example, if you fear that you’re unqualified, you have to take a good look at what skills you have and realize that either you do have the right skills, or you have the ability to learn the right skills.
  • Repeat the truth. Repeat it so often that it becomes louder than any doubt in your mind!

When you do this, you’re not just ignoring the fear and pushing it down (which makes it worse). Instead, you’re addressing fear immediately so you can confidently say, “Not today. I already dealt with you.”

Side note: As long as you’re taking risks and doing things that challenge you, fear will be part of the picture. That’s healthy and normal. You’ll never eliminate fear completely, but you can deal with it effectively so that it never paralyzes you.

2. Figure out what you want to do.

Listen, the last thing you want when you’re thinking about changing careers midlife is to end up in a new job you equally hate. To avoid that nightmare scenario, do your research and make sure you know enough about the industry and role you want to pursue.

Your goal should be to find a position that allows you to work in your sweet spot—the intersection of what you do best and what you love to do most. The best way to discover your sweet spot is to ask yourself a series of questions (and I recommend journaling or making a list of whatever comes to mind):

  • What are some of my natural talents?
  • Of those talents, which am I actually passionate about? Which talents give me energy and make me feel alive?
  • What specific group of people would I most love to help?
  • What problem do I want to solve for that group of people?
  • What solution do I want to/can I provide?

When you sit down to reflect on these questions, you’ll notice patterns appear. Pay attention to those patterns because they’re indicators of what your dream job could be.

Once you have an idea of what type of job you want to pursue, start researching where you can perform that role. Start in your zip code and don’t discount places in the broader industry of what you want to do.

But also stay open-minded to opportunities outside your zip code. Relocating to a new city or state is worth the effort for the right opportunity. If you end up finding a job outside your city, download our relocation guide for a smooth and confident transition.

RELOCATING FOR WORK?

Follow this step-by-step guide to reach your destination with confidence.

3. Find out what skills you need to learn.

Now that you know what career you want to pursue, you should research what—if any—education or experience you need to qualify for that role.

Be honest with yourself. Do you have a skill set that would equip you to pursue that career? Or is there something you still need to learn? The good news is: You can learn any skill at any age (unless you’re 95 and want to play professional hockey—but even then I wouldn’t rule it out completely).

Find out what qualifications you need by looking at a few different job postings for the jobs you’d apply to. Make a list of what education, training or experience they require. Finally, take that list and research (I know, you’ve done a lot of research!) the most affordable ways to get those qualifications.

You’ll want to choose the path that best fits your preferred timeline, personal time constraints, and your financial reality. Speaking of your finances . . .

 

4. Make a budget to fund your career change.

It can be overwhelming to think about everything that a career change will require financially—more education, more training or a new location are all possible expenses—but don’t let that discourage you.

You don’t need to be rolling in money to change careers. You don’t even need to be debt-free—you just need enough to get started.

Based on what skills you need to learn to step into this new career, come up with an estimate of the cost to get that education. If it turns out you do need to spend some money on formal education or training, build it into your family’s budget and know that it may take a little longer than usual if you have to work a job at the same time to pay for the training.

Also be prepared to save, make sacrifices, and even sell some stuff so you can fund the dream as you go. It might not be easy, but it will be worth it!

5. Learn those new skills.

Going back to school shouldn’t be your go-to if you need to learn a new skill. Instead, get creative! There are countless ways to get the education and experience a job requires. Here are just a few ideas:

  • If you need to continue working at your full-time job, look for night classes at your local community college or online courses.
  • Find out if there are any returnship programs in your industry.1
  • Look for a company that is willing to train you to do the job, on the job—it’s a thing! A study by Robert Half International found that 84% of companies are willing to hire and train a candidate who lacks the required skills for the job.2
  • Take advantage of free resources like podcasts, library books, online articles, YouTube videos, etc.
  • Ask professionals in your network if they can mentor you.
  • If the position requires a portfolio, create one by asking friends and family if you can produce work for them for free or at a discounted rate.

A lot of people think not having a college degree is a setback when changing careers midlife. But did you know that, in an exciting new trend, companies are now starting to waive their college degree requirements?

On job-search websites like Craigslist and Indeed, job postings asking for a college degree dropped from 34% in 2012 to 30% in 2018.3 Work history requirements have also changed—in 2012, 29% of jobs asked for 3+ years of experience, and in 2018, only 23% did.4

All of that just means that you shouldn’t let your concern about not having enough skills or experience keep you from pursuing your dream job. Go learn what you need to learn and get after it!

6. Make meaningful connections in the industry.

Way too often, people get stuck doing a job they hate just because they think they don’t have any connections in the industry they’d prefer to work in. Folks, that’s not a good reason to stay miserable!

The truth is: You know a lot more people than you think.

And even if you don’t know a lot of people right now, you can make powerful connections by simply getting around the right people and in the right places. That’s what the Proximity Principle is all about—in order to do what you want to do, you have to be around the people who are doing it and in the places where it’s happening. And that’s true at any age.

As you start learning new skills (from step five), you’ll naturally meet people who can be meaningful connections in the industry (professors, professionals, peers, etc.).

But you can also build a web of connections by:

  • Informing your inner circle of friends and family about the new career you want to pursue.
  • Asking your inner circle if they have any connections in the industry.
  • Moving outside your inner circle to potential connections at your church, in your neighborhood, parents of your kid’s little league team, at the gym, and beyond.
  • Reach out to these connections, meet them for coffee, share about your desired future, and ask for advice (always come with something to offer them as well).

Once you begin to use the Proximity Principle and start getting to know people who are doing what you want to do, you’ll find that opportunities will come your way. Someone will know about a job opening, or be able to give you a recommendation, or ask you to come work for them. It’s happened countless times, and it can happen to you.

That, my friends, is the right way to network!

7. Win the interview process.

Okay, we’re in the homestretch, folks. The final step to changing careers midlife is to start applying to jobs and winning the interview.

  • Upgrade your resume. Check out my resume guide where I walk you through exactly how to format your resume so that it stands out from the pile of resumes on the hiring manager’s desk. I can’t stress this enough: Your resume needs to have a referral from one the connections you’ve made in step six. That is what will set your resume apart. Like I always say, a resume without a relationship is worthless.
  • Prepare for the interview. Preparation breeds confidence, and confidence leads to winning. I have a robust interview guide that walks you through five strategies that will help you stand out in the hiring process. Do yourself a favor and get your free copy.
  • Follow up after the interview. The way you follow up after an interview can make all the difference when it comes to sealing the deal and getting the offer. Use my touchpoint timeline to follow up like a pro and make the best first impression.

This may feel like a lot to handle right now. That’s okay—I know it’s a lot of information. But you know what? You can do this. It’s going to take time, perseverance and patience, but I know you’ve got that in you.

So, wherever you’re at on the journey, know that it’s not too late, you’re not too old, and you do have what it takes to change careers midlife.

If you need some more strategies and practical advice for making a career move, listen to The Ken Coleman Show or give me a call at 844.747.2577!

 

About Ken Coleman

Ken Coleman is the bestselling author of The Proximity Principle and national radio host of The Ken Coleman Show.

Pulling from his own personal struggles, missed opportunities and career successes, Coleman helps people discover what they were born to do and provides practical steps to make their dream job a reality.

Listen to The Ken Coleman Show on SiriusXM, your local radio station, or wherever you listen to podcasts—and connect with Ken at kencoleman.com.

Three Emotions You Experience When Conquering Fear

Three Emotions You Experience When Conquering Fear

Three Emotions You Experience When Conquering Fear

5 MINUTE READ

I was sitting on my front porch, drinking my morning cup of coffee, and scrolling through Twitter when I came across a video that stopped me in my tracks.

I bet you’ve seen it—the video quickly went viral and got millions of views.

It’s about a 14-year-old boy named Tim Bannon who was born without arms. In the video, he attempts a 20-inch box jump at a summer camp he attends for limb-different youth. Take a look:

 

Powerful, isn’t it?

What caught my attention about this video was how clearly it demonstrated the power fear can have over us. If we allow it, fear will consume us and hold us back in every area of our lives. From careers to relationships, no part of your life is safe from fear’s trap.

But notice how I wrote allow it. Fear is real, and it’s paralyzing. But at the end of the day, we have what it takes to overpower fear so we can reach our highest potential.

 

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This video taught me that no matter what emotions we experience when facing fear head on, we’ll be better equipped to know what to do with those emotions if we’re able to identify them. Identifying the emotions will help you go from being a passive participant in the situation to an active one.

If you rewatch the video, you’ll witness Tim power through three emotions as he conquers his fear of falling. Instead of caving into the roller coaster of emotions, he was able to channel each emotion to propel himself forward—and I want you to be able to do the same.

As you can see from Tim’s experience, you’ll experience a range of emotions when trying to conquer a fear. Let’s talk about three of those emotions.

1. Agony

Fear torments us, doesn’t it?

In the video, you can see Tim agonizing over his fear of falling as he attempts an exercise that typically involves momentum from your arms.

He hesitates during the first couple of jumps he takes, which keeps him from succeeding. That’s because when you’re focused on the possibility of failing, you’re not able to put forth all the effort and power you have within.

What’s interesting is that Tim’s fear of falling during his attempt is—in a way—not reasonable. There are two large men standing on either side of him, ready to catch him if he falls. But he’s too focused on the agony to realize he’s believing a lie. Because the truth is, if he messes up his footing, he won’t really fall. He’ll be just fine!

Don’t we all do that? We focus on where we might fall short and what might make us fail, rather than putting our focus on what is actually true in that situation.

The truth in your situation might not be as obvious as two large men standing by you, ready to cushion your landing. But I’m willing to bet there is a truth that can replace the lie you’re believing—and that truth will help silence the agony.

If you’re unsure about what the truth is in your situation, talk with people you love and trust. When you’re in the thick of it, it’s hard to see beyond your fear—but a trusted outside perspective can help clear up some of that fog.

2. Anger

After experiencing the agony of the fear, you might begin to feel angry. Just like Tim, you get frustrated because any failed attempts affirm the lie you’re believing.

This is probably the most important emotion of the three, because anger could be what either makes you or breaks you, depending on how you channel it.

When you’re feeling anger in the process of conquering your fear, you have a choice between one of two actions:

  1. Retreat and let the anger overpower you (the flight response).
  2. Turn the anger into power to propel you forward (the fight response).

The second is exactly what Tim does in the video. After agonizing over the fear of falling and getting angry at his failed attempts, he’s had enough. He turns that anger into power, jumps harder and higher, and conquers the box jump once and for all.

3. Awe and Astonishment

Do you know what it feels like to finally conquer a fear? It’s exhilarating. You experience a rush of emotions that quickly overwhelms you. You stand astonished, because now you have proof that you have what it takes to do the thing you were afraid to do.

And no one can take that away from you.

You can see the awe and astonishment on Tim’s face when he jumps off the box and falls straight into the arms of his coach, tears streaming down his face.

He gets affirmation from himself and from others that he is, in fact, able to accomplish more than he thinks he can.

And the same is true for you.

Whatever fear you’re struggling to conquer, I want you to know that it’s normal to experience agony in the beginning, and that the agony might turn into anger. But that’s when it’s up to you to decide what you’re going to do with that anger. Which will you choose: fight or flight?

Only one of those choices will lead to the overwhelming exhilaration of crushing the fear that once haunted you.

Press on, folks—you are more capable than you think!

 

About Ken Coleman

Ken Coleman is the bestselling author of The Proximity Principle and national radio host of The Ken Coleman Show.

Pulling from his own personal struggles, missed opportunities and career successes, Coleman helps people discover what they were born to do and provides practical steps to make their dream job a reality.

Listen to The Ken Coleman Show on SiriusXM, your local radio station, or wherever you listen to podcasts—and connect with Ken at kencoleman.com.

How the Proximity Principle Can Change Your Life

How the Proximity Principle Can Change Your Life

How the Proximity Principle Can Change Your Life

4 MINUTE READ

6:00 a.m.: The alarm goes off.
6:01 a.m.: You hit the snooze button.
6:06 a.m.: The alarm goes off again, you realize it’s Monday . . . again.
6:07 a.m.: You lie in bed thinking about how much you hate your job.
6:10 a.m.: You have a bona fide “case of the Mondays.”

Sound familiar?

If that’s your normal Monday routine before you even get out of bed, you’re not alone. 70% of Americans have no passion for their jobs.(1) And considering how many hours of our lives are spent working, life’s just too short to spend it hating your nine-to-five.

That’s why Ramsey Personality Ken Coleman is on a mission to help you turn your dream job into a reality with his new book, The Proximity Principle.

The Proximity Principle—What Is It?

Sounds really fancy, doesn’t it? But what the heck does it mean? The Proximity Principle is a simple, straightforward strategy Ken came up with when he was reflecting on how the right opportunities “just happened” in his own life. The truth is, nothing magical happened. Instead, it was hard work, discipline and a lineup of “rights” that made things click.

 

Ready to find your dream job? We’ll show you how.

The Proximity Principle: The right people + the right places = opportunities. 

If you use this principle when it comes to landing your dream job, it will make all the difference in the world. For the ideal opportunity to find you (aka your dream job), you have to put yourself in contact with the right people who are connected to the right places.

What Can You Expect in The Proximity Principle?

Find the proven strategy that will lead you to a career you love.

Listen—you don’t have to throw in the towel and accept that you’ll be stuck working at a job you hate for the rest of your life. Don’t buy into that lie! Ken walks you through the strategy you need to find the career you love!

Discover the right way to go after your dream job.

It’s time to demystify the process of how to get to where you want to be. After all, your ideal career isn’t just going to fall into your lap with little to no effort on your end. In The Proximity Principle, Ken shows the action steps you need to go from wanting to land your dream job to actually sitting in the seat living the dream.

Learn the five types of people who can help you get there.

“It’s not what you know; it’s who you know.” That old adage is true. But as Ken points out, it’s not simply being a “serial connector,” and going from networking event to networking event hobnobbing and swapping business cards. That might make you feel productive, but where is it really getting you? It’s time to learn how to build real connection.

“All dreams are a little crazy. That’s why they are called ‘dreams.’”
—Ken Coleman

Start Pursuing a Career You Love

Don’t wait until a midlife crisis strikes to stand back and take inventory of your life. You have the power to make change happen! There’s no requirement that says you have to hate your job or work a boring one either. But the truth is, change requires effort, and this book will help you figure out exactly which step to take first.

Start going after your dream job now. With this proven plan in your hands, why wouldn’t you?

Put an end to empty networking and sending out your resumé to the abyss of the internet. Order The Proximity Principle today and start making real progress on your job search! 

12 Summer Reads to Help You Win With Money

12 Summer Reads to Help You Win With Money

What's on your summer reading list?

8 MINUTE READ

For most people, summer is best spent going on that long-awaited family vacation, soaking up every ounce of sunshine possible, and checking off all those fun activities from your summer bucket list.

With some of the country still sheltering in place, that bucket list may not look like what you thought it would. But that doesn’t mean it can’t be a summer to remember! Instead of venturing to the beach or that amusement park, grab some books and learn how to be a better leader, dump those student loans, cultivate contentment, or map your steps to becoming an everyday millionaire.

Whoever said reading beachside is the only way to burn through your summer reads hasn’t picked up these books. Here are our top 12 books that are sure to make this summer your best one yet.

1. The Richest Man in Babylon

All of this coronavirus craziness probably has you ready to wade through all the financial nonsense out there and get back to the basics. We don’t blame you. The Richest Man in Babylon is full of financial wisdom that dates back to ancient Babylon. It’s probably what your great-grandma turned to for financial advice.

This Ramsey Press revised edition of George Clason’s classic shares stories of people who struggled with debt only to come out on the other side ready to build lasting wealth. It even includes Dave’s sound advice from The Dave Ramsey Show. This little book will inspire you to take a new look at your own finances and change your life.

2. The Proximity Principle

Around 70% of Americans are unengaged at their jobs.1 Sure, right now, many of us are blessed to even have jobs. But if you’re dreading Monday mornings, it might be time to start looking for new opportunities that will get you pumped to go to work each week. And you can work toward your dream job while you keep food on the table and gas in the tank.

Listen: You don’t have to stay in a job that’s just that—a J-O-B. Ken Coleman answers all the questions swirling in your head about how to network, gain a mentor, and close the distance between where you are right now and where your dream job is. So, go ahead—watch your kid do their 20th cannonball and then jump on into this incredible read!

3. Debt-Free Degree

It’s never too early to start thinking about college. And your kids can go to college . . . debt-free! Did you know the average college graduate walks across the stage with $35,000 of student loans?2

 

Lead others to financial peace! It’s easier than you think. Learn how.

For years, people have been spoon-fed the idea that student loans don’t really count as debt. But that’s a bold-faced lie. Student loans are the worst. It’s like going through a pandemic . . . and running out of toilet paper. Yikes.

National bestselling author Anthony ONeal has created this step-by-step guide on how to help get your kid through college without the loans and set them up for financial success. Kicking off your student’s future debt-free? That’s a gift that keeps on giving!

4. Destroy Your Student Loan Debt

In this 64-page Quick Read, Anthony ONeal gives you the ugly truth about student loans and how they’re actually hurting you. If you’re new to the Baby Steps and short on time, but want the facts on how to tackle those loans for good, this motivating read might be your favorite one of the summer. Anthony gives you a step-by-step plan on how to send those student loans packing—for good.

5. Smart Money Smart Kids

Give. Save. Spend. Teach your little ones the value of hard work when they’re young and they’ll be masters of their piggy banks (and their finances) as they grow. Father-daughter duo Dave Ramsey and Rachel Cruze team up to share their personal stories of raising money-smart kids (and growing up with a financial guru as a dad).

Dave and Rachel tackle the importance of teaching your kids where money comes from, the value of hard work, paying cash for college, living responsibly, and how to avoid debt like the plague.

6. Love Your Life, Not Theirs

Comparison is dumb. Not only does it make us want what others have but it makes us ungrateful for what we do have. (And let’s be real: When we want what others have, we’re probably going to spend ourselves broke.) Keeping up with the Joneses is overrated. Why? Because the Joneses are broke!

This is the perfect summer read. No matter what your summer looks like (or what it doesn’t look like), there’s still so much to be thankful for. Rachel Cruze will show you how to live the life of your dreams by wanting the life you already have, steering clear of debt, and leaving behind the stress. You won’t be disappointed.

7. Business Boutique

You know that dream that’s been cooking in the corners of your mind for the past few years? The one that keeps you up at night and makes your heart go pitter-patter? Yup—that one. Who says you can’t turn that dream into a real-life actual business? And who says you can’t make some serious money doing what you love? Send those naysayers packing and pick up this step-by-step guide by bestselling author Christy Wright.

This read is everything you need to know about how to start making money doing what you love. You’ll learn how to create a business plan, manage your time, market your brand, and sell your product. Oh, and all those nitty-gritty details like taxes, budgeting and pricing? Christy covers those too.

8. The Total Money Makeover

If you’ve never read this, you’re in for a treat. This isn’t just another boring book about finances and spreadsheets. Nope. This bestselling book is going to be one you can’t put down until you’ve read every last word.

Not only does it give you a proven plan for how to take control of your finances—once and for all—but it also tackles those etched-in-stone money myths you may have believed all your life. With real-life stories of people who have hit rock bottom and worked their way to the top, this book will inspire you, motivate you, and help you give your finances the makeover they deserve.

9. The Graduate Survival Guide

Turns out, the choices you make in college can lead to a successful future . . . or knock you down for years to come. This book by Anthony ONeal and Rachel Cruze talks about the five mistakes many college students make in college that cripple their financial future when they should be chasing their dreams.

This book lays out the honest truth when it comes to credit cards, student loans, dumb decisions and the mistake of not having a plan (or money) in college. If you’ve got a recent high school grad in the house, they’ll want to binge this—instead of Netflix.

10. Everyday Millionaires

All millionaires drive fancy cars, eat steak dinners prepared by their own personal chef, and only wear brand-name clothing, right? Wrong! Chris Hogan and his team conducted the largest study ever recorded on 10,000 U.S. millionaires. What they found was that millionaires actually live on less than they make, invest, use coupons, and avoid debt like the plague.

This summer read will burst those millionaire myths floating around and help you realize that you too can be an everyday millionaire. Dive in. You won’t be disappointed.

11. One Question

If you could ask Tony Dungy one question, what would it be? What about Malcolm Gladwell or President Jimmy Carter? Ken Coleman sat down with these amazing people (and many more) to ask them questions about leadership, integrity, parenting, reaching your full potential and more. Once you start, you’ll be glued to the pages, learning from the giants of our time.

12. The National Study of Millionaires

Remember that study Chris Hogan and his team conducted on 10,000 U.S. millionaires? We decided to share it with you. Have you always wanted to know the average amount a millionaire actually spends on their groceries? Or the stats behind just how many of them received an inheritance? The numbers will surprise you. This may not be the easy poolside read you’re used to, but if you’re one who loves research, this is right up your alley.

Well, what are you waiting for? Head over to our $10 (or less) Sale and stock up on these amazing reads for your summer bucket list. You’ll be inspired to change your life—for the better—in no time.

What is Fixed Income Investing?

What is Fixed Income Investing?

What is Fixed Income Investing?

8 MINUTE READ

When you decide to get serious about saving for your retirement, it’s important to know your options. And believe me, there are a lot of options out there to choose from—and you need to know what to invest in and what to stay away from.

From time to time, you might hear the term “fixed income investments” thrown around, especially when people are talking about things like bonds and annuities. They might sound good at first, but do they really deserve a place inside your retirement portfolio? Just sit tight. I’ll walk you through what fixed income investing is all about.

What Is Fixed Income Investing?

Basically, fixed income investing is designed to give people a steady stream of income on a regular basis, usually in the form of interest payments from bonds. Now in theory, fixed income investments are supposed to offer investors something to invest in that is less risky than stocks. The problem is, that usually means you’re settling for below-average returns on your investments.

 

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Think of it like its own category of investments that pays investors a certain amount of cash in the form of dividends and fixed interest. But it’s important to mention that fixed income investments typically involve arrangements that look a lot like loans. That’s no bueno, my friend.

Types of Fixed Income Investments

When it comes to fixed income investments, one thing’s for sure: You’ve got options. Here are some of the most classic forms of fixed income investments you might come across:

Certificates of Deposit (CDs)

When I’m talking about CDs, I’m not talking about those little discs we used to play music with before Spotify took over. No, certificates of deposit (CDs) are basically savings accounts that let you save money at a fixed interest rate for a set amount of time. There’s a catch, though. Most CDs come with a certificate that says you’ll need to leave the money in there until the CD reaches its maturity date, which is when you’ll be able to take your money out without paying a penalty.

Here’s the problem with CDs—they have very low interest rates. They might be useful for reaching short-term savings goals, but I don’t even consider them a true long-term investment. Steer clear!

Bonds

Bonds, also known as “long-term fixed income investments,” let companies or governments borrow money from you. That’s right, you’re basically giving them a loan! When you buy a bond, you’ll receive a steady stream of interest payments from the company or government until the bond reaches its maturity date—that’s when they will pay you back for the original amount.

So, let’s say you buy a $1,000 bond from your local government. The term of the bond is two years with a fixed annual interest rate of 5%. In this scenario, you would receive $50 in interest each year from the city throughout the bond’s term, and then you’ll get your initial $1,000 back at the end of the two years. That means your initial $1,000 investment just turned into $1,100.

While there are a lot of different types of bonds, these three are the most common types: government (backed by the U.S. Treasury), municipal (issued by state or local governments), or corporate (issued by companies to fund growth). You could even buy bond mutual funds or exchange-traded funds (ETFs), which are funds made up of many different bonds.

Bonds have a reputation for being “safe” investments because they don’t rise and fall like stocks and mutual funds do. But here’s the thing: The returns you get from bonds just aren’t impressive, especially when compared to stocks. Earning a fixed interest rate might protect you when the stock market is down, but it also means you won’t profit when times are good.

Bottom line? I do not recommend investing in bonds—you’re better off investing your hard-earned money in growth stock mutual funds.

Fixed-Rate Annuities

A fixed-rate annuity is basically an agreement between you and an insurance company. Here’s how it works: You make a series of payments to an insurance company for a certain amount of time, called the “accumulation phase.” In turn, they promise to pay you a specific, guaranteed interest rate on your contributions—usually around 5%—once the accumulation period ends. Those payments to you could be stretched for a certain number of years or for the rest of your life.

Listen, while the idea of a guaranteed income for life sounds great, the rate of return that fixed annuities offer just won’t cut it. You can do much better than that with good growth stock mutual funds. Stay away!

Money Market Funds

Not to be confused with money market accounts, money market funds are fixed income mutual funds that invest in the short-term debt of the U.S. government and large companies. Money market funds usually aim to invest in debt that is supposed to be paid back in less than one year, providing safety from interest rate changes and reducing the risk of borrowers being unable to pay back the loan.

But these funds are terrible as long-term investing tools because they offer very low returns (I hope you’re starting to see a theme here).

Pros and Cons of Fixed Income Investments

So, should you consider having fixed income investments as part of your investing strategy? Let’s take a look at the pros and cons.

An advantage to fixed income investing is that it offers investors a steady stream of income over the life of a bond while giving the recipient—like a business—access to immediate cash or capital. Having a stable income allows investors to plan out their spending, which is why fixed income investments are tempting additions to many retirement portfolios.

Some fixed income investments get special tax treatment that could take the sting out of Tax Day each year—especially municipal bonds, which are usually tax-free at the federal, state and local levels. Treasury bonds, while subject to federal taxes, are also free from state and local taxes. Some experts also say fixed income investments add healthy diversification to your investing portfolio, balancing the highs and lows of investing in stock mutual funds.

But does the good outweigh the bad? Let’s take a look at some of the drawbacks of fixed income investing:

  • Lower return on investments
  • Bonds lose their value as interest rates rise and bond prices fall
  • Inflation risk
  • Credit risk
  • Liquidity risk (meaning if you have a fixed income investment that you want to sell and you can’t find a buyer)

Should You Include Fixed Income Investments in Your Portfolio?

Here’s the deal. People have this idea that fixed income investments are safe and reliable. But the truth is, their values actually fluctuate the way that stocks do, and you could lose money investing in bonds. And besides, the return you’re getting with these types of investments are usually terrible, especially compared to growth stock mutual funds. I do not recommend investing in bonds, annuities or other types of fixed income investments.

I do not recommend investing in bonds, annuities or other types of fixed income investments.

So, what do I recommend? I want you to invest 15% of your gross income in good growth stock mutual funds, which will offer you better returns and are more suited for long-term investing. A quarter of your portfolio should include “growth and income” funds, which are made up of stocks from big, stable companies that should provide your portfolio with predictable returns that are still better than most fixed income investments.

Talk It Over With an Investment Professional

Now, before you invest in something, you need to understand how it works. That’s why I always recommend sitting down with an investment professional who knows what they’re doing.

Don’t have one? Our SmartVestor program is a great service that connects you with investment pros in your area. Each one has been vetted by our team at Ramsey Solutions and they will patiently walk you through the investing process.

Reach out to a SmartVestor Pro today!

About Chris Hogan

Chris Hogan is a #1 national best-selling author, dynamic speaker and financial expert. For more than a decade, Hogan has served at Ramsey Solutions, spreading a message of hope to audiences across the country as a financial coach and Ramsey Personality. Hogan challenges and equips people to take control of their money and reach their financial goals, using The Chris Hogan Show, his national TV appearances, and live events across the nation. His second book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth—And How You Can Too is based on the largest study of millionaires ever conducted. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at chrishogan360.com or facebook.com/chrishogan360.

What are Index Funds?

What are Index Funds?

9 MINUTE READ

Trying to figure out which types of investments to include in your portfolio can be tricky. After all, there are so many options to choose from and it can feel overwhelming at times—and most people feel like giving up before they get started.

But the fact that you’re here reading this tells me that you, my friend, are not like most people. You want to take charge of your financial future, and that starts with getting familiar with all of your investment options—including index funds.

Index funds get a lot of talk on the cable news shows and all over message boards, but are they really the best option when it comes to investing for retirement? Well, I’m here to break down index funds for you so that you can decide whether or not they have a place in your investment plan.

Ready? Let’s do this!

What is an index fund?

An index fund is a type of mutual fund designed to mirror the performance of the stock market or a particular area of the stock market.

 

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A mutual fund lets investors pool their money together to invest in something. So in this case, the money in an index fund is used to invest in stocks, bonds or other types of investments inside a particular index. Speaking of which . . .

How do index funds work?

In order to understand how an index fund works, it’s important to understand what an “index” is.  When it comes to the stock market, an index is basically a measuring stick. Indexes help investors measure the performance of the stock market in almost the same way you would use a ruler to measure how long something is.

There are hundreds of different indexes out there to measure many of the different sectors of the stock market. The S&P 500 Index, for example, is the one most experts use as a benchmark for the overall U.S. stock market. Standard & Poor (S&P) is a ratings agency that identifies the top 500 largest companies on the New York Stock Exchange to include in its index. In a very real way, they use it to measure the overall performance of the stock market.

So, what’s inside of an index fund? It depends on the index the fund is based on! An S&P 500 index fund, for example, is made up of stocks from many of the companies found inside the S&P 500 with the goal of mirroring the performance of that index. So, if you invested in an S&P 500 index fund, you own 500 stocks in a single fund with returns that are almost identical to the gains (or losses) of the S&P 500 itself.

This makes index funds a very “passive” form of investing. Instead of being run by a fund manager looking for investments that will beat the market, an index fund is more than happy to settle for “average.” Index funds are like mirrors—they’re designed to copy the performance of the index they are based on. No better and no worse!

What are some different types of index funds?

From bonds to foreign stocks and everything in between, there are hundreds of indexes out there used to track the performance of almost every sector of the financial market you can think of. And if there’s an index for it, you can almost bet your bottom dollar there’s an index fund for it.

We’ve already talked about the S&P 500 index fund, which is probably the most famous example of an index fund out there. But that’s just the tip of the iceberg! Here are some other common index funds you’ll find, and you’ll notice that each one has its own unique flavor:

  • Russell 2000 Index Fund: This fund is made up of stocks that are in the Russell 2000 index, which focuses on smaller companies.
  • Wilshire 5000 Total Market Index Fund: Made up of almost 3,500 stocks, this is the largest U.S. stocks index out there and is also used to measure the performance of America’s publicly traded companies.
  • MSCI EAFE Index Fund: Whoa, that’s almost half the alphabet right there! All you need to know is this index fund mirrors the performance of the international stock market, with foreign stocks from Europe, Australasia, and the Far East (that’s what “EAFE” stands for) included in the mix.
  • Barclays Capital U.S. Aggregate Bond Index Fund: This index fund is very different from the others in this list. That’s because this index follows the performance of the U.S. bond market and is full of bonds instead of stocks. Bonds are basically loans where the government borrows money from investors—and agrees to pay them back, with interest.
  • Nasdaq Composite Index Fund: This fund has stocks from around 3,000 companies listed on the Nasdaq exchange, which is often used to measure the performance of the technology sector.
  • Dow Jones Industrial Average (DJIA) Index Fund: The Dow Jones is the oldest stock market index in the U.S., made up of stocks from 30 large companies from all kinds of different industries. This index fund will have stocks from companies that are included in the Dow Jones index.

Remember, with an index fund, don’t expect to get returns that are better or worse than the stock market or the index the fund is mirroring. Basically, you are the market.

What are the advantages and disadvantages of index funds?

If there’s one thing I tell everyone about investing, it’s this: Never invest in something you don’t understand. You need to have a good grasp of your investing options before deciding to invest your hard-earned money into anything. And that means weighing the pros and cons of all your options—including index funds.

Here are some of the pros of having index funds in your investment portfolio:

  1. Index funds are diversified. Like I mentioned earlier, index funds are a type of mutual fund. And like other mutual funds, index funds are usually filled with stocks from hundreds of different companies. That gives you a nice layer of diversity.
  2. Index funds have lower expense ratios. Because index funds are basically just copying the index they’re named after, there’s not much to manage. Because of that, index funds usually have lower fees and expense ratios.
  3. Index funds are predictable. What you see is what you get. With an index fund, you know you’re going to get returns that are more or less the same as the stock market. And just like the stock market, there are going to be ups and downs.

But here are some reasons you might want to think twice before adding index funds to your investment mix:

  1. Index funds won’t beat the market. Listen, average is okay. But do you want to settle for “okay”? I don’t think so!
  2. Index funds are not very flexible. What’s inside of an index fund isn’t really up for debate. It only changes if the index it’s based on changes. So, the holdings inside your S&P 500 index fund, for example, will only change if the S&P 500 drops some companies for others in its index.
  3. Some index funds have higher maintenance fees. You’ll hear a lot of about lower expense ratios from index fund crusaders. But hold up! While it’s true that many index funds have lower expense ratios than actively managed mutual funds, they’ll charge a hefty maintenance fee—sometimes listed as a “12b-1” fee—to make up for it. And those can really hurt your returns in the long run. Be on the lookout for those!

Should index funds be part of your investment strategy?

Listen to me, I don’t want you to settle for average. Here’s my advice: Invest 15% of your gross income in good growth stock mutual funds that have a long track record of strong returns that beat stock market indexes like the S&P 500.

Your investment portfolio should be divided evenly between four types of mutual funds:

  • Growth and income funds: These are the most predictable funds in terms of their market performance.
  • Growth funds: These are fairly stable funds in growing companies. Risk and reward are moderate.
  • Aggressive growth funds: These are the wild-child funds. You’re never sure what they’re going to do, which makes them high-risk, high-return funds.
  • International funds: These are funds from companies around the world and outside your home country.

That way, your investment portfolio will be well diversified—which means you’re not keeping your entire nest egg in one basket. But you’re still going after funds that are going to beat the market and help you build a nice, big nest egg for retirement over time.

Get With a SmartVestor Pro!

Now look, some mutual funds underperform the stock market—and you want to stay far away from those—but there are many mutual funds out there that outperform the market. Picking and choosing the right funds is a big deal, people! That’s why I always want an investment professional in my corner to help me separate the winners from the losers.

And besides, it’s always a good idea to sit down with a pro who can help you set goals for your financial future and help you understand all your options, from index funds to growth stock mutual funds.

Our SmartVestor program is a free service that connects you with investment professionals in your area. Each one has been vetted by our team here at Ramsey Solutions, and they will patiently walk you through the investing process.

Connect with a SmartVestor Pro today!

About Chris Hogan

Chris Hogan is a #1 national best-selling author, dynamic speaker and financial expert. For more than a decade, Hogan has served at Ramsey Solutions, spreading a message of hope to audiences across the country as a financial coach and Ramsey Personality. Hogan challenges and equips people to take control of their money and reach their financial goals, using The Chris Hogan Show, his national TV appearances, and live events across the nation. His second book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth—And How You Can Too is based on the largest study of millionaires ever conducted. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at chrishogan360.com or facebook.com/chrishogan360.

What Are the Types of Debt?

What Are the Types of Debt?

Types of Debt

11 MINUTE READ

Car loans, student loans and credit cards. Oh my!

Debt comes in many shapes and sizes. But no matter what form it takes, debt just steals from you and your future. It’s time to take back control of your money! Here’s everything you need to know about the different types of debt—plus how to break up with debt for good so you can start living the life you want.

What Is Debt?

Debt is when you owe anyone money. Any time you don’t pay in full—that’s debt. Are you still making payments for something you bought? Yep, also debt. You purchased the Cadillac before you had the cash. You borrowed from your mother-in-law because you didn’t have the moola. No matter how you package it, debt means you’re at the mercy of someone else until you pay them back.

money icon 

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Maybe debt is a common word in your house, or maybe you think you’ve done a good job avoiding it. But no matter what kind of relationship you have with debt, Proverbs 22:7 says the borrower is slave to the lender. When you have debt, you’re no longer working just for you or your family—you’re working for the people you owe money to. And the average American carries $34,055 in consumer debt.1 That’s not okay! You’re made for more in this life than just working to pay off debt.

Listen, debt is debt. And it’s holding you back no matter what type it is! But let’s walk through the types of debt that are out there so you can know how to avoid the traps. Keep in mind, some debts fit into more than one category.

Secured Debt

The dealer hands you the keys to a brand-new SUV. You pump your fist in the air and drive home to show off the car you just bought. Except you didn’t just buy it—you financed it. The bank owns the car. You just get to pay them to drive it each month. That’s secured debt.

With secured debt, any money you borrow is backed by a physical item. In other words, there’s collateral. When you finance a car, boat, RV or even a home, the lender looks at your credit to check your borrowing history. That helps them determine your interest rate (money charged just for the act of borrowing). They also place a claim of ownership (also called a lien) on your stuff. If you stop making payments, the lender can take the item back (either through repossession or a foreclosure).

Secured debt is great for lenders because it means less risk for them. They either get their money, or they get the item back to sell. But it also means more risk for you. The moment you don’t pay up, you’ll be saying hello to the repo man and goodbye to your precious Honda. And with assets that go down in value (like cars), you could end up underwater and owe more than the item is worth.

But instead of paying someone else to use their stuff (because that SUV isn’t yours until you finish paying it off), what if you saved up cash to buy that item up front? Not only will that save you a ton of money in interest, but you’ll also get a better night’s sleep knowing your car (and your mattress) is paid for.

Unsecured Debt

So, if secured debt is backed by something that can be taken away, what about unsecured debt? Unsecured debt means there’s no collateral for the loan. Think credit cards, student loans, medical bills, payday loans or personal loans. It’s money you’ve borrowed, but it’s not directly tied to an item. This makes it harder for the lender to get their money when you don’t pay up, so unsecured debt usually has a higher interest rate. And it also means you’re more likely to face debt collectors or lawsuits if you miss payments.

This kind of debt can pile up quick if you’re not careful. With secured debt, you’re more motivated to make payments because you might lose your car, home or something you use every day. With unsecured debt, it’s not as easy to see where the money you’re borrowing is going, but you still need to pay off the debt ASAP!

Revolving Debt

Revolving debt is an open line of credit. It’s when you enter into a cycle of borrowing money and paying back—just to borrow more money. It’s kind of like the revolving door you use to enter a mall to buy things with your line of credit. You can borrow up to a certain amount (called a credit limit), and as long as you make the minimum payment by a specific date each month, you can keep spending. Revolving debt is your credit card, store card (we’re looking at you, Target), or even the tab you’ve racked up at your local hardware store.

With this type of debt, it’s easy to feel like you have your credit under control because the minimum payments you make are usually super small compared to your credit limit. But only paying the minimum each month (or anything less than the full balance, for that matter) means you have to pay interest on the rest of your balance later. And if you miss a payment, you’ll owe late fees on top of everything else! No gaming system or pair of shoes is worth the mess you could be in if you use a credit card.

Even if you pay off your entire balance at the end of the month, there’s still a period of time where you owe someone else, whether it’s a store or a credit card company. That thing you bought technically isn’t yours until you’ve paid off the balance. Time to do a 180 and revolve right out of this debt for good.

Nonrevolving Debt

Nonrevolving debt is a line of credit that can’t be used more than once. It’s a car loan, a business loan, a student loan or a mortgage. You borrow a specific amount of money and pay it back in installments before a certain date. And your minimum payment each month usually depends on how much you originally took out. Once you’ve paid the loan off, it’s gone, and you don’t get any more funds to spend.

Like all debt, interest is also involved. But with nonrevolving debt, you’re usually dealing with some larger numbers. So even if you make the minimum payment each month, you’re still going to have to pay interest on the remaining balance. These loans are probably going to take some time to pay off (especially a mortgage), which means you will end up shelling out more than you borrowed to begin with. And depending on your interest rate, that can add up to some serious cash. For example, let’s say you took out a 30-year $250,000 mortgage at 3.8% interest. When all is said and done, your house will actually cost you almost $420,000 ($250,000 plus about $170,000 in interest)! That. Is. Insane!

Sneaky Debt

Cars, motorcycles, couches, computers, dishwashers, even pets—you can finance anything nowadays. You’ve probably seen the flashing, neon signs: zero percent APR! Or 90 days same as cash! These, friends, are examples of sneaky debt. Salespeople know most folks don’t pay off that furniture set or treadmill within 90 days—and the moment your time is up, crazy interest rates kick in with full force. Even credit card points and airline miles are another way to tempt people to spend more money in the hopes of getting a very small reward. Don’t fall for these debts disguised as deals. They’re not worth it!

There’s also another kind of debt you may not even know is debt . . . and it’s in your pocket. Yep, cell phones fall into the sneaky debt category because many of us don’t think twice before signing a contract and agreeing to pay off our phone every month for the next two years. But it’s secured debt. It may not seem like a big deal, but the truth is, you still owe on that device, and it could be taken from you if you don’t pay up. Instead of financing the latest iPhone, you’d be better off saving up to pay for the whole thing with cash.

Good Debt vs. Bad Debt

Spoiler alert: There’s no such thing as good debt. That’s like saying there are good kinds of the flu.

Take student loans, for example. Some folks think student loans are “good debt” because they help a student better themselves. But really, loans just end up getting in the way and holding the borrower back for years. Just ask the thousands of people who are still drowning in student loan debt because of an English degree they got back in 1998. There are ways to get a quality education that will help your career, but student loans aren’t the answer.

What about a mortgage? We get this question all the time. Yes, a mortgage is debt, but it’s the only kind we won’t yell at you about. Even then, we’ve got some guardrails to keep you from derailing your goals—and your life. If you can’t pay cash for your house (that’s our favorite option), we tell you to only take out a 15-year fixed-rate mortgage. And your monthly payment should be less than 25% of your total take-home pay. Plus, you need a good down payment of 10–20%.

How to Get Out of Debt

Take a moment and dream. What would your life look like without debt? What would you do if you didn’t have any payments holding you back? Would you travel more, start a business, or bless others?

Debt keeps you in the past, makes you worry about the present, and steals from your future. The sooner you call debt what it is—dumb—the sooner you can take back your income and kick Sallie Mae and those nasty credit cards out of your life. Here’s how to pay off your debt once and for all:

Make a budget.

The first step in paying off debt is to be more intentional with your money. And the best way to do that is with a zero-based budget. When you give every dollar a job, you make sure the bills get paid while you make progress on your goals. Tracking your expenses every month also makes it easier to see where you’re overspending and where you can cut back. Do you need to ditch the cable bill to pay off that credit card? Maybe it’s time you trimmed your grocery budget so you can throw even more money at your debt.

A budget tells your money where to go so you’re not left wondering where it went. If you’re tired of having too much month at the end of your money, a budget is your new best friend.

Use the debt snowball.

If you’ve got more than one type of debt fighting for your attention, the debt snowball method will give you focus. It’s the best way to pay off debt because it helps you prioritize your different debts and gives you motivation to tackle them one by one.

Here’s how it works: First, you list all your debts from smallest to largest (regardless of interest rate). Then you make minimum payments on all your debts, except the smallest debt—that’s the one you attack with intensity. Get a second job, sell your stuff, use that budget! Do whatever it takes to throw as much money as possible at that littlest debt. Once that one is done, take what you were paying on that first debt and add it to your payment for the next debt. Keep doing this until all your debts are gone for good!

When you give yourself little wins, you’re more likely to keep attacking your debt. Think of it like a snowball rolling downhill and gaining momentum along the way. You can even use our debt snowball calculator to figure out how soon you could be debt-free!

Get on a plan that works.

Here’s the deal: You can either let your money control you, or you can control your money. If you’re ready to call it quits on debt, Financial Peace will show you the way. Learn all you need to know about how to budget, pay off debt, save for emergencies, invest for your future, build wealth, give, and so much more. Start a free trial of the Financial Peace Membership and take control of your finances!

Deferment vs. Forbearance: What’s the Difference?

Deferment vs. Forbearance: What’s the Difference?

8 MINUTE READ

When it comes to paying off your student loans, the struggle is beyond real. It can feel straight-up life-crushing and maybe even impossible. But hey—you aren’t alone under this weight. There are 44 million student loan borrowers in America who, put together, owe around $1.6 trillion in student loan debt.

If you’re feeling burdened by this debt, you may be searching for a way to pause those payments—like applying for student loan deferment or forbearance. But don’t jump into this temporary relief just yet. First, you should know more about how deferment and forbearance work—plus other options you have if you’re feeling completely overwhelmed by your student loans.

Before we dive in, let’s give a quick call out: Under the current Coronavirus Aid, Relief, and Economic Security Act (aka the CARES Act), payments for federally owned student loans are suspended until September 30, 2020, with a 0% interest rate during that time. So, this gives you two options. You can pause paying if your finances are tight. Or you can keep paying because anything you put toward those loans right now will go straight to the principal (the original amount you borrowed) instead of the interest!

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Okay, now back to our regularly scheduled blog content:

What Is the Difference Between Deferment and Forbearance?

So, both student loan deferments and forbearances put a pause on payments. You can’t apply for either if you’re in default on your federal student loans. And—this is important—you have to keep making your regular payments until you get official word that your deferment or forbearance has been approved. You can’t just stop paying after you fill out the paper work, or your loans will become delinquent, meaning you missed a payment. If you miss several payments, you could go into default, meaning you broke the loan agreement and may have to suffer some pretty serious consequences.

One of the main differences is what happens to your interest during the payment pause. And it’s one heck of a difference, as you’ll find out. Let’s look deeper into how student loan deferments and forbearances are similar and different:

What Is Deferment?

Deferment is a way to stop paying on your student loans—temporarily. People who are in school, currently unemployed, in the military, getting cancer treatments, or having financial hardship (that means you can’t afford to pay your bills—and you can prove it) are most likely to qualify. The length of a deferment depends on the type. For example, students enrolled in eligible colleges and programs may qualify for an In-School Deferment for the entire time they’re enrolled and possibly up to six months after they leave. And an Economic Hardship Deferment can last up to three years.

When you get a deferment for subsidized federal student loans or Perkins loans, you don’t have to pay for the interest, and more interest doesn’t build up. But for other types of student loans, the interest does build up during deferment. That means the loan balance (what you owe) will be higher when the deferment time period is over.

What Is Forbearance?

There are two types of forbearance: general and mandatory. In a general forbearance, you make a case for why you can’t keep up with the payments, and then the lender decides to approve or deny your request. You can apply if you have financial difficulties, medical expenses, change in employment, or other reasons you can’t cover your loan payments. Just submit your general forbearance request, and the loan provider will review it. But keep in mind, only direct loans, Federal Family Education (FFEL) Program loans, and Perkins loans are eligible for general forbearance.

Mandatory forbearances are, well, mandatory. (The title kind of gave that one away.) Here’s what that means: If you qualify, the loan provider has to accept your request. So, what usually qualifies?

  • You have a direct loan or FFEL Program loan.
  • You’re serving with AmeriCorps, working in your medical or dental internship or residency, or working as an activated member of the National Guard.
  • The total amount you owe every month for all your federal student loans is 20% or more of your total monthly income.3

With either type of forbearance, your payment is put on hold, but the loan continues to build up interest. That interest just piles onto the balance. (Yikes!) In other words, the amount you owe increases. Sometimes a lot. You might be hitting the pause button on payments, but your balance is getting bigger the whole time. It’s like taking a pause on doing the laundry. Yeah, you get a break for the moment, but that pile of dirty clothes is growing larger every day. Only this is much worse because it’s debt.

Private Student Loan Forbearance

If you have private student loans, you can’t apply for deferment or forbearance. You’d have to contact the lender to talk through your situation and see if they’d give you break in making payments. Even if they do, though, expect your interest to build up during the break. You’d still have to pay your entire loan amount (plus all the interest) in full.

Is Deferment or Forbearance Right for Me?

When you put your student loans into deferment or forbearance, you risk losing control of the debt. You may feel some relief in the moment, but the debt isn’t going away. In all cases of forbearance and some cases of deferment, the debt actually gets bigger because the interest keeps piling up. You aren’t solving a problem. You’re delaying it and letting it grow.

The only time you should even think about pausing student loan payments is if you’re in a financial situation where you can’t cover your Four Walls: food, utilities, shelter and transportation. You don’t pay Perkins if you can’t feed your family. But if things don’t come to that, keep fighting the good fight of paying off these loans. Yes, it’s tough. But you’re tougher.

Alternative Repayment Plans

If you’re struggling with student loan debt, deferment and forbearance aren’t your only options. (Thank goodness, since they’re more harmful than helpful.) Let’s look at what else is out there.

Student Loan Consolidation

student loan consolidation takes all your different loan payments and turns them into one payment. It’s the only form of debt consolidation we recommend—but only if it checks every single bullet point below. Otherwise it’s a no-go. So consolidate only (and we mean only) if:

  • It doesn’t cost you anything to consolidate.
  • You can get a fixed rate instead of variable rate.
  • Your new net interest rate is lower than your current net interest rate.
  • You don’t sign up for a longer repayment period.
  • You don’t lose motivation to crush the debt quickly!

Refinancing Student Loans

Here’s a better plan than pausing your payments: Refinance your student loans. Refinancing works through a private lender if you have federal loans, private loans or a combo of both. You’ll need a trustworthy lender (one who doesn’t try to get you into more debt and doesn’t charge to refinance). This company will pay off your old lenders and become your new lender. By refinancing for a lower rate, you’ll pay less interest on your loan every month, save money, and use those savings to get your debt down to zero quicker.

Income-Driven Repayment Plan

There’s also something called an income-driven repayment plan. If you qualify, the monthly payment on just one eligible federal student loan is adjusted based on your income, and whatever you don’t pay off after 20 years might be forgiven. Might. But be careful—those loan forgiveness rules change up quicker than you can say “regret.” Also, paying on a loan that long means you’re actually spending thousands more than what you borrowed in the first place. Why? Because the interest rates are stupid high. And let’s be honest: 20 years is just too freaking long to be in debt.

Listen. We know student loans—and any debt for that matter—can start to feel like a weight that’s squeezing the very life out of you. And a break from payments might seem like a temporary quick fix. But instead of trying to delay the problem, get mad at it! Get mad enough to pay off all your debt as quickly as you can, so you don’t feel weighed down anymore. Make freedom from debt your reality.

It is possible. And you can do it!

You can kick all your debt to the curb—goodbye, see you never—and take control of your money. The motivating tools and lessons inside Financial Peace can help. And right now, you get it all free for 14 days! Don’t pause the problem. Get the real solution. Start your free trial to Financial Peace today!

Deferment vs. Forbearance chart