9 Principles to Achieve FI Series 1 of 3 | Military Money Manual Podcast Episode 3 Show Notes

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Military Money Manual Podcast Episode 3 Transcript

[00:00:00] Spencer: All right. Hello, and welcome back to another episode of the Military Money Manual Podcast. I'm your host Spencer. 

[00:00:08] Jamie: And I'm Jamie. 

[00:00:09] Spencer: And in this episode, we're going to start going over nine money principles live your life by. These are nine principles, that after reading nearly every single personal finance and investing book I could get my hands on- these nine principles are the summary of all those books, research, and that time spent. So, what we'll do is a three-episode series. And if you want to get into all of these principles in depth, the best place to do that is the book that's coming out, “The Military Money Manual”, and that should be coming out soon.

And we're recording this in 2021 and it should be out in August of 2020. 

[00:00:53] Jamie: Yeah, that'll be great. Where can they find that book again, when it's out? 

[00:00:56] Spencer: The easiest place is gonna be “militarymoneymanual.com”. We'll have a link right there on the homepage or “militarymoneymail.com/book” will also get you there, and that's also going to be on Amazon, Audible, and basically anywhere you can find an eBook or a paperback or hard cover.

[00:01:12] Jamie: Awesome. So, let's dive into the nine commandments, if you will, of personal finance that you've kind of summarized for us an easy way. So, we're gonna talk about the first three today only, and then we'll go three at a time over the next three episodes. Let's just go, quickly, over all nine. Can you just give us, what are the nine principles? 

[00:01:29] Spencer: Sure. So, from the top, spend less than you earn. Number two: don't accumulate debt. Number three, pay down your high interest rate debt ASAP, as soon as possible. Number four, save a three-month emergency fund. Number five, maximize your tax advantage retirement contributions. Number six, remember that your savings rate beats your investment return. Number seven, keep your investments automatic, simple, low cost and diversified. Number eight, spend your money on what matters to you. And number nine, buy income producing assets, not liabilities. And like you were saying, that's the nine. In this episode, and in the next two episodes, we'll take them three at a time. So, in this episode, we're gonna focus on spend less than you earn, don't accumulate debt, and pay down your high interest rate debt ASAP. 

[00:02:22] Jamie: Yeah. So those seem like kind of basic principles to some. And so, some of the listeners may be at a more advanced spot in their personal finance journey than that. But what we've found, and I would say what I found- I think you would probably say similar experience- is that you never know what blind spots you might be missing. You might even if you're Major or E8 and you've been in the military a long time and you have a lot of money saved up, there might be still something you could do to achieve a little bit more. So, don't write this off if you're more advanced “this is something for an 18-year-old to listen to because there may still be goodness for you there. 

[00:02:55] Spencer: Yeah, definitely. I mean, I think the spend less than you earn applies at all income levels, right?

[00:03:00] Jamie: Yeah, because you have the doctor- 

[00:03:02] Spencer: Or you have pro athletes making millions of dollars a year, but they spend multimillion dollars a year. And at the end of their career, they have no money. Because they spent it all. 

[00:03:10] Jamie: Exactly. Or they assume that their income's always gonna be the same and don't put any aside.

[00:03:14] Spencer: Right. So, let's talk about that in depth now, spend less than you earn. Obviously, if you spend exactly what you earn, then you're not gonna be saving anything. If you spend more than you earn, it's pretty hard to keep that going. Other than in modern financial system, we have debt. Right? So, you can, you can borrow money at various interest rates. Credit cards are usually astronomical, 20 or 30%. A lot of military service members used to get into payday loans. Which obviously have terrible rates at which you can borrow money.

I think a lot of that has hopefully gone by the wayside. There's been a lot of laws like the military lending act, the MLA, that is trying to protect military service members and cap the rates at 36%. But I think a lot of that is still out. I mean, 36% is insane, right?

[00:04:04] Jamie: Even a regular Amex card or Chase card at 19- 20%, or 28%, if you're carrying debt on that, it's gonna be very hard to get ahead. So, when you say spend less than you earn, should they be thinking of that as a weekly, biweekly, monthly, or yearly goal? How do we put that into a tangible timeframe where they can take action on that? 

[00:04:22] Spencer: So, I think for myself, I think what I used to focus on, especially in the beginning of my personal finance journey was just getting ahead on the per paycheck basis. Right? So, it used to, when I first came into the military and I was a young Lieutenant, I would essentially pay all my bills with one paycheck and then I'd have only a few hundred dollars to make it to the next paycheck. And then again, I get to that paycheck, and I'd have more bills to pay, and I was barely saving anything other than paying off my student loans and just paying my bills.

So, I guess you could look at that as like a, I mean, we get paid on the 1st and 15th a month, right? So twice a month essentially, all my accounts balanced out, I was spending less than I was earning, but just barely. Now, my income has grown as I've promoted through the military. I would say that it's more of an annual thing, right? Like I just set a savings rate and I know that if I'm saving 20, 30, 40% at the end of the year, it doesn't really matter if I spent the other 60% that I had left over. I'm still saving 40%, right? 

[00:05:36] Jamie: Yeah. I think there's definitely a person that's right for and a time and place for it, but not at the beginning for most people. They probably need a more detailed budget, whether it's an app or mint. I personally use “YNAB”, “you need a budget”, it’s a really good one actually. One of our coworkers’ brothers runs that. 

[00:05:53] Spencer: Yeah, that's right. 

[00:05:54] Jamie: Which is a really cool, random connection. So, yea, but if you're actually like looking at ‘where is all my money going', and you don't know, you need to start with writing down all your expenses and actually seeing what's going out of your bank account. You may be getting charged fees by your bank that you're not aware of. $5 $10 $20 a month really adds up. 

You have annual bill or monthly bill for Netflix, and for HBO max, and for Hulu, and for Spotify. I think I already said Amazon prime, but like all those things just add up. They do. And when you're behind and you don't know where your money's going, then you have to start by at least identifying what's happening.

So, whether it's whether you call it a spending plan, or a budget, or listing out your expenses or anything like that, in my mind, the only way to spend less than you earn is to know what you're spending too. So, you have to identify what's going out. 

[00:06:40] Spencer: Yeah, definitely. So, one thing that we used when we first got started was “mint.com”. And we would track every dollar and figure out where it was going. We were able to quickly identify the subscription services really add up. Everything's a subscription now. So, it's both a positive, because for $15 a month, you can get access to every single song in the world on Spotify. But everything's a subscription service. So, you have 10 subscriptions, all of a sudden, it's $150 going out of your pocket and that's not going towards your goals right now. 

If, you are covering your goals and you're like, ‘you know what, no, I'm getting happiness and joy from spending a hundred dollars a month on subscription services', then by all means do it. But if you don't know, and if you're like, ‘man, I can never get ahead, I'm still in debt, why is it taking me so long to pay off this debt'? Once you audit, essentially yourself, by using YNAB or using Mint, and figure out, ‘oh man, I have all these subscription services. Maybe I can trim one or two of them and send that money to a debt repayment'. Then you're out of debt that much faster. 

[00:07:40] Jamie: Yeah. And what I would add too is it's all a temporary sacrifice or change in your quality of life or lifestyle. In reality, cutting Netflix or Spotify for six months or 18 months, isn't gonna change anything in your life.

[00:07:52] Spencer: That's true. 

[00:07:52] Jamie: You're gonna be okay. But if you cut some of your subscriptions and it helps you get out of debt a month faster, that that will change your life. 

[00:07:59] Spencer: That's right. I mean, we're at the point now where we're on our journey towards financial independence or financial freedom. And if there's a subscription service that we want, we'll sign up for a month or two to watch, you know, whatever new shows on HBO and then we'll cancel it. They're pretty convenient. You just have to remember to cancel, and not just let them keep turning over. But that was one sacrifice that we made very early on in our journey to make sure that we prioritize our debt repayment. And now that we've done that, we've knocked that out and we have a great savings rate, and we have a lot more income.

It's a lot easier for us to add those subscription services back in. You'd be, surprised by the amount of people that are losing insane amounts of money on their Amazon prime membership, for example. So, you think like, ‘oh, it's really convenient to have free shipping and fast shipping', but most people aren't actually getting that much out of it. If you want free shipping or fast shipping, you just pay for it for that period. 

The other side of this, I want to just touch on briefly is, other than spending, what about the earning? So, what kind of tips, or what have you seen people do to maybe earn? So, maybe they cut their spending a little bit, but they also earn more, maybe spouse goes back to work or they pick up Uber driving. Any concepts like that or tips? 

[00:09:11] Jamie: Well, I mean, that's the great thing about the spend less than you earn, right? There are two sides of the equations. So, you can cut your expenses and keep your income the same, or you can increase your income and increase your expenses at the same time. And now the gap is getting wider, faster, and accelerating your path towards whatever your goals are. For myself personally, I started the website a couple years ago. It didn't make any money for years and years, makes a little bit of money now, but you know, having that side hustle or that side project that you work on in your free time can really help move the bottom line quickly.

I know with the Gig Economy now, a lot of people do end up making a couple hundred bucks on the weekend driving for Uber or doing Instacart or any of those gig apps. Now I will say though, they can be kind of distracting from the more important goals right now, if you're in a hundred thousand dollars of credit card debt and you need to dig your way out, then maybe you do need to take those gig economy jobs. But maybe that's not the right thing for you. If you've got three kids at home, you work hard during the week and you just need to take that weekend and spend time with your family. So, there's got to be a balance. You have to prioritize, and you know, remember that you have to live too. You have to. If you're not enjoying what you're doing, then why? If you never see your kids and you and your spouse are trading off shifts, high fiving in and out the door from day shift to night shift. 

My wife is a nurse. In a career field like that overtime is easy to get or working on a weekend prime shift, any kind of industry like that, where you maybe sacrifice a little bit. So, your spouse can get extra tips at a restaurant by working Friday night, instead of Saturday during the day or whatever it may be; take the overnight shift at the ER, if you're in the medical world or something like that, where you can just do the same amount of work, but get paid a little bit more, because no one else wants to work during those hours. Right?

[00:10:55] Spencer: Yeah. Definitely. 

[00:10:56] Jamie: Okay, so spend less than you earn- number one! Number two?

[00:10:59] Spencer: All right. Number two: don't accumulate debt. It's pretty directive and for a lot of people, they hear it way too late. So, for myself personally, I took on over $60,000 of student loans when I was in college. I thought it was a good idea at the time because I was getting great education, having a great time doing the ROTC program at Boston university, which was a very expensive school and the scholarship covered a lot of the tuition, but I still had when I graduated over $60,000 student loan debt. And that meant for basically the first four years of my air force career, at first it was almost half my paycheck going towards student loan debt repayment.

Yeah. Which is insane. 

[00:11:40] Jamie: It's steep. So, I would say in the military, a lot of debt we see is not only student loan debt, the USA career starter loan, whether they target academies and RTC commissioners, or soon to be lieutenants and ensigns to take out a $25,000 or $30,000 loan at a very low interest rate. But even with that, unless you're going to be very smart with it, can put you behind if you're not careful.

[00:12:02] Spencer: Did you end up taking it? 

[00:12:03] Jamie: We did. And my wife did too because we were mill to mill for a while. So, when we started our career out, we combined were over a hundred thousand dollars in debt. I think it was like $107,000, $108,000, somewhere in that. So, we dug out of a big hole, dual income, no kids for a very short portion of that, then we had our first kid. So, it's tough when you're starting in a negative spot and not starting either even, ahead a little bit. And some of that might be the setup of your family and what you can afford, but you can get it for your degree, and still commission and get a job without being at a prestigious university too. So, not only you're attacked by car dealerships and mortgage lenders and wanting to live in a really nice house with granite countertops or whatever it is, but you're also sold the lies that you need to go to the right kind of school or otherwise you're going to be scum. So, you're just bombarded by marketing in all avenues of life. That's, in my opinion, what drives debt for most people.

The average car, payment's something like $550-$600 a month for a four- or five-year term.

[00:13:03] Spencer: Well, I think now they're offering a lot of seven-year car loans, right? Which is just insane. 

[00:13:07] Jamie: Honda has been emailing me, trying to get to trade in my car and get a brand new one. And the payment they're offering me is $672 a month for five years. 

[00:13:15] Spencer: What's the interest rate then? 

[00:13:16] Jamie: I didn't even get that far. I'm not even looking at it. I'm not interested, you know. $672 is a huge portion of people's monthly bills for a lot of military families. 

[00:13:27] Spencer: Yep. Well, the benchmark that I always come back to is- the Roth IRA right now in 2021- to maximize a Roth IRA account is $6,000 a year, right? That's $500 a month. So, if you're making a $650 car payment, then you're essentially either foregoing or sacrificing your retirement. And if you threw $6,000 a year into a Roth IRA over 20 years, then stopped contributing, at year 40- based on a normal SMP500, seven or 8% stock market return- you'd be a millionaire at 60, you know?

So, you have to think about, it's not just $650 a month. It's if you do that for five years to yourself and then just stop contributing, by the time you hit retirement age, you probably have over a million dollars. So, it's not just that monthly payment you're losing, you're taking away a lot more from your future self as well.

[00:14:19] Jamie: Yeah. Opportunity lost, opportunity cost. 

Debt is one topic that I'm passionate about and I feel like there's a lot of emotion behind this as well. Which is even okay for a guy in the military to say, but there's something we've talked about. There's something different about when you own something, versus when you're paying, whether it's a house with a mortgage, renting, or a car with a lean on it. When it's yours, it's just a different mindset of living and a little bit of freedom there. And so, it's a psychological win and an emotional advantage to when you're not behind and under the bills.

If you're scared of when the bills are gonna come and you're scared to go check the mailbox, then you need to probably look at debt right now. Sorry, we're talking about accumulating debt and I jumped ahead a little bit. 

[00:15:00] Spencer: Well, I want to stay on this topic because like you said, it is an emotional issue and I think it gets to the fact that so much of money is psychological, right? The numbers are the numbers. It's just math. Math is easy, once you hit fifth or sixth grade, you have all the right math to figure what the optimal solution is. But at the end of the day, it doesn't matter what the optimal solution is, it’s what feels good, it's the psychological, it's the little marketing traps where they're like, ‘it's only $650 a month, you can afford that'. And maybe you can, but if you just had the car paid off, or paid cash for it, and then you invested $650 a month into the stock market for the next five years, you'd be so much better off than the loan they're trying to offer you. 

So, yeah, I think in the military some of the biggest offenders that I see are- I don't really see payday loans that much anymore, it might just be because of the career field that we're in, the people we interact with in in the air force, it might be other branches have more of those kinds of problems?

[00:16:00] Jamie: I mean, they're still there. If you go outside any big army base, they're still all outside the gates, they must be making money. 

[00:16:04] Spencer: But the thing that I do see is credit card debt, mostly, and I think a lot of that is young airmen or young officers and they just kind of lose track because they just swipe the card and swipe the card, then all of a sudden it's like, ‘oh the minimum payment's only $25', well I'll do that and then a month goes by, and another month goes by, and before you know it, it's $10,000. It seems like an insurmountable amount, right? Especially if you're already living paycheck to paycheck and you're not spending less than you earned. So, I think it's definitely a trap that a lot of service members fall into, and you don't have to be young either, you could be major like us, making six figures a year. Before you know it, a couple of credit cards, trying to make some minimum spends, and all of a sudden, maybe back yourself into a corner where you have to cut back for the next couple months to pay the card off. 

[00:16:50] Jamie: Yeah. I think a lot of the credit card issue comes up with, keeping up with the Jones' mentality of, ‘Hey, I'm new to the unit, everyone else has an AMX platinum, so I should get an AMX platinum' or whatever it is. Which there's hopefully a time where that'll be a great card for you, and you can check out the “militarymoneymanual.com” when the time comes. 

[00:17:06] Spencer: Google ‘Amex Platinum, military money manual', and you will find everything you need to know about the Amex Platinum card. 

[00:17:13] Jamie: What are some warning signs or signs that it's not quite right for you to get a- especially a premium- credit card? When should they probably put off the credit card game? What kind of stuff would you be looking at? 

[00:17:23] Spencer: I think the most important thing is, do you have a plan and budget? 

[00:17:29] Jamie: If you're behind or living paycheck to paycheck, probably not.

[00:17:29] Spencer: If you're not already contributing 5%-10% to your TSP, if you don't have savings accumulating where you're spending less than you earn and you have excess cash now, I think starting with a debit card is really where most people should start. Getting used to every time you swipe, the money leaves your account, and you have to be able to either keep track of it with a YNAB type app, mint, or whatever banking app that your bank provides. 

[00:17:56] Jamie: Or good old Excel spreadsheet too.

[00:17:57] Spencer: Yeah. So, I think the right place to start is with a debit card and do that for a few months. And if you're like, I can handle myself, I know what expenses are like- I think the other thing too, for the premium credit cards is if the minimum spend is let's say $6,000 over six months. If you don't naturally spend a thousand dollars in a month, you are a young airman and your food's covered, your rent's covered, you get a clothing allowance, and you'd like to go out on the weekends and have fun with your friends, and maybe you spend $500 a month, then don't go get an Amex Platinum card and have to make a thousand dollars a month spend. Your lifestyle will naturally inflate to the point where meeting a credit card minimum spend is easy. Which can be hard to hear if you're making $20,000-$30,000 a year as a young airman or young soldier, but that's just the facts. Your income will increase, your life expenses will increase to the point where getting a premium credit card and meeting the minimum spend is not a problem.

[00:18:57] Jamie: Yeah. It's just a temporary sacrifice to help you accelerate getting to your goals. Which hopefully includes having enough money saved to choose when you want to stop working and some of the other principles of financial independence or financial freedom and stuff like that. 

The last thing about debt is watch out for the other apps out there where you can get your paycheck two days early. You sometimes see them advertising on Hulu. I think there's, again, the marketing is very smart, whether it's with that or impulse buys, like target knows exactly what to put right by the register so that people will buy something that's marked up 300%. All of this is very intentional and very smart from a business standpoint. We, the customers are at the losing end of this. You're never going to beat a company like target or McDonald's at their marketing game. They're too big and too smart. And if you think you're winning against Amex or Chase, there's a very small percentage of people that do. You might not be in it, so just be careful with that. 

[00:19:48] Spencer: Yeah. I think the big thing to remember with that is I know when I first started my personal finance journey, I was trying to get away from living paycheck to paycheck. I treated every dollar as if it was mine and everybody else was clamoring together to get my dollars and I had to hold onto them as tight as I could. That mentality did not serve me later in life when my income increased. But I think initially it is a good blueprint, a good mindset to have where you have very scarce resources, and you need to be very intentional with how you spend them. So, buying that Bang or that Monster energy drink when you're at the shop, if you don't need it, don't get it.

I encourage if you want to be wealthy, if you want to get ahead, then sometimes you have to make sacrifices. Honestly, a lot of those sacrifices are probably going to end up being good for not only your wealth, but your health as well.

[00:20:38] Jamie: Correct. So again, this is all to help you with your goal. But if you think that the only way to go through life is to work until you are 65 or 70, you know, work forever. You do 30 years in the military and then go straight to a GS job for another 20 or 30 years, there's so much more to life than that. We hope, over the series of podcasts and on the website blogs and through the book that's coming out soon, to convince you that there is another alternative out there and you can control when to stop working and you can control where your money goes and things like that. So, don't just accept the way the culture says that you retire when you're 62 or whatever. There are other options. 

[00:21:14] Spencer: Well, I just learned for the first time, the other day that you could work for 30 years of your life and your social security payments are indexed to the poverty line. So, when you retire at 62, your social security payments might only be $15,000 a year. I thought there was some kind of like fixed minimum to it, but no. If you didn't contribute, then you miss out on a big chunk of social security there. Whereas if you make six figures for 30 years, when you retire your social security payments could be $4,000 a month. So, in the military, a lot of people rely on the government to take care of them. And you have to be looking out for yourself.

[00:21:53] Jamie: Yeah, if ‘Plan A' is social security and your VA disability check, you might want to start doing some more research on how to take control of your own right life and your finances. I could talk about this stuff all day, especially these couples. So, we talked about spending less you make, we talked about not accumulating debt, but what happens if someone is already in debt? That takes us to topic number three. 

[00:22:15] Spencer: Yep! So, pay down your high interest rate debt ASAP, as soon as possible. So, first of all, what is high interest rate debt? The ‘ Service Member's Civil Relief Act' or ‘SCRA' was a law that Congress passed that fixed any debt acquired before entering active duty at 6%. So, I use that as a benchmark. You'll see some people say 3%, 4%, 5%, anything that's over there. So, like the USA career start alone, I think for service academies is like 0.75%. That's extremely low debt. 

You could potentially get away with just paying that off over the five-year plan and not super prioritizing that and instead prioritizing investing, right? Because you're probably going to make a better return than 0.75%. But, if you have any debt over 6%, especially if you accumulated it before active duty, first of all, you need to talk to your lender about getting SCRA benefits applied to that debt so it can be reduced to 6%. So, now that we talked about what is high interest, let's say that you do have debt, whether it's student loans- I think mine was like I said, $60,000 and then the interest rate was about 4%. So, in my mind I wanted to be debt free. I wanted every dollar that I received for my paycheck. I wanted to decide what to do with it. For my wife and I it became a priority to pay down my student loan debt.

And there's really two ways that I've found to pay down any kind of debt. The Dave Ramsey method, which is known as the debt snowball, and essentially Dave is a pretty well-known financial guru. He's built a whole media empire around essentially getting people out of debt and helping people put their lives back together. 

[00:24:02] Jamie: And both of us have used at least a portion of his principles to get out of debt and build our wealth. 

[00:24:06] Spencer: The “Total Money Makeover” was one of the first personal finance books I read. It was also the first personal finance book I read where I said, ‘all this stuff is pretty easy, I could probably write my own book'. 

[00:24:17] Jamie: Especially then, because you just repeat the same thing.

[00:24:19] Spencer: Yeah, exactly. So, what the debt snowball is you take, let's say you have five debts, you basically just rank order them from smallest amount. So, one's a hundred dollars to the largest amount and say one's $1,000 or $10,000, and you just pay the $100 off first. And once that's done, you keep your payments the same and you just roll those payments into the next highest dollar amount debt.

And what you get is that psychological boost. Say I had a credit card that had a hundred dollars on it. Once you pay that off, either lock that account, close that account, don't accumulate more debt, and then move on to the next target. And Dave likes to talk about gazelle like intensity about repaying the debt, and you have to do it. And if you stay focused- I mean, you guys paid off what, $107,000 in four years.

[00:25:01] Jamie: Uh, I think it was closer to two years. I have a look back at that. I have my old budget spreadsheet. I think it was something like 27 months. It was very, very gazelle intense if you will. Yeah, full disclosure, we went full Dave Ramsey, snowball method. If you're looking at it from the opposite viewpoint of, ‘well, it doesn't make sense to organize him that way'. He says, don't think of it as a math problem, because if math could get you out, then you wouldn't be in debt already.

So, it's a behavior problem. And that's where like Spencer was saying the psychological benefit of paying off that debt and seeing ‘ oh, I can do this'. You pay off one loan, that's $700 on one credit card balance, and you start to get that mental victory of, I can make progress and start to pay off debt and then the momentum and the emotional and psychological benefits kick in. 

[00:25:45] Spencer: Yeah, what I noticed too was, as you get closer to the finish line, you get more intense. So, when we sold a house after our first duty station and we had $40,000 cash and it was so tempting to just throw it in the stock market, invest, max out our Roth IRAs, which I think we ended up doing that, but we also had $20,000 left of student loans. That was the obvious choice, right? We were like, let's be done. So, I wired them the money and they sent me the letter a couple days later saying you're done. It was one of the greatest feelings to just to be done with it. And then every single dollar that we got after that, we got to decide what to do with it. 

[00:26:21] Jamie: Yeah. It's a really nice benefit when you decide where your paycheck goes. At one point we had a car loan, and it was, I want to say $450 a month and knowing that that had to go out first and then everything else I could choose sucked. But then when we could choose ‘oh, now I have $450, and I can go through my goals'. So, I'm, I'm really biased towards the debt snowball. Full disclosure. I think there's a lot of goodness in there and it helps a lot of people that are so lost on what to do. Start here. Yeah. Get small victories and build that momentum going. 

[00:26:48] Spencer: Yeah. I'm a big fan of the debt snowball. I'm also a very analytical guy. So, I quickly did the math and realized that it makes financial sense to pay the highest interest rate debts off first. I didn't need the psychological victory, also a lot of my loans were about the same dollar amount, $10,000- $20,000 where it would be a long time until I got that psychological boost of paying. So, for myself, I use the debt avalanche method, and it's essentially the same principle as the debt snowball, except instead of rank ordering the debts from smallest amount to largest amount, you rank them from highest interest rate to lowest interest rate. And if you do the math, it's just mathematically optimal to- if you have a 30% loan- to make payments on that first because essentially, you're buying yourself a 30% return if you pay that off. Versus a 6% loan, you should prioritize the 30% loan.

The problem becomes the 30% loan is $10,000, and the other loan is a couple hundred dollars then it's tough to feel progress. 

But you can mix and match too. So, you know, as you create the budget plan, as you marshal your resources to attack this debt problem, you might realize ‘if I just switch fire here for a couple months, I can knock out this $700 credit card, close that account, or just freeze the account, then I can pivot back to my high interest rate debt'. And at the end of the day, you'll still end up debt free about the same point in time.

[00:28:15] Jamie: Yeah. And I think mathematically, in most cases, you'll come out ahead organizing by interest rate. But I think in most cases it will also be a very small difference. It's not gonna change your life, a couple hundred dollars, maybe a thousand dollars total in the difference of interest. So, one of the things that you talk about in the book is these are kind of the two options. Two of the main techniques pick one and do something. Which apparently is becoming my catch phrase, but yeah. Do something. Just get out of debt as soon as possible.

No matter which way you do, if you organize it- and you can bounce back and forth. Like I said, I'm biased yeah towards the debt snowball, but math is not going to get you out of debt because your behavior is what got you into debt. And that's one of the things that Dave Ramsey talks about a lot.

[00:28:55] Spencer: Well, great I think we really- unless you have anything else to add on to the debt stuff?

[00:29:00] Jamie: I'll stop because I could literally talk about this all day. This might be my very favorite series. We haven't even, we're only 30% done with it and I'm already in love. 

[00:29:09] Spencer: I think we could have an entire podcast just on different debt strategies, maybe walking through both of our stories on how we got out of debt, because I think that is really motivational to people to hear. If someone said you have a $107,000 of debt right now, you know, that would be soul crushing. To when you start realizing like, okay, that like this is gonna be hard to dig out of. But once you do it, I mean, once you say less than 30 months, right? 

[00:29:30] Jamie: Yes. So, we are 24 years old and out of debt.

[00:29:32] Spencer: Yeah. So, I think we'll definitely have to have a podcast to talk about that, but we're gonna wrap this one up and next time we're gonna talk about the next three of the nine principles.

So, today we talked about spend less than you earn, don't accumulate debt, pay down your high interest rate debt ASAP, and next time we're gonna talk about save a three-month emergency fund, maximize your tax advantage retirement accounts, and remember that savings rate beats investment return. So, until next time, do something! Whether it's the debt avalanche, debt snowball, but don't spend more than you earn, don't accumulate debt, and knock out that debt ASAP.

Make sure you check out “militarymoneymanual.com” and the “Military Money Manual, A Practical Guide to Financial Freedom”, a new book coming out August 2021. And you can find more details on Amazon or “militarymoneymanual.com/book“.