By Douglas Goldstein, CFP®, co-author with Susan Polgar of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing
You can absolutely get of debt. However, you need to use the right strategies and tactics in order to crush that debt. Based on research from the world’s greatest strategists… chess grandmasters… you can get yourself on the right track fast. Here’s how to do it:
When chess players battle it out on the chessboard, one of them often seems to be in an precarious situation, on the verge of losing a valuable piece, if not the game.
Yet, even though they may be treading on thin ice, about to lose the shirt off their back (or at the very least the game), they often choose to adopt standard tactics to help them turn the game around and come out ahead.
So too, when it feels as if you are drowning in debt, follow these two tried-and-true steps to turn debt on its head and become financially successful.
Steps to Get out of Debt
Step one: realize that managing money requires strategy, not just good luck
When running your finances, you need both a goal (like a well-funded retirement) and an effective strategy to achieve it (i.e., save 10% of salary every month in a mutual fund). But how do you make the transition from setting a financial goal to actually achieving it?
On the financial level, you may be working hard and trying to save but you can’t get ahead because of your debts. Even seemingly ‘good debt’ like student loans or a mortgage can be difficult to repay when faced with a limited salary. (And don’t get fooled by the phrase ‘good debt.’ Ask anyone in debt–no one ever smiles about how good it is.)
Recognize that a limited salary is not the only hindrance towards getting out of debt. Often people in debt have many self-imposed obstacles (lack of motivation, limited perseverance, or no true desire to change) that have nothing to do with the bank.
Imagine that you’re playing chess. If your pieces are trapped behind each other, you yourself are guilty of holding your position back. However, if you carefully move your pieces out of the way, then you allow all of your chessmen the freedom to maneuver, work together, and win. If you find yourself emotionally unable to change your bad money habits, then no matter how hard you try, you’ll never fix your debt problem. Try this exercise: Look at one, relatively minor financial mistake that you know you’re making, like buying expensive coffee, not brown-bagging your lunch, or even spending too much on your cell phone plan. It’s easy to alleviate these mistakes. Fix them over a period of 21 days and you’ll realize that you can, in fact, fix your financial situation. Building financial self-confidence starts one step at a time. In just three weeks, you’ll begin to change your outlook, and that will get you rolling so that you can crash through all of the emotional obstacles that have been stopping you from changing your bad money habits.
The first step to getting out of debt is understanding how you got into it in the first place, and then realigning your money habits.
Step two: Slow and steady
Like the pawn slowly plodding one square at a time across the chessboard in an effort to transform himself into a ‘better’ chess piece, you need to navigate the minefield of debt reduction one at a time.
Start with the smaller ones first. Focus on one debt, rather than making miniscule payments on many debts at once. This way, you can see debts end, and the light at the end of the tunnel gets closer.
The first debt you should attack is credit card debt
Even if your credit card debit is small, pay it off first. High interest rates make credit card debt grow exponentially. While paying off credit card debt, change your spending habits and use cash or perhaps a debit card. This way, you can only buy things if you can afford them now. And when you pay in cash, there are no interest payments to make your expenses even higher.
Paying off debts is the first step towards financial freedom. While it may seem as if all is lost, there is always the chance to turn your fiscal situation around. You can use chess metaphors and strategies to turn your financial board around, just like a chess grandmaster will surprise her opponent and turn around a seemingly lost game.
Step beyond your self-imposed limitations and become a grandmaster of investments.
Douglas Goldstein is both a Certified Financial Planner™ professional and an avid chess player. He and World Chess Champion, Grandmaster Susan Polgar are co-authors of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing. Available for sale online as well as at www.richasaking.com.