First Quadrant- Debtor

Whether you’re in college borrowing student loans, or you’re in the workforce with a ton of credit cards, you will be regarded as a debtor to all bankers. Why do some people fall in a hole of debt, while others manage to rise above it all? Sometimes you can’t really stop it. You were born into a lower income family and you’ve had to pay your way through life. I call these debtors the diamonds in the rough. These types of people have the ability to transform their debt to knowledge later on in their lives. They know the true value of a dollar and they usually try their best not to blow their money on random things.

On the other hand, you have this type of debtor that ends up blowing even more money on stupid things because they don’t know any different. They will spend all their money on a depreciating asset¹ and then use their credit cards and loans to make it “pimped out”. “Pimped out”is just another word for stupid spending. Usually, these types of people are very generous to their friends at a young age. They usually pay for drinks at the bar, fast-food for friends after the bar, and have massive parties at their place when the bar is closed. I call these types of people the live-in-the-now debtors. They don’t think of the long term liability they are getting themselves into. I worry a lot about the live-in-the-now debtors. Unfortunately, they are usually the ones that file for bankruptcy before their 26^th birthday.

Similarities between most debtors

• Look at their minimum payment as their actual payment.
• Spend 15-20% more than what they make.
• Eat out more than they eat in.
• Present thinkers instead of long term thinkers
• Postpone paying off their credit cards and keep more cash on hand.
• Have trouble sleeping at night because they worry about paying credit card bills
• They have addictive personalities i.e. drinking, gambling, and so on

Solution

The first step to reach the Check Casher quadrant is regulating your spending habits. Stop using credit cards to pay for things. Go on a cash only budget. If you need help if your budget, please take a look at this post. When you’re on a cash only budget, once you run out of money, you run out of money! You can’t rely on credit cards to bail you out this time. A cash only budget teaches self-discipline and can cure your debtor type of personality. Your big bills need to be paid before you start paying for the small stuff. Your rent or mortgage, food and necessary bills come first! Here’s a rough budget for reference purposes.

Slowly pay for your credit cards till they reach $0 balance. This might take three months or even three years depending on your debt level. After you reach the $0 balance, you can jump to the Super-Savers quadrant. Give yourself a high five! Now you have to learn how to become an Intelligent Investor.

*eFIPO’s Rule* When you’re a debtor, do not buy any thing you don’t absolutely need!

¹ Cars, TV’s, stereo systems