How to Start Paying off Debt / Wealth Labs Podcast with Garrett Gunderson

look there's so many people trying to pay off loans but they're going about it in the wrong way as a matter of fact as society we've kind of defined loans as debt debt meaning anytime we owe someone anything we call it debt but the reality is debt is not meaning that we have a loan debt is a function of owing more in loans than we have in assets you can actually have a loan and not be in debt I'm gonna say it again you can actually have a loan and not be in debt well we have to understand is which loans are efficient and which loans are inefficient and there's a way that you could shave off a lot of time it takes to pay off these loans if that's your objective by understanding one pooling strategy called the cash flow index let's put more money in your pocket increase your financial IQ and create more peace of mind clarity and certainty in your life welcome to money matters a weekly segment of the wealth lapse podcast where we tackle the money topics the matter how would help you be mystified money make things so much more simple and have something you could practically put on the ground so that right now you could immediately improve your financial life and have a lot more peace of mind so I've got Tim I think I hurt myself card and we say this because Tim has hurt his back so bad before that he had to crawl on his hands and knees couldn't make it so he just decided to stay in that spot of his house for about twelve hours laying flat on his stomach that's why it's Tim I think I hurt myself garden one of the brightest money mines that I know out there and my co-host for this segment of women play money matters as we go through the cash flow index so let's talk about this cash flow index and how it works okay so the cash flow index is really at the heart of it it's way that we can analyze each debt from a cash flow perspective which is exactly the way the banks and lending institutions analyze loans right they teach us to focus on an interest rate so that they can focus on cash flow we need to focus on cash flow right so if you only focus on the interest rate that may be a fool's errand that might not be the fastest and best way to get rid of these loans so if you have more than one loan what you want to do is write down these loans individually what's the loan balance and then you want to divide it by the minimum monthly payment now what you're currently paying with the minimum monthly payment with each loan individually so loan balance divided by minimum monthly payment that's going to spit out your cash flow under now if that index is less than 50 I call out the cash hog yep you have a cash hog on your hands it means a high payment in relationship to a relatively low balance great situation for the bank and financial institution because they're getting a lot of cash flow without a lot of their capital at risk right but if it's above 100 that's a more efficient loan meaning okay you have a decent amount of money that you borrowed with a relatively small payment in relationship to that now somewhere between 50 and 100 I'd call that the danger zone or the you know maybe where we look at is is there a structure that you go through to improve your cash flow index but let's just go through this and why it's so simple and the methodology of how to use it yeah I mean the simplicity of it is just that simple formula that you gave them it's so easy to quickly identify which loans or cash efficient for us and which loans are cash efficient for the bank once we identify that now we have complete control over those payments a we can I prioritize which ones to pay off prioritize the payments we're gonna make we'll see I see what I call it the flock shoot of debt repayment right where people say well I've got all these loans and I'm gonna pay an extra this much to each loan and they feel like they're making a lot of progress my cousin is shotgun approach yep right just like you're shooting all of it goes there is like okay whichever loan was due earliest that's what you okay I paid extra cuz that extra money then the next one you pay extra too it's a slower more risky process like what we're really teaching in women play is economic independence economic independence is creating enough recurring revenue which is known as cash flow to cover life's basic expenses so sometimes it's hard to create that cash flow and some of the easier things to do would be to lower the expenses but not through budgeting and cutting back and elimination simply through efficiency through what you could do with the cash flow index to eliminate an expense not because you cut back and enjoy life less but because you deliberately and intentionally attacked it in a way that helps you to lower that bar right when it comes to standards we want to raise the bar when it comes to economic independence we want to lower the bar so it's easier to get over or to jump over I don't I don't jump very high so that kind of helps yeah right perfect alright so so let's say you got five loans uh-huh and one of those loans is a 30 the other loans are in the 50s 60s or over a hundred so tell them what to do so you're gonna focus all of your efforts towards loan repayment towards that cash flow in excess of 30 now the other thing about a2 is depending on the balance or the size of that loan it depends back into control of the money so if it's a hundred thousand dollars at i/o and I can only afford to put a thousand bucks a month extra towards that loan it's gonna take me quite a few years to pay that off so I don't know if I want to make that thousand our month payment to them every single month right I'd rather put the thousand dollars a month in my own account earn money on that use it for growth and then let that grow till I have a big enough balance to pay the bank off just be careful you're not gonna go put that in a stock market or mutual funds or some speculative investment like cryptocurrency we want something that's stable we want something that's fairly liquid meaning it's available to you you could access that and then it's not gonna be volatile that because of the economy all the sudden you're like oh I thought I was doing better but now I'm not and it's gonna take me longer to pay off this loan so you want to just continue to be a listener to figure this out as we continue to unveil different opportunities but we want to begin with the cash flow index you only pay extra to the one with the lowest but if you find out that that's still gonna be years before you pay it off you want to set up a separate account and start funding that account first because you want to build up enough in there to be able to write a check to pay this off in one fell swoop well you still have access to cash liquidity and a chance to earn interest so we'll have other podcasts on how you can lower your interest rates or how you can restructure your loans or how you might be able to reallocate if you have inefficient or underperforming assets but right now we just want to focus on the cash flow index and look you might even find that if you have a lot of loans and you're filling what most people would call deeply in debt then that can be in hindrance for your health for your sleep and for productive thinking so I even have a strategy around that because we want to help you abolish scarcity it's the greatest restorative wealth and one of the ways you can do it is what I would call the 90-day debt delay where you find your cash flow indexes and if you have one that's a really low cash flow index rather than immediately putting money towards that low-cal products for the next 90 days where could you invest your money as a business owner to increase productivity and profitability as an employee your increase your skill set or increase your ability that would allow you to get a raise and maybe even learn what to ask and what to do in those interviews in order to increase that income so that you're investing back into yourself so you become more productive and then after that 90 days now you can regroup with an increased income to start attacking those loans it reminds me of when I was flying out of Newark so I was flying out of Newark in the pilot gotting said we're number 27 for takeoff I was like we're gonna be here for a long time then they opened another runway there was actually going east and I was trying to go back to Salt Lake City but when they got in the air they just turned around so we actually went in the wrong direction for 10 minutes and then we turned around and start ahead in the right direction but it was better than sitting on the ground waiting forever so the 98 look that delay could fill that way you're like well I'm not actually paying down my debt right now are not paying down my loans to be more accurate well the reality is yeah but you're now increasing your production you're becoming more abundant you're being able to create more value you're increasing your income which can make a massive difference over time rather than falling prey and victim to being in scarcity and only scrimping sacrificing saving delaying deferring paying this down and not having any ability to think more productively absolutely and I love the cash flow index because it gives us an opportunity to discover what our best opportunity is for our cash right right we can look at that cash flow index and say well how much cash flow am i freeing up if I go after all my loans but if instead I use that money as you just described to grow will outgrow the money that would have been saved by paying off those loans right you're gonna hear a lot from us invest in yourself first always right so you're doing that now and in the future you're gonna hear say you want to build up plenty of safety and liquidity because it's not just so that you can handle turmoil or turbulent times but it's so that you have cash for the opportunities that come your way there's gonna be opportunities whether that's to buy a business whether that's to make the right investment whether that's to you know grow your money not because of hey everyone's doing it but because something within your expertise something within your wheelhouse something within your knowledge we're all in store for dozens of opera - knees over our lifetime most people just don't have the cash to capitalize on it and the best time to be able to capitalize on it is when no one else has access to cash because it's all tied up in the equity of their home it's all tied up in paying down one loan that didn't lower a payment so we're trying to help you get more control over your money have the proper methodology have a lot more efficient method and use and determine with this cash flow index now what I've seen happen sometimes is sometimes the one with the lowest cash flow index is a zero percent interest rate loan either a credit card or a car loan and so people will kind of battle with me or say well that doesn't make sense I would pay off the zero percent interest rate when I have a twelve percent credit card over here absolutely and the only time it would make sense as if those balances are similar right or the cash flow index on them are similar and I can understand like okay well one's a few ways away and the other ones are 20 - alright fine go after the one with the interest rate but when there's a big difference you're gonna get so much cash freed up for so little capital invested that you can now go attack that next loan with more vigor with more cash absolutely and you've lowered your risk because you no longer have that payment and we're looking at everything from debt to income that income is for every dollar you earn what percentage of that dollar has to go towards your loans right and the higher that amount the harder it is to get access to borrowing or maybe even better interest rates because you can't go borrow the money because you've used too much of your debt to income so if we can lower the bar from economic independence because we pay something off and then attack the next loan with even more cash that has been freed up and plus if we lowered it up to income you might have access to better loans and maybe paying off some of these loans actually improves your credit score and improved credit score might lead to getting better interest rates we're looking at a much bigger picture here not just isolated in one single vacuum absolutely and that's what happens a lot of times with the loan thing right it's just get out of debt get out of debt get out of debt at all cost any and all cost and so they just attack those loans with full vigour they they jeopardize their safety and security they jeopardize their growth and production and all those things the cash flow index allows you to get back into control and say no this is the best way for me to handle it I'm only handling this one I'm gonna do a debt delay we have all these options that allow that growth and abundance which will far far outgrow the benefits of just total loan on so loan balance divided by minimum monthly payment find your lowest cash flow index after you find your lowest cash flow index look how long is it gonna take to pay that off if it's within 12 months you might just put money directly towards that to pay that down if it's gonna be years and it's gonna take longer you might want to set up a separate account and start saving your money will be able to reference different opportunities and options as we go through a tool called cash flow banking and there's strategy that way where you could store your money and get maybe four or five percent in a tax advantaged way rather than sitting at one maybe two percent in a taxable way and most savings or money market accounts and even get two percent you got to put in a decent amount of money or I've access to the right types of banks for that so we're looking at what are the most efficient ways you might delay paying any loans for 90 days invest back in yourself then skill set it back in your business if you own a business or even creating a side hustle where you can start using those dollars to invest in building out the processes procedures or the types of things that allow you to earn that extra income and then when your income goes up then reallocating towards attacking your loan and paying it down or reallocating towards putting more money into that savings account or that investment account that's more safe and stable then when that grows to a certain amount you can pay these loans off so look at those cash flow indexes understand where you're at and even if it's a lower interest rate you might attack something with the lower cash flow index because it's gonna free up that cash flow faster to attack the next loan you might improve your credit score which means there's gonna be more opportunity we're looking at the big picture and I'll kind of end with this I was in Minneapolis I remember this because I just left Cancun where it was 82 degrees we're talking Fahrenheit then I flew into Minneapolis where before windchill it was negative 22 degrees the only conversations we had there were about the weather every time I saw someone they were typically calling someone to come start their car I met people that this they did this for a living because it was so cold you had to have special tools just to get the car to turn over and my beard was frozen when I walked outside because I had some like oil in it to kind of shape it I was like wow this is insane and then now I'm speaking to 400 people and before I even really said anything this woman's raising your hand which made me think maybe my fly was down what going on I wasn't sure but she was pretty emphatic about it and so I was like okay I finally called on her and she's like I'm a CPA and we joined working with your team you know thirteen and a half months ago and your team said we'd be able to pay off our loans with 1/3 less time and that's not the case now I started to consider when she said this maybe I need to go outside even though it's negative 22 that's where I really remember the weather she says in reality we only have eighteen and a half months left now what did they do they looked at the cash flow index they found out which loans to attack one at a time they then used other funds that were underperforming to pay off higher and straight loans which created a guaranteed return and improve their cash flow they refinance some of their loans and consolidated them at a lower interest rate which then allowed a better situation that way right so with all of this it shaved off a lot more than we originally anticipated and then they took that extra money to pay down these loans that was going towards the other loans that now were refinanced they were now paid off and so there's kind of a trickle effect so I just want to share that story there's a lot of possibility but the cash flow index is where it begins now what you're paying with your cash flow index that's one side of the story but what does it look like for the bank that's the investment index we'll cover that on another episode [Music] [Music]

Channel: Garrett Gunderson

Views: 21,071

Keywords: How to Start Paying off Debt / Wealth Labs Podcast with Garrett Gunderson, How to Start Paying off Debt, Wealth Labs Podcast with Garrett Gunderson, Garrett Gunderson, Wealth Factory, Wealth Building Strategies for Entrepreneurs, Financial Freedom, Financial Independence, Getting to economic Independence, what would the Rockefellers do, business, success, entrepreneurship, Robert Kiyosaki, Matt Clark, Ryan Daniel Moran, Tim Ferriss, Grant Cardone

Id: qPDtQIrYu3g

Length: 14min 54sec (894 seconds)

Published: Wed Jan 01 2020