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Debt Strategies and the Story of Kenya

Updated: Jun 21, 2019




Either you have debt, or you don’t. If you’re fortunate enough to live life without debt, you should be heavily accumulating assets. You might be young and haven’t fallen into the trap of debt yet. Debt is only good when you’re able to leverage something with it. Possibly you’re older and have successfully become debt free through hard work, goals, budgeting, and sacrifice. I commend you.


I’m primarily talking to the majority of Americans who do have debt. First I want you to know that no matter what, you can get your head above water if you want it badly enough.

If we’re out of shape, how do we get fit? Discipline, consistency, replacing bad habits with good ones, and having a plan. In the beginning, it may be painful and over time it gets easier and you get better and better. One day, you see results in the mirror and that motivates you to do even more.


Everything we accomplish in life begins with having a vision, paired with the belief that we can achieve the object or circumstances of our desire. The story for winning in your financial life is the exact same story for physical fitness and the approach is the same, as well.

Debt can be a crippling burden, or it can be used as a great motivator toward fully owning your freedom. Every day we can make decisions regarding how we want to handle our debt. It is very important to understand the numbers, as well as implement a real debt strategy that you can stick with.


Before we discuss strategies, I’ll share a quick hack to optimize your weekly cash flow. Let’s assume $2000 goes in your bank account on the 1st and the 15th of every month. I know I can’t be the only one that ever experienced too much month at the end of the money. Can you relate? Have you been there? Here’s what I did.


Step 1: Make a list of all your fixed monthly expenses. Fixed expenses are the things you have to pay, no matter what. Mortgage, car payment, utilities, internet, cell phone, insurance, groceries, etc. Next, factor in discretionary expenses such as: entertainment, travel, clothing, miscellaneous, etc. You will arrive at a number. This is a very rough draft of creating your budget. Congratulations, you’ve taken a huge step toward financial freedom that millions of people avoid every day.


Step 2: Make a list of what day of the month each fixed expense needs to be paid. This part is critical. After that, pull out your calendar and organize the expenses according to what is going out per calendar week. For example, you may have your car payment due on the 8th and your electric bill due on the 10th, and your cell bill due on the 12th. Figure out how much is going out every single week of the month and record those 4 figures.


Oftentimes, people make enough in a month to pay all their bills, but are constantly behind, or check to check, because they have not taken inventory like this to restructure their expenses in their own favor. It is very common to have a high number of expenses during the last week of the month while we are waiting for a check to roll in so we can pay bills and buy groceries. Here’s where the fun begins.


Note: You will need to devote time to this and you’ll probably want to do this late at night, early morning, or on a day off from work.



Step 3: Call your creditors and bills and modify your due dates to create a balanced schedule of outgoing payments for every week of the month.

Here’s an example of how the average persons finances look. Based on this scenario you would call and say this:


“I’m doing some financial planning and it’s very important to me that you get your money every month. Currently my billing date is on the 25th and it will work much better for my financial plan if you can change my billing date to the second week of each month, somewhere between the 8th and the 14th. This will ensure timely payment every single month and I know that’s very important to you.”


Your expenses will probably look something like this:

Week 1 : $960

Week 2: $320

Week 3: $555

Week 4: $1750

Total: $3585

Earnings: $4000



Since you now have an itemized list of what’s going out every week, make the necessary calls to structure your payments so the same amount of money is being paid out every week.


After doing this your monthly expenses will look something like this:

Week 1: $896

Week 2: $875

Week 3: $900

Week 4: $914

Total: $3585

Earnings: $4000



This is the real magic. See how you now have more breathing room every week and much more disposable cash in week 2 and week 3 every month! Week 4, followed by week 1 was putting too much of a strain on your paycheck. You always made enough money, you just needed to take the time and do some personal accounting to make the numbers finally work for you.


Streamline your payments like this to position yourself for long term success with your personal finances. Over time, you will need to revisit and rebalance this portion of your financial plan to realign new expenditures, as well as accounting for former obligations that no longer exist. We will discuss savings at a later time, but always always pay yourself first even if you need to begin with $5 a week.




2 Strategies


When it comes to your personal financial plan, you certainly don’t need a financial advisor. All you need is to know the components of a solid plan for your goals, and commit to the strategies to get there. Debt repayment is an integral piece of your financial plan because everything you owe on decreases your net worth, current purchasing power and ability to save or invest, as well as creates drag to your overall bottom line for your personal balance sheet. The faster we can pay off debt, without accruing new additional debt, the closer we are to financial independence.


The first strategy we will discuss is commonly referred to as debt stacking. For both illustrations we will assume we are dealing mostly with credit card debt because this debt is toxic and counterproductive to your wealth building strategy.


Debt stacking is appealing for the person that truly values the bottom line and wants to pay the lowest amount in interest over time on their debts. For this method, order your accounts from highest percentage rate to the lowest. Based on your interest rates, you’ll want to consistently pay the minimum balance on all your debts, except for your target account which consists of the balance you will pay off first.


When you pay off the target account, you’ll reallocate the same money you were paying to the next target account. Continue to do this for the next debt and the next until everything is paid off. This only works if you make the decision not to accumulate any more debt. The bottom line is that you’re freeing up more and more cash to pay off each debt because you’re using the same overall monthly payment to pay your debts as you go from target account to target account. Over time, it really starts to compound and work in your favor.


Debt Stacking may look like this:

Credit card #1: $4000 22% APR

Credit Card #2: $8300 18% APR

Credit Card #3: $3750 10% APR

Bank Loan: $2900 6% APR


Pay these accounts in order from highest APR to lowest. When you pay off credit card #1, apply the same payment to credit card #2, in addition to the minimum payment that you were already paying toward credit card #2. Repeat this process until you’re debt free.



The second strategy is known as Debt Snowballing and simply involves paying off the smallest balances first. Similar to the first method, you will pay the minimum payments on all your other debts, until the account with the lowest balance is paid off. Reallocate the money from the paid-off account to the account with the next lowest balance, and so on.


This won’t ensure you’ll pay the least amount of interest over time, but a major draw to this method is you’ll be able to cross off debts sooner. Getting those wins helps you to stay motivated, continue with your plan, AND stay out of debt. Neither strategy is better or worse than the other. It boils down to what style works better for you. Would you rather pay less overall, or feel the victory of zeroing out an account?


Debt Snowballing may look like this:

Bank Loan: $2900 6% APR

Credit Card #3: $3750 10% APR

Credit card #1: $4000 22% APR

Credit Card #2: $8300 18% APR


You will quickly pay off the bank loan of $2900, and it won’t take long to eliminate credit card #3. As you can see, the smaller ones will go quickly, leaving the larger balances with the higher APR’s left. Commit to one and stick to it. What is your current debt repayment plan?

I want to end this section helping you understand that not all debt is toxic. There is good debt and bad debt. Credit cards and payday loans are very bad debt that can financially hold you hostage your entire life if you don’t create a serious plan and a written, rules-based strategy for managing your personal finances.


Let’s take a look at this scenario. Kenya pays $1200 a month toward the mortgage on an investment property. The property has a storefront with 2 residential units above. She earns $2000 a month in rent from the shopkeeper, and $850 a month from each of the tenants that live above the store. As a landlord, Kenya collects $3700 a month from the three tenants and pays $1200 to the bank. Kenya keeps $2500 a month as passive income and uses the bank’s money as leverage. She earns $30,000 a year as a landlord and is well on her way to owning a second investment property.


This is considered good debt because all Kenya needed to do was have the proper credit score and pay a down payment to the bank to buy the property. She uses the money from the bank to make more money than she owes every month for her investment.


For her high school graduation, Kenya’s uncle bought her 50 shares of Amazon stock in the year 2000. It cost him a little over $2000 at the time. He died in 2001, and she never sold her stock because she felt a sentimental attachment connecting to her uncle.


In 2018, Amazon shares went over $2000 per share. After holding for 18 years, she knew her uncle would want her to benefit from his investment in her future so she decided to finally sell and make a new investment into real estate. Her Amazon stock holdings were worth $100,000 by the time she decided to buy her investment property, allowing her to make a nice down payment and keep her mortgage payment low. This is the type of debt that we want to create. This is the path to financial freedom.


Now you know of two clear strategies to pay off your debt, Debt Stacking and Debt Snowballing. Find one that works best for you and include that in your written, personal financial plan. Make the decision you will not accumulate any further debt.


You learned that not all debt is bad debt. Hopefully Kenya’s story made you think about a few things and ask yourself some deep questions. What would be the value of a promising, high growth company in 20 years if you bought stock for one of your younger family members? How can you position yourself to own your own property, or more property? Did you consider how Kenya used the gains from one investment to move into another investment?


In life, it’s not about having all the flashy things money can buy just because you can pay for it. When you choose to win at life, it’s about consistency and commitment. Make a decision that you will become financially free and you will do whatever it takes, as long as it takes. She definitely could have paid for a nice car with $100,000, or taken several extravagant trips. Since she is financially educated, disciplined, and determined to become financially free, her investments pay her what some people make in a year, allowing her money to work for her. A similar story exists for you, all you have to do is go out and make it happen.


Invest in yourself.



by John Hall







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