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Invictus, Miracle, and Tony Robbins?

July 19, 2010

Invictus

Recently I watched the movie “Invictus” about South African’s championship in the 1995 Rugby World Cup with the backdrop of a very tense racial period in South Africa. Nelson Mandela, played by Morgan Freeman, was elected the first black president since the end of Apartheid. Francois Pienaar, Matt Damon, was the captain of the almost all-white South African rugby team.

Mandela’s support of Pienaar’s team helped to reconcile a country as team won the championship, beating the heavily favored New Zealand team for the title. In some ways this movie was similar to the movie “Miracle,” about the 1980 U.S. hockey team made of amateurs who shocked the world by winning the Olympic gold after upsetting the favorites, the Soviet Union, in the semi-finals.

Miracle on Ice

What do these two sports movies have to do with your personal finances? I hope you can learn two concepts from these movies about how to defeat your debt. First, both teams had an intense focus on how to win the championship. After you have perfected your monthly budget, I hope you have the same focus on paying off your debt. It can make life difficult for a while as you refrain from purchases you once made, but if you maintain intense focus, you will succeed in the end.

Second, both teams achieved success through momentum.  Self-help expert Anthony Robbins says, “The most important thing you can do to achieve your goals is to make sure that as soon as you set them, you immediately begin to create momentum.”

Third, the teams did not lose site of their goals.  “The most important rules that I ever adopted to help me in achieving my goals were those I learned from a very successful man who taught me to first write down the goal, and then to never leave the site of setting a goal without first taking some form of positive action toward its attainment,” Robbins says. 

If you want to get out of the debt, today is the day you write down that goal and start to create positive momentum. One of the best ways I’ve seen to build momentum toward paying off debt is known as the debt snowball. Personal finance expert Dave Ramsey has made this method very popular.

First, write down all of your debts from the smallest amount to the largest amount.  Note, you do this by amount, not by interest rate. Every month, you pay the minimum on all your debts, except the one with the smallest amount, and you put all your extra money into paying off that debt. When that debt has been paid, cut up the credit card or stop using that line of credit, and use the money you were using to pay off that debt to the next smallest amount. After a few months, you will see some of your debts disappear and you will have momentum to attack your largest debts.

One common objection to this method is that mathematically it does not make sense. If you went straight by the numbers you would want to pay off the debt with the highest rate first. This is correct, but if you were a mathematical expert you probably would not have credit card purchases that you could not pay in full every month in the first place.

Personal finance is first about the psychology behind savings, spending, and earning, and then about how the numbers work. When you can see debts disappear, it gives you confidence you are on the right path to keep going. If you are making payments, but do not see debts disappear, sometimes it can get frustrating and it is easy to fall back in to old habits.

 The only thing stopping you from becoming debt free is you. Make the decision and the commitment to get rid of your debts today. Get excited about it. Think about how much better life will be without those monthly bills hanging over your head. Start building momentum.

You may ask yourself whether all debts should be put in this debt snowball? We will tackle this question and discuss good debt versus bad debt in a couple of weeks.

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