Now At Last: Dealing With Debt

By Richard Reis

Hello dear,

*sigh*… Today’s topic is tough.

However, after 3 cups of coffee, many notes, and looping Jason Derulo’s Watcha Say countless times; I think I’m ready.

So let’s get going.


I won’t give you a history of debt since David Graeber already did so in his ginormous, 560-page book Debt: The First 5,000 Years”.

Great book. Now, I don’t agree with everything Graeber says. But some parts were fascinating. For example:

“The first recorded word for ‘freedom’ in any known human language is the Sumerian word ‘ama-gi’, which literally means ‘return to mother’ — since this is what debt-free people were allowed to do.” — David Graeber

My first thought after reading that was “Holy smokes the first word for ‘freedom’ means ‘debt-free’! Man, we’ve been dealing with this crap for a while!”

Some people might argue that consumer debt is good because it’s “the lifeblood of our economy”.

Others will debate that society would thrive more if everyone became frugal.

What’s my opinion? It’s hard to be 100% certain when even economists don’t agree.

But I’d say sure, debt is good for the economy (businesses make more money when you buy their products, whether or not you can afford them).

But debt is not good for you, the indebted individual.

“If you have debt, you’re not a free person. You’re explicitly owned by your debt and implicitly owned by the creditor.” — Jacob Lund Fisker
Note: Before going further, I’d like to add that this letter isn’t about people who can’t pay back their debts (like the unavoidable medical debts John Oliver talks about in this video).
I’m also not referring to someone who gets a loan to start a business (despite Mark Cuban being very vocal about that, and I agree with him).
I’m referring to the person who doesn’t save money, borrows it, and uses it to get consumables like a car, furniture, or electronics. Not only that, they’ll still go out to restaurants, buy a dog, and/or drive a car worth more than $5,000. You know who you are. This is for you.

The best way to deal with debt is to travel back in time and avoid it.

Short of doing that, this letter might be your second best option.

Step 1: See Your Debt As An Emergency

Most financial advisers will tell you to “budget” and divide your paycheck into categories like “debt payment” right next to “miscellaneous spending” and “save 5%”.

However, if you’ve read my other letters you know I don’t get my information from “most advisers”. No, I go straight to the top of the crop and humbly ask them to teach me their wise ways.

You know what they say?

“Your Debt is not something you ‘work on’. It is a HUGE, FLAMING EMERGENCY!!!” — Mr. Money Mustache

Why’s that? Because of a small thing called interest. It’s so tricky, you’ll find some people saying things like “I don’t have to worry so much about my debt, the interest is just x%”.

That’s the problem right there! Interest isn’t a “small thing”. It’s more like a termite. Sure, it looks small. But, give it enough time and soon your favorite wooden table is gone.

Step 2: Don’t Learn “How To Manage Debt”, Kill It

Somehow “financial success” is determined by how well you can manage debt. Do it well enough and you’ll earn the gratifying badge of “high credit”.

The problem is that learning to become a “debt-navigating ninja” is not a skill worth spending time on.

Why? Because that’s the equivalent of building a bigger and bigger house of cards.

I know, it looks impressive. But, all it takes is a well-exhaled puff of air for it all to come tumbling down.

For your average “debt-navigating ninja”, that puff would be your run-of-the-mill turnaround in the economy (which happens every decade or so, like the 1999 dotcom bubble collapse, or the 2008 housing bubble), followed by a job loss. Suddenly, the house of cards comes tumbling down.

Don’t waste time and energy learning how to build a house of cards. There’s an infinite number of more useful skills. Just pay off your debt.

Step 3: How To Pay Off Debt

Coincidentally, someone sent me this Harvard Study a few days ago. It says the best way to pay off debt is by starting with the smallest amount first (I believe Dave Ramsey made that method popular by calling it the “Debt Snowball Plan”).

Mmmm watcha say?

I don’t think their method is wrong, I’m sure it works. The “ok” method you stick with is better than the “great” method you don’t.

However, keep in mind those people say it’s the best “psychological option”. By starting small you’ll pay more and more as you go. It makes sense.

The problem is, in the meantime, you’re paying the high-interest fees!

Whad’ya know. The best psychological option isn’t the best logical option. (*this statement caused quite the controversy in the comment section. Arguing over the best method for paying debt is like arguing over the best diet. Just do something! Which is why I’ll link to an intelligent reader, Shauna Gordon’s reply here.).

If you asked the Navy SEALs of the personal finance world, the top early retirement bloggers, they’d tell you to do two things:

1. Cut spending DRASTICALLY.

Luckily, two weeks from now I’ll start writing about ways to do this.

In the meantime, know that while you’re in debt is not the time to “enjoy life” by traveling or going out with friends. You’re on fire, and interest will add more fuel to it every month!

Your best bet is find roommates, don’t go out, ride a bike to work, and live off of ramen noodles. Until you’re debt-free.

The less you’ll spend the less you’ll need and the less you’ll need the less you’ll spend.

Need inspiration? I’ve got your back. Here’s a video on how Joe Mihalic paid off his $91k Harvard debt in ten months.

2. Pay high interest debt first.

Ok, you’re saving 60% of your income and ready to throw it at your debt. Where do you start?

Of course, you make the minimum payment on each debt to avoid penalties.

Then what?

I know, Dave Ramsey and those Harvard people would say “snowball your debt”.

Suppose others told you you could lose weight by doing 10 pushups a day; sure, you’d lose some weight over a looooong period of time. But it’s nothing compared to how fit you’d be if you embraced powerful deadlifts and heavy kettlebell swings.

Remember, if you want to achieve the fastest results, start with the high interest debt first.


What About Borrowing Money?

If you borrow money for a good purpose (like consolidating credit cards so you can never use them again), go for it.

But don’t even think about borrowing for a wedding or vacations! Regardless of the rate.

What about windfalls?

We all have a lucky break or two in our lives (could be things like a raise/ bonus at work, some inheritance, or a ferrari rear-ending your car).

What do you do with the extra dough? Buy a shiny Celestron 127EQ Telescope so you can gaze at the stars in wonder?

NO! Every extra penny you earn goes towards paying your debt first.

Once you’re done, you could spend it. But a wiser option would be to add it to your investments so you can retire early and increase your net worth.

And, that’s it for today!

After this letter, you will feel awake. With every paycheck you’ll:

1. Spend as little as you can.

2. Make the minimum payment on each debt to avoid penalties.

3. Put everything that’s left towards the debt with highest interest first.

In no time, your debt is gone!

I really, really hope this letter helps.

See you next week (follow the series here to be notified).

Be well.


P.S.: Coincidentally, Tony Robbins launched his new book Unshakeable today. Which is a “step-by-step playbook, taking you on a journey to transform your financial life and accelerate your path to financial freedom”. I haven’t read it yet, but you probably already know I’m a fan of Tony’s last book Money: Master the Game and use some of his principles in my own work. Besides, 100% of the profits are donated by the author to Feeding America. So, of course I’m excited about this new read!

Thanks for reading! 😊 If you enjoyed it, hit that ❤️ button below. It would mean the 🌎 to me and will help other people see the story.


Since I write about finance, legal jargon is obligatory (because the guys in suits made me). Before following any of my advice, read this disclaimer.