thinkrichyuppiesfreechapter

Sha Nacino | Trace Trajano_____________________________________

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This book is presented to:

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Think Rich, Yuppies!_____________________________________

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Sha Nacino | Trace Trajano

Think Rich, Yuppies!

How to Overcome Credit Card Debts and Start Becoming Truly Rich


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Copyright © 2011 by Sharon T. Nacino and Trace Wendell D. Trajano.

All rights reserved.

Published by The LLOYDLUNA Communications, Manila, Philippines.

No part of this book may be reproduced in any form or by any means without the

prior permission of the authors.

The information in this book was obtained from the authors’ personal experiences

and insights. While every effort has been made to make this book as accurate as

possible, the authors disclaim any liability or risk as a direct or indirect

consequence of the use of any contents of this book.

Edited by Jionette Clyde Arawiran

Cover Design by Marguelle Designs

Book Layout and Publication by

The LLOYDLUNA Communications, Manila, Philippines

Printed by KD Printing Corporation located at 2 JP Laurel St.

Dona Faustina Subdivision, San Bartolome, Novaliches, Quezon City

Tel. No. 9375935

Requests to the publisher for permission should be addressed to The Business

Evangelist, The LLOYDLUNA Communications, 1745 Dian St., Makati City 1235

Philippines, Tel. (63) 2 505.5336, Fax (63) 2 846.1089.

LLOYDLUNA also publishes its books in a variety of electronic formats. Some

content that appears in print may not be available in electronic books. For more

information about LLOYDLUNA products, visit our web site at www.lloydluna.com

ISBN: ISBN 978–971–93474–5–3

Printed in the Philippines.

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Chapter 8

Deep in Debt: To Control Your Debt, You Set it and

Forget it!

“I’ve grown my debt and now it’s haunting me..bank keeps calling at my office..i thought having a credit card is great but I’m wrong coz now my debt is greater than my income..i hate this kind of life..”

—Anonymous’s comment on http://tracetrajano.com

When I ask the question, “What is the one thing that is stopping you from getting out of the ‘rat race’ and onto the fast track?” one of the most common answers is debt. It’s a variation of “Hey Trace, I’m earning enough for my family but I have this big credit card debt… It’s ₱100,000… How will I be able to get out of this?


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http://tracetrajano.com

http://tracetrajano.com

That’s one of the most common things that I’ve read in my blog comments, so in this chapter, we’re going to solve that problem. As the title of this chapter goes, to get out of debt, you set it and forget it. Later on, I will show you how you can do that.

Is Debt the Death of Your Dreams?

The answer to that is “Absolutely Not!” You can turn this debt — this stumbling block – into your stepping stone. Because here’s the thing: debt is finite but your income, if you set it correctly, is infinite. Let me repeat that. Debt is finite but income is infinite. Think about it.

Let’s say you buy a piece of property. Imagine you have millions of pesos and you can buy a piece of property i.e. five-storey building. It will produce ₱1million pesos a month in income or cash flow, so whether or not you work, you get one million pesos a month in cash flow; and that’s forever — until the property is standing there. You can pass it on to your heirs. That’s why your income is infinite; whereas your debt is always finite. It will, at some point, end.


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So take comfort in the fact that you can create infinite income. As we know in Mathematics, no matter how big a number is, it’s always smaller than infinite. Here’s the other thing I’d like you to think about. I want you to be undeterred by debt and use it instead as your stepping stone to financial success.

Here’s the truth: Your past does not determine your future. You can change your future by changing your present, by changing how you think now.

And here’s another truth: what you think about, comes about. This is called the “Law of Attraction.” But here’s the problem: the Law of Attraction cannot distinguish or understand if you put the word “no” in front of it. It doesn’t see the “no.” It’s like this: I tell you the statement, “Do not think of a purple elephant” and you repeat that after me, “I am not thinking of a purple elephant.” What color of the elephant are you thinking of? Exactly — purple. That’s how the Law of Attraction works. So if you say, “I’m getting out of debt, I’m getting out of debt.” Then guess what? You will get more debt. You will attract debt because you are thinking about debt.


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In order to eliminate debt in your life, as one of my mentors, Bob Proctor said, “You set up an automatic debt repayment program so you can focus on prosperity.” Focus on the positive, which is wealth or income, not the negative, which is debt.

This sounds very good, but what exactly is a debt repayment program? Let me illustrate this in an example. We’re going to do a little bit of math. Let’s say you’re a high earner, you’ve been working for about ten years, you’ve climbed the corporate ladder and now you’re earning ₱100,000 a month. This is just an example so do not think that this will only work for people who earn ₱100,000 per month. It can work whether your salary is ₱10,000 or ₱5,000 per month, if it’s ₱1 million per month or USD100,000. It works in any of those cases. I just want you to get the principle. So going back to our example, let’s say you owe three people or three entities:

You owe Ram, the Hard Money Lender — maybe he is the stereotypical “bombay” doing 5-6 or whatever. You owe Ram ₱20,000 and you pay ₱2,000 pesos every month.


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You have a Visa credit card at 36% interest. You owe ₱50,000 and you need to pay a minimum amount of ₱1,000 a month

You owe ₱50,000 from MasterCard. Minimum payment is ₱2,000 a month.

You are in deep debt in this example. You actually owe more than what you earn every month. So let’s say you are able to allocate ₱10,000 per month for your debt repayment program.

I’d like you to do a little bit of math. Calculate what I call the “Debt Cash Strain Factor.” This is your total balance divided by the minimum payment you need to make on a monthly basis.

Calculate the “Debt Cash Strain Factor” (DF)

DF = Loan Balance Minimum Payment

Lowest DF gets paid off first


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And what I want you to do is pay off the debt with the lowest Debt Cash Strain Factor first. By doing it that way, you’ll be able to pay off your debts a lot quicker than you think.

So in this example, you owe Ram ₱20,000 but you pay him ₱2,000 a month. The Debt Cash Strain Factor (DF) is 10. MasterCard has 25 and Visa has 50. The idea here is you pay all of them the minimum monthly payment required, except for Ram, to whom you’ll have to pay more than the minimum amount. I’ll explain why.

Ram: DF = P20,000 = 10 P2,000

MasterCard: DF = P50,000 = 25 P2,000

Visa: DF = P50,000 = 50 P1,000


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Recall that you allocate ₱10,000 per month but you need to pay a total of ₱5,000 (₱2,000 for Ram, ₱1,000 for Visa, ₱2,000 for MasterCard) as your minimum payment to all three. It would be a mistake to pay only the minimum. If you do that, it will take you forever to pay off your debt.

When you pay Ram first, you pay him ₱2,000 (that’s the minimum he requires). In addition, you can pay him another ₱3,000. We don’t want you paying the minimum only, remember? That means you’ll be paying him ₱5,000.

And then on Month 2, you do the same thing. But notice that since you now owe Ram ₱15,000 because you have paid ₱5,000. The interest due, if you do the math, is P1,500. Because your total principal has gone down, your minimum payment should go down as well.


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Month 2

Ram MC Visa

Balance P15,000 P50,000 P50,000

Payment P1,500 P2,000 P1,000

Additional P5,500 --- ---

And then on Month 3, you do the exact same thing. Now, notice this. On Month 3, you only owe Ram 9,500 pesos and your monthly interest due is only 950 pesos. Now you can pay Ram even more in terms of principal. So can you see how your debt gets paid off a lot quicker?


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Introduction

Month 3

Ram MC Visa

Balance P9,500 P50,000 P50,000

Payment P 950 P2,000 P1,000

Additional P6,050 --- ---

If you do the math, basically by Month 6, Ram would have been paid off. You can now allocate your payment towards paying off the next one, which is MasterCard. Instead of paying ₱2,000 pesos only, you should be paying ₱7,000 in additional principal payment. By the time you pay off MasterCard, you will have to pay ₱10,000 a month for Visa.


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Month 6

Ram MC Visa

Balance -- P50,000 P50,000

Payment -- P2,000 P1,000

Additional -- P7,000 ---

Can you see now how you can really accelerate paying off your debts by doing it this way? It’s a simple technique. It’s very, very powerful, and it works! But what If you come up to me and say “Hey Trace, what if I really made a lot of financial mistakes and I can’t even afford to pay the minimum payment anymore?”

Well, there are several things that you can do.


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Introduction

Step 1: Cut down on living expenses

Forego that grand wedding you’re planning. Make it simple. Postpone that expensive vacation or that gimmick. Opt for free or cheaper place of recreation. No movies, no dinner out. For a while, seriously cut down on a lot of things. If you can sell some of those things or gadgets that you’ve accumulated over the years, do it. It will help you to also get rid of all the clutter in your house as well.

Step 2: Renegotiate the debt.

Why not try approaching one of the credit card companies to whom you owe and renegotiate your debt. As an example, you can call and say “Hey MasterCard, I owe you ₱50,000 and I pay you ₱1,000 a month. What if I offer you ₱10,000 now and consider all the ₱50,000 debt gone?”

Some of you might be thinking, “Trace, no, that doesn’t work in the Philippines.” Well, it does work in the Philippines and I know because a relative of mine did this. And in fact, he did this not just once but several times across the different credit cards he had. So offering them a big chunk of money versus their receiving payments in little increments


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is always tempting to them. It could actually be a Win-Win situation. Why? Because instead of receiving a little bit of money on a monthly basis, they can receive a big chunk of cash now. And guess what — they can write that loan off and they can lend again. They can lend that ₱10,000 or ₱20,000 that you paid them and so they can make more money. So it can be a Win-Win situation.

Let’s say you a got a “No” when you offered ₱10,000 to pay off ₱50,000. They asked you to pay ₱25,000 instead and they will write off your ₱50,000 credit card debt. Heck, go for that if you can raise the other ₱15,000. That would still be far better than having to pay off ₱15,000. Try renegotiating your debt. There’s no harm trying especially if your debt is killing you. Who knows, your credit card company might just agree to your proposal.

Step 3: Look for other means of income

What if you’ve been trying to live below your means and yet you still have a lot of debt? What if you tried renegotiating your debt and the creditor said “no”?


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Then now, you have to look for other sources of income. One way is through real estate. Don’t think that you need hundreds of thousands of pesos for this. In fact, you can buy real estate with no money down. It can be done, wherever you are.

Even in Singapore, there’s a guru who also teaches people how to buy condos with no money down. It’s possible in any country, in any market, as long as homeownership is allowed. There are certain techniques in buying a house with no money down and selling it quickly for quick cash.

Jay Castillo, for instance, made 140,000 pesos in cash — that’s not the equity. That’s cash in his pocket in just seven days. Think about it: 140,000 pesos in cash. If you had such an amount, what could it do for you right now? How much of your debts will be paid off if you can generate that amount of money in a very short span of time? And maybe right now, it’s hard to believe it. But it can happen.

You just have to get the know-how, and get the right coach so that you’d be able to succeed as how Jay and my countless students all over the world have done. You can become my next successful student if you just seek out the know-how and the coaching.


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Let me end this chapter in the same way that I started it, and that is to tell you it’s high time for you to convert your stumbling blocks into your stepping stones. One of the greatest motivational speakers of all time, Norman Vincent Peale, said that when life throws a dagger at you, you can either catch it by the blade or by the handle.

So how does that apply to your finances? Well, granted you have a lot of debt, but so what? Welcome to the real world. There are a lot of people with big debts and yet they’re able to turn their life around. The thing is, there’s always an advantage for every disadvantage. So you might be thinking, “What is the advantage of having a lot of debt?”

Well, having big debts forces you to simplify your life. That’s one advantage. As I said, you’ll be able to distinguish better the important things and needs from your wants. It forces you to simplify and to make the right priorities. It forces you to get rid of clutter from your home, or your wardrobe.

Just look hard enough because if you have accumulated a lot of debt, it’s likely that 90% of them are things that you don’t even use or see or enjoy. So it’s high time to simplify your life and enjoy the things that really matter.


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Now, big debt also forces you to think big. You’ve probably heard of this story before, but let me tell you the story again. Donald Trump, as you all know, back in the late 80’s to early 90’s, got into financial trouble. In fact, he was in great debt. His net worth became negative. Personally alone, not including the debt that his company owed to creditors, he’s liable for 900 million dollars of debt.

Think about it. How much debt do you have in your credit card? Do you have 900 million dollars in debt? I bet not!

When Donald Trump saw a beggar down the street in New York, he said to himself: “This beggar is richer than I am.” That beggar was richer than him because he owed 900 million dollars. Yet he utilized his big debt to simplify his life, focus on the things that are really important, and return to what made him rich in the first place.

He then went into executing and implementing what needed to be accomplished, into getting more deals done, and you know what? — in five years, he was actually richer than before he got into financial trouble.

If Donald Trump can turn his life around, convert a 900 million dollars of debt into billions of dollars


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of net worth, why can’t you overcome a fifty thousand, eighty thousand, one hundred thousand pesos credit card debt? That is nothing. Realize that big debt gets the winners in life to think big, to turn their greatest adversity into their greatest victory.


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