Scott at Debtkid.com admits on his site that he was essentially the “stupidest kid ever.” He recently told MainStreet that day trading “risky stuff like Forex and high risk options” threw him into more than $350,000 of unsecured personal debt. Ouch!
Alan Corey, through a combination of skill and extreme frugality, accrued over a million dollars by the age of thirty. (He writes about his saving strategies in his popular book, "A Million Bucks By 30.")
So what makes these two human beings so different? Armchair psychologists that we are, we asked both of them to respond to our questionnaire. Their answers may intrigue you:
You find a $100 bill on the street. What do you do with the money?
Alan: If I had debt, it would go to that first. Otherwise, I just wouldn’t go to the ATM that week and continue on as normal.
Scott: I'd keep the $100 bill in my wallet and vow not to spend it. There is something about having a large bill on hand that makes me feel secure. Plus, it's a great mini-emergency fund.
Is there a structured approach to debt payment that you advocate?
Alan: Definitely at least 10% of all income should go to pay off debt. Minimum. I usually do 25%, but I understand that’s not always possible. But no matter how hard things get, it’s never less the 10%.
Scott: Knocking off my smallest debts has worked best for me (a la Dave Ramsey's snowball method). Especially if your credit cards, for example, are all similar interest rates, tackle the lowest balance card first.
Do you live within a set budget?
Alan: Oh yes, and I love it! I created a way to budget that has a reward system and doesn’t require saving receipts which I hate to do. I go to the ATM every Sunday morning and withdrawal $100. I have 7 days to spend $100. I only spend what’s in my wallet and I make sure to pay cash for everything. I don’t go back to the ATM until the following Sunday, no matter what. If I’m out of money, I’m out of money. If I have some green in my wallet Saturday night, I spend it all whatever way I like as a treat for staying on budget. It’s a reward to me for being budget conscious. Additionally, I know I spend $400 a month every month without doing any formal accounting.