Get Out Of Debtdebtmanagement1

Stephen Martial, a salesperson from Dallas, Texas, sells fax machines and photocopiers to local mid-sized companies.  He earned about $86,00 last year.  Not bad, considering he just got out of university less than 3 years ago.  Ladder Angles, 42, sells real estate and she is one of the top sales people in her office located in a suburb of Vancouver, British Columbia.  Her before tax income was $325,000.

Martial and Ingles have a secret.  There is something about them that they don’t want you or anyone else to know about.  It has to do with a two inch piece of plastic in their wallets; the credit card.

It’s gotten so bad that unless something changes soon, Ingles will be forced into bankruptcy.  No laughing matter.  She just put an addition to her dream home.  Bankruptcy means kissing that house good-bye.  It also means that the Mercedes and the extra cars will be history.  In addition, you can imagine how this will affect her attitude; which will have a direct (negative) impact on her sales production.

So many people today are drowning in a sea of debt.  If you are like most people I talk to you are probably increasingly worried about debt.  It sneaks up on you and then chokes the life out of you.  Tell me how you can sell, with enthusiasm, putting the customers interest above your own, when you are drowning in debt?

Here are the facts:

  • We are borrowing at a record pace.
  • We owe more now than almost any time in recent history.  In December 2012, a record 18.8% of after tax income in North America when to repay consumer installment debt.

In the USA alone, Money Magazine reported that instalment debt, including auto loans and credit-card  balances, recently topped a record $1 trillion–a full one-third increase  in just the past two years.

Late payments on credit cards reached 3.3% last  year, the second highest delinquency rate in a decade. And home mortgage delinquencies hit a two-year high in the third quarter of 2012, the last period for which figures are available. In fact, over the past 10 years, as mean incomes stagnated, total household debt, including mortgages, has soared from equaling 80% of annual disposable income to 93%.

 Getting credit is easy, paying it off… ain’t.

You are probably one of the millions who are under pressure because of debt.  And this hampers your sales. Most financial planners say that, depending upon your stage in life, monthly debt payments for everything but your mortgage should not exceed 10% to 15% of your take-home  pay. If you’re shelling out 20% or more, you’re well into the danger zone.

How Did We Accumulate This Mountain Of Debt? 

A surprising answer.

There are many ideas why most people are in such terrible financial situations.  We could blame the credit card companies for making it so easy to get credit.  We can blame the banks.  It might be your parents, your teacher, your company.  It might be a million things but let me give you the reason that has emerged from my speaking with thousands of salespeople over the years.

It might have something to do with what Stephen Covey calls the Personality Ethic.  Sometime ago, Mr. Covey discovered that a major shift had occurred in our society.  A shift away from the Character Ethic to the Personality Ethic.  I’m no expert on Covey or his material, (All of which, I suggest, you read immediately!) but as it relates to sales, it makes perfect sense.

There seems to be this need to become a “personality” in selling today.  To some degree, I agree with it  to position and differentiate yourself.  What I don’t agree with is the notion that debt is the way to do it.  Character is what is key.  However, in many circles today, what gets top billing are the trappings (which you must borrow to attain) of personality.

That is, get yourself a big, expensive car, buy yourself the best house or condo you can get your hands on.  Buy the best clothes, the slickest jewelry.  Don’t worry about how you will pay it back, just get it because, you must show the world you are a “somebody.”

Let me tell you that when you have to hand the keys to your “dream home” back to the bank because you couldn’t afford the payments, you don’t feel like a “somebody.”

“Gerry, can you help me out?”  Mark Martin asks. “Sure, if you want a straight answer, that is.”  I respond to the hot new salesperson for a company I’ve been hired to train.  “What’s up?”  I ask.  “Well, I’m really selling up a storm and if things keep going well, I’ll be able to buy a nice new BMW.  All the shooters in my company have one.  What do you think?”  “Why do you think you want one, Mark?”  “Well,” he sheepishly answers, “I guess so I can fit in.”  I look at him disapprovingly.  He knows that I’m not thrilled with his idea.  “Oh, yeah.  I think it’ll help my sales!”  He blurted.  “Help your sales?  How?”  “You see, having to pay the $673 monthly payment will motivate me to get out there and make my calls.”

Right there is the problem.  Let me identify two.  First, this “keeping up with the Jones” philosophy is responsible for everything from ulcers to suicide.  So, get rid of it.  Its a bunch of jazz.  The Jones aren’t thinking about you, they are busy thinking about themselves.  So forget about what others think.  I like the bumper sticker that says, “Laugh all you want…it’s paid for!”  Second, a common practice among the go getters is the foolish notion that having a debt, they will be motivated to work.

We buy things we don’t need.
With money we don’t have.
To impress people we don’t like.

–Anonymous

 Wake up!  That’s not even true.  It’s only an excuse to indulge your undisciplined, “I can’t wait for anything” mindset.  If that’s the way you live your life, by refusing to put the investment phase BEFORE the reward phase, then I pity you.  Life will be hard indeed! All this is, is Covey’s personality ethic.  “Look at me, I’m important.”  You aren’t important because you qualified for a loan!  You are not somebody special because you have The Platinum Card.  It just means that you qualified on some form to get credit.

That’s not wealth, it’s debt. It’s fake.  It superficial.  Look deeper – character.  You don’t need the pressure.

 “The problem with money is that it makes you do things you don’t  want to do.”— The Movie: Wall Street

How To Win The War On Debt

Strategy:  Get the right attitude about debt.

Getting your debt in line is an attitude before it is an action.  You must see debt for what it is.  It’s a trap!  Plain in simple, it’s a nice technique to kill your sales, ruin your health and your marriage.  It’s bondage.

You must come to despise it.  It’s too alluring otherwise.  It’s intoxicating.  I remember once going in for a simple $20,000 loan.  I left the bank with $70,000.  I got sucked into the trap. I grew up in poverty.  Getting credit was next to impossible when we were kids.  But when I applied for the $20,000 loan, my income was sky high.  They gave me the loan, gave me a $20,000 limit credit card and a $30,000 line of credit.  I was flabbergasted.

Strategy: Determine the interest rates on all your credit cards and pay them off as soon as possible.  Do NOT continue to use them. Become a “cash” person.

Do you even know what rate of interest you are paying on your credit cards?  (14% to 21%)  Pay them off first.

“Despite today’s hot stock market, over time any investment you can make is unlikely to beat the effective return you get  when you pay off high-rate debt,” explains Bob Hammond, author of Life Without Debt (Career Press, $14.99).

 “The only problem with debt, is that you have to pay it back.” – Patrick Morley, The Man In The Mirror

Strategy:  Re-negotiate your debt to lesson the monthly pressure. 

More advice from Money Magazine:

Negotiate with lenders. Money readers have heard this tune before, but it’s worth another chorus. You’d be surprised how easy it is to wrangle more borrower-friendly terms from lenders today. “Most banks and card issuers would rather lower your interest rate or slash fees than lose you as a customer,” says Edward F. Mrkvicka Jr., author of The Bank Book: How to Revoke Your Bank’s “License to Steal” and Save up to $100,000 (HarperCollins, $12). “That goes for credit cards, mortgages, even car loans.”

If you’re paying the going rate for credit-card debt, call your card issuer and threaten to switch to a lower-rate competitor. Your issuer won’t budge?

Strategy:  If you need capital for a business project follow these common sense guidelines.

Never put yourself in a dangerous position with personal guarantees.  In other words, don’t become personally liable beyond the financial asset.  If the project fails the lender  can only look to the financed asset as collateral.

Give up equity instead of borrowing.

Stay out of the pressure zone. Don’t think that having to come up with a huge monthly amount will motivate you.  I know several awesome salespeople whom can’t get up in the morning to face the day because of debt.

Strategy:  If you have problems in this area become accountable and or get help.

I have found that the principle of personal accountability to be one of the most powerful forces in my life.  If I have an area in my life that I want to have more control over, I bring it up to my accountability group.  Every Thursday evening, I’m with six other men and we help each other keep our promises.  There’s something about having to discuss these issues with others which helps me keep things in line.  Maybe it’s just knowing that they will ask me about it next Thursday.

No matter where you are in the world, I have contacts, whom I would be happy to recommend who are experts in this area.  If you want a few names of people whom I trust, simply call and tell me what city you are in and I’ll give you a couple of numbers to call.  Otherwise, seek out a professional who can help sort through this mess.  It won’t go away on its own.

If debt is causing pressure for you, it is affecting you sales.  I guarantee you that.

Entrepreneurs Credo
A dollar borrowed is a dollar earned.
A dollar refinanced is a dollar saved.
A dollar paid back is gone forever.

 

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