Hope Will Not Get You Out Of Debt

by Ryan Yates

As defined by the Merriam-Webster Dictionary Hope is a verb; to cherish a desire with anticipation. Hope can mean many different things to different people. Hope boils down to the act of wishing or willing something to happen. Usually something positive for the person whom makes the wish. A very common example would be “I hope I win the lottery.”

Hope is the belief for a positive outcome related to events and circumstances in one’s life. Hope is the feeling. Debt is a fact. You are either in debt or you are not in debt. A person could hope to get out of debt, but hope in this sense doesn’t translate into that person’s ability to get out of debt. Getting out of debt requires thinking, planning, and hard work. You could sit around on the couch watching your new 72 inch LCD TV hoping the TV will magically pay for itself, but that just isn’t going to happen.

A manager I work closely with made a statement a few months back that has been on my brain ever since (hence this post). He stated “Hope is not a strategy.” The work we perform revolves around maintaining production equipment so that we can produce widgets. Our goal is to produce widgets with the highest possible quality with the least amount of cost. When the manager questioned a peer of mine about the time required to fix a piece of machinery the peer said, “I hope it will be fixed in 2 hours.” Sorry Joe, wrong answer. If hope is not a strategy then the correct answer should be, “As long as X is the problem it will be fixed in 2 hours, otherwise it will take an extra hour to troubleshoot and fix the problem.” This answer puts a time frame on the known issue X, and sets a total time limit of 3 hours to cover a secondary issue if one pops up. Once the goal and time frame is set, the team knows how to proceed. People move faster when firm time constraints are put in place.

This same idea can carry over to personal finance and debt reduction. Firm time constraints need to be in place in order to progress through a debt repayment plan. Not a plan set up by a “Debt Con” company, a plan set up by YOU. This is where we being to take hope out of the equation. Hope will not repay your debts, action will. These are the steps you need to take to get out of debt; figure out your net worth, get on a budget, plan your snowball, live on less than you make, and get to work.

Figure Out Your Net Worth

By understanding your net worth you will be able to REALLY see how much debt you have. How to Calculate Net Worth is a post that gives complete detail on the process. Here are the Cliff-Notes version:

  • Step 1 – Gather the following information
  • Balance of all checking and savings accounts
  • Balance of all retirement accounts (IRAs, Roth IRA, 401K, 403b, etc…)
  • Balance of your 1st, 2nd, 3rd mortgages (if you have any)
  • Balance of any vehicles (car, boat, motorcycle, atv, RV, snowmobile, etc…)
  • Balance of all other debts (student loan, credit cards, personal loans, 401K loans, etc…)
  • Step 2 – Perform the calculation
  • Add up all the assets you have. The assets are; the checking/savings accounts, the retirement accounts, the value of the house, the values of the cars, the values of the toys, and anything else that can be sold for money. The results are the total value of your assets. This might look like a good number, but don’t forget about all the liabilities still on the paper or computer screen.
  • Add up all the liabilities. The liabilities are; the mortgages, the vehicles, and the debts.
    Subtract the liabilities total from the assets total.
  • The resulting number is YOUR NET WORTH

Get On A Budget

Without a budget you might as well go back to hoping your way through life. On paper on purpose is the only way you’ll be able to understand the flow of money through your household. I recommend checking out BudgetPulse for a free online budgeting tool. If you like Excel spreadsheets check out Debt Free Adventures budgeting sheet. My personal budgeting spreadsheet is extremely simple, I feel it might be too simple for someone starting out with budget. Below is a picture of it and here is the excel file if you are interested.

Plan Your Snowball

Once you know how much debt you need to pay off (from your net worth) and you know how much money you can apply toward your debt (the budget) it’s time to plan your attack. I use a spreadsheet created by Vertex42 and it works great for me. All you have to do is enter in the debt amounts and play with the sheet. The sheet will help you to figure out how long it will take you to pay everything off. Here’s the Debt Reduction Calculator from Vertex42. Below is a shot of my current sheet. The orginal sheet doesn’t factor in any additional monthly snowball money so I’ve made a slight change to the Vertex42 sheet and added an additional $$ cell (my sheet). I use this cell to add in my debt snowball money (extra money from the budget and pizza delivery money). You can adjust the amount to see how a second income can help the process along. When I started my additional money was $1500. It’s quite a bit more now as I continue to find more money to apply to the snowball. The more money you pay each month, the quicker you can get out of debt (no brainer, I know).

Live On Less Than You Make

Yes, I said that. You need to live on LESS money than you bring in. A budget will help you do that. You will need to sacrifice in order to reach debt freedom. Hope will not get you there, the timely actions you take will. The actions you take are the only way out of debt, unless of course you win the lottery.

Get To Work

Take a second job. Use your talents to make money. Do whatever it takes. It really is that easy.

If you are in debt, you are in a time of crisis. Draft your plan. Put time constraints in place. Hold yourself accountable to meet the timing, and throw hope out the window. Hope is a great tool to use for getting through certain parts of life. It will help lift you up when you are down (not down in debt). It can put a smile on your face. It can help to calm you during family illness. But hope will NOT get you out of debt. Stop wishing, hoping, whining, complaining, blaming, and procrastinating and get to work. The actions you take along with your ability to stick to a plan are the only tools you need to destroy your debt.


Matt Jabs March 16, 2010 at

Amen… hope will get you nowhere – that’s not to say you should be hopeless… but rather hopeful and always working.

Action, discipline, and faithfulness are our best friends when getting out of debt.
.-= Matt Jabs´s last blog ..Exchange Traded Funds (ETFs) =-.

Jeffrey Kosola March 16, 2010 at

@Matt Yes Sir “Action, discipline, and faithfulness..,” without these 3 ingredients our debt reduction recipe won’t taste good 🙂 Somehow I know that hope does not factor into your debt blasting plans. Both of our progress has been great!!

Forest March 16, 2010 at

I have said this a million time but here is my rough situ.

I have $40k of debt but it’s all frozen and I pay $200 per month to it… 100% of that cash goes towards the debt because of my debt management plan…. Until I have the cash to make settlements or pay in full this continues as it…. Obviously my plan is to one day pay in full.

I don’t earn a large amount of cash but I don’t spend a lot either so am pretty much at 0 right now… Just now am I starting to be bale to start saving and working out what cash can be used for what now that my finances are laid out simply.

I need to start making the budget a written thing and not a thing in my head. Thanks for the kick in the backside 🙂
.-= Forest´s last blog ..Garbage City – Now That’s Entrepenuralism =-.

Jeffrey Kosola March 16, 2010 at

Read this then start writting your budget!!! It’s very easy and will help you to spend even less. One of these days I’m going to interview you about the debt con you did. I’m very interested in how it’s set up. You are the only person I know doing one. Good luck my friend. Let me know if I can help with a budget…

Forest March 16, 2010 at

No problem, I did Debt Management which is a little different to Debt Consolidation…. I’m game for an interview whenever you have time… I also plan to write more about it on my blog, I was just waiting for everything to be confirmed and working and it now is….
.-= Forest´s last blog ..Garbage City – Now That’s Entrepenuralism =-.

Ted March 16, 2010 at

I was running on straight up hope for a while. Maybe my wife’s biz would take off, maybe I would get a raise, maybe something would happen…

Now I have real hope, an actual date of being free, plans that I can actually fulfill. It is awesome. Instead of a wing and a prayer, I have an actual plan and the means to make it happen.
.-= Ted´s last blog ..I am sad… =-.

Jeffrey Kosola March 16, 2010 at

Ted, I’m so happy that you have a plan now. Straight up hope isn’t good for much except making you feel good. Thanks for sharing

harvestwages March 16, 2010 at

hey Jeff,
Many rely on hope, and turn not to work hard. Hope is much associated to luck. I think, hope is good if we consider it as a tool to drive our hard work.
.-= harvestwages´s last blog ..How Social Media Sites Make Money Online =-.

Jeffrey Kosola March 16, 2010 at

Harvest you are very correct. Luck is just like hope. Hard work, dedication, and planning are the way to win. Hard work is my absolute favorite tool in my tool belt, followed by smart work 🙂

myfinancialobjectives March 16, 2010 at

True hope ALONE will not get you anywhere, though hope definitely has it’s place in our lives. Hope can result in action and it can be a motivating factor. “I hope that I will be named MVP this year. Meanwhile I’m gonna workout and play hard. I hope I get it”. Look at Obama’s slogan for his campaign: “Hope & Change”. That was his slogan right?
.-= myfinancialobjectives´s last blog ..The Ultimate Motivator: Compounding Interest =-.

Jeffrey Kosola March 17, 2010 at

@MFO I believe hope does have a place in our lives but I try to not use the word. It reminds me of wishing and having luck. Using the MVP example I would phrase it as “I will workout extremely hard so that I can play even harder throughout the season. I know that the ranking system is not in my control, but I will continue to give 100% to be named the MVP.” Hope is hard to measure. A person knows inside what 100% is, so including it will help the person to understand if they are applying the correct amount of effort to get the results needed.
Oh yeah, Hope & Change. Obama was able to use hope to steer people toward his campaign. Now that actions are required, that hope seems to be all but faded away. Hope will only get things so farther, hope can not make the health care bill pass.

@JanB Which program where you using before?? Good luck with Vertex. Money Funk has included another calculator you can check out too.

@moneyfunk I’m glad you liked it. “I will take care of this later” use to be my favorite statement. The extra money always came, but increasing my cost of living came with the money. The end result was getting more and more into debt. Now that we’ve woken up from the como, it’s easy to see the problems with using hope to get through this situation. If you work hard enough and fast enough those restrictive bonds can catch you 🙂 Keep working at it, soon enough both of us will be in the wealth building mode.

JanB March 16, 2010 at

Man, that link to Vertex’s debt calculator is going to save me ten bucks a month. I have been paying for a similar function because I couldn’t geek out how to do it myself. Thanks for the link. I will be reading more, I subscribed to your blog through bloglines.
.-= JanB´s last blog ..Impulse Buying — NOT the perfect way to spend a day. =-.

Money Funk March 17, 2010 at

Ah, Jeff! This is an awesome in depth post. You’ve out done yourself.

I used “HOPE” for too long. Or is it being purposely naive by saying to myself, “I will take care of this later”. You know… believing I will come into money later. Ah, hard lesson to learn for myself. But it’s people like you who are such inspiration by working hard to get out of their restrictive bonds. Keep it up!
.-= Money Funk´s last blog ..ING Orange Saving Account =-.

Money Funk March 17, 2010 at

Hey, if its not Vertex… there is http://www.whatsthecost.com/snowball.aspx.
.-= Money Funk´s last blog ..ING Orange Saving Account =-.

Stay at Home Mom CFO March 18, 2010 at

Although I have a solid plan and have done all the things in your post I still am a little bit still “hoping”. I need 2-3 months for nothing too expensive to arise to throw us off track. We have only $500 emergency savings right now, so anything that comes up over that amount will put us in a tight spot until we can build up a big enough enough buffer. I can’t wait to NOT be relying on HOPE.
.-= Stay at Home Mom CFO´s last blog ..Don’t Count Your Money Until it’s “There” =-.

Jeffrey Kosola March 18, 2010 at

@SAHMCFO Start NOW and do whatever it takes to get $500 more dollars into your emergency fund. That means putting on hold any debt repayment plans you have at the moment. Something will come up in the next 2-3 months, so wouldn’t it make since to beef up the fund now so you don’t have to worry as much? I think so, if you need help locating a source for the extra money I’m sure I can help you find it. The only way to stop the addication to hope is to put a little more action into the mix. If all you need is $500 to quit using hope then do whatever it takes to get that $500. If you need $1500 to feel secure, then get the $1500. Whatever you need to do, just do it. If you can take hope and worry out of the equation, then it becomes a math problem. Math problems are great because there are no “feelings” to get in the way.

Keep up the HARD work young lady. Feel free to bounce any questions off of me anytime.

Stay at Home Mom CFO March 18, 2010 at

Thanks Jeff. I think you should go into behavioral psychology after the delivery gig:) You know, I expect my tax refund any day now. I originally had that money allocated to go to high interest debt but I’ll probably take a chunk of it and apply it to the emergency fund instead. I can keep adding to the emergency fund and IF no disasters arise in the next 2-3 months I can put the excess in the emergency fund to debt. D’UH! I’ll sleep much better without that worry. It’s hard not to get ahead of yourself, NOT laying a solid foundation FIRST is why I’ve failed before.
.-= Stay at Home Mom CFO´s last blog ..Don’t Count Your Money Until it’s “There” =-.

Jeffrey Kosola March 18, 2010 at

Hmmm Dr. Jeff, just doesn’t sound right. Don’t put the cart before the horse. You need to have yourself protected as best as you can before you begin paying off the debt. Paying off the debt will do not good if you have to use more debt to cover an emergency. That will just keep you in a constent cycle of debt. In order to break the cycle put that tax return into your emergency fund, THEN work your plan. I know all about getting ahead of yourself. I delivered for 10 months before I realized I needed a budget and a plan. Now that’s getting ahead of yourself and WASTING time and money. Make a plan, protect yourself, then work the plan.

the Dad, Climbing Out March 18, 2010 at

“Hope is not a strategy.” I love it and will be using it in our department meeting today. Thanks, Jeff’s manager! 🙂

.-= the Dad, Climbing Out´s last blog ..Wisdom from The Tutu =-.

Jeffrey Kosola March 18, 2010 at

Haha, my Manager says you are welcome. I feel bad for him because he gets to deal with me everyday 🙂 Good luck in your meeting.

Derek Clark March 28, 2010 at

Hope is not a strategy. That is an awesome phrase, I read it in a John Maxwell book once. He put it this way: “I’ve know businesspeople who were not realistic thinkers. Here’s the good news: they were very positive and had a high degree of hope for their business. Here’s the bad news: hope is not a strategy.”

Hope is also not a strategy for government, though it worked out well for Obama as a slogan. Look at what that hope-n-change has gotten us so far. I think there are a lot of people who have been sorely disappointed in what their “hope” has gotten them.
.-= Derek Clark´s last blog ..Weekend Link Love – March 27, 2010 =-.

Jeffrey Kosola March 28, 2010 at

I was not aware that John Maxwell had said that but it sure doesn’t surprise me. He is always a down to earth writer, even if the higher power is guiding him. Thanks for including the quote, I love it. I might have to mention it to my manager.

Kristine April 7, 2010 at

The word “hope” suggests that’s some outside force is going to deliver you out of debt. I think it’s important to focus on moving towards what you want, in this case, financial freedom. And of course, take action. Take note of what works for others, and follow suit. Things are only as hard as we make them.

Jeffrey Kosola April 8, 2010 at

That was stated well Kristine, we share the same mindset.

Matt Czarnek October 12, 2010 at

“Live On Less Than You Make” – It’s amazing how many people don’t realize what a good idea this is. I’ve got friends who spend every cent they make as soon as it comes in.

One even took a job working at a clothing store and she spent more money than she made and is paying it off with the minimum credit interest payments.

martin September 25, 2011 at

great budget sheet will make it easier to see where my money goes every month

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