Four Intensity Levels in Debt Reduction: Tailoring Intensity to Fit Your Personality

Mastering Debt: Understanding Your Financial Intensity Levels

Join Dr. Bryan Foltice in this episode of the Bryan Foltice Behavioral Finance Podcast as he dives deep into the concept of financial intensity levels, particularly in the context of paying off loans and debt. Bryan shares his unique approach from his Money Strong program, offering four distinct intensity levels: minimal effort, moderate effort, high effort, and extreme intense effort. Drawing from personal anecdotes and professional insights, he emphasizes that not everyone should approach debt repayment the same way. Listeners will learn how to identify the level that best fits their personality and situation, and how to design their financial goals accordingly. Don't miss valuable tips on creating a balanced financial plan that promotes both debt repayment and wealth building.

00:00 Introduction to the Podcast
01:15 Understanding Intensity Levels in Finance
02:59 Personal Stories and Lessons Learned
09:05 Four Levels of Debt Repayment
20:57 Conclusion and Final Thoughts

Transcript

0:04

Welcome to the Brian Foltis behavioral finance podcast, where we unravel the mysteries of behavioral finance and unlock the secrets to making smarter, more informed decisions with your money. Now here's your host, Dr. Brian Foltis. Welcome everybody to the Brian Foltis behavioral finance podcast. It's me, Brian Foltis. And today we are going to be talking about the different types of intensity levels that would not only we have in our life, but in our finances, particularly when it comes to paying off our loans. So thank you very much for tuning in today. And if you like what you hear and want to help me spread the word of behavioral and personal finance, please make sure you like and subscribe. If you have anything nice to say, we'd love to see that. That does help the algorithm. Get this out to more people, spread the word and really try to help people make better financial decisions. After all, that's what I'm here talking to my computer in order to do. So again, thank you very much. Today we're going to jump right in to these intensity levels of paying off. Our loans or our debt. And this comes around the section that I have in the money strong program. That's called overcoming student loans and other debts. And this is where my approach differs from other people who are trying to help people do similar things, which essentially our objective is trying to get people out of debt in order to not go back into debt. And then we can build wealth, but what I've observed is not everybody is wired the same way. And so when we're trying to come up with our intensity levels in order to come out of debt, not everybody should be coached or encouraged to do the same thing or to work this. through their debt the exact same way. And so instead of doing this run for your life, get your out of debt as quickly as possible. I don't care if you starve yourself or whatever ramen noodles all day. I'm going to take a step back and lay out four different levels of intensity. Talk about the pros and cons behind them and then see. with an eye, which one fits you best, or the, maybe the individual that you're trying to help or know that's in debt, which one fits them the best. This is not a one size fits all objective here. And I always think about this too. Where when I was growing up playing basketball. I had this do or die mindset that win at all cost, and if you lose, it was literally the end of the world. And you might say that's tongue in cheek, but when I was in high school, I remember losing a game. playing poorly and I would sneak through. I left my car. I snuck through the back door because I knew all the college coaches were waiting out front, right outside of the locker room. And so to avoid them, I went in the back door and walked three miles home in the cold. And I actually stopped at Burger King and I sat there with a Coke at Burger King by myself. Until Burger King closed, and then I walked the rest of the way home, and I look back and go, I took that so hard. Similarly had a game in college where I played terrible and we lost and decided that I did not deserve to sleep in a bed that night. I drove out in the middle of nowhere and slept in my car that night and was really just Took these things really hard. So then. I realized this actually helped me because I remember being in close games going, you know what, let's find a way to win this thing because I don't want to sleep in my car. I don't want to put that on myself anymore. And so we would win these close games. We've find this within ourselves too. hit buckets or make plays in order to win these games and found there's like this real satisfaction around those kind of things as well. We're going to talk this summer. I've got it all teed up because there's a bigger purpose here around living a rich life and mental health and intensity levels, how it all plays together. And I'll just give you a little prelude here that, this mindset of super high intensity, super do or die. It can help you in some ways, but it also if you keep talking to yourself in this way and it's a negative loop, like a negative coach then this can really backfire and set you back. And so we'll talk about that later. But yeah, my intensity level around that was super, super high. So when I had my loans in my 20s, And we said, Hey, I'm going to make the decision to get out of debt. How do you think I went about it, lackadaisically or, Oh, let's just see what happens. We'll let it play out. No, it was just unbelievable. discipline and merciless to the penny. And so that was my approach. That was my effort level all in every cent counts. We're going to get out of this as soon as possible. And it's just do or die, just like I would do play a basketball game. And then when I would go. I had that same approach of just real discipline and it's all about winning. Let's just get the win and realizing that my players weren't acting the same way and I get really frustrated. Why are you not acting as if this is do or die? And I finally said, Oh man, I, this is not. You can't force your intensity level or your will on other people. You can help coach them, but you have to be, you have to realize that not everybody is wired like you. And so I went and I saw my buddy who, this is When you play college basketball, you go through this even all these years later, I know I've, they've got my back. I've got my teammates back. And even if it's been a number of years since we've talked, we'll pick up right where we left off. There's this real camaraderie and brotherhood around this. And one of my former teammates is a Division II. Men's basketball coach in Michigan and they won the national title a couple years ago now I want to say have a great program and One thing I could identify with him is our do or die attitude We were very similarly wired around that he won a ton in high school So did I we won a ton together in college and I saw him having success With his division two players and you're winning national championships there. That is some real good quality basketball. And I asked him, I said, do you coach your players the same way you played? And he said, no. He said, if I did, I wouldn't have anybody to coach because not everybody. There's only a select few players that had the same mindset as us and. Everybody else we have to deal with different. And if you didn't, I wouldn't be able to do it. So he recognized this and adapted very quickly. And that's what helped him be successful. And so this is where all that to say when we are talking about. Getting out of debt. I'm trying to evolve here I'm trying to be a better coach in order to help people and go and we don't have to all do rice and beans and Mercilessly eek out every penny here, but I want to lay out the four. So we're finally getting there friends. Sorry for the tangent We're finally gonna get to the four intensity levels here and we'll break them down figure out which one is the best for you Number one, minimal effort. This is a minimum payments and minimum payments. So if your monthly budget is tight, you don't have a lot of certainty around your financial situation. This is less than ideal in my opinion, but at least it's something at least you're making your minimum payments. You're not defaulting on your debt and you have. an acknowledgement of paying off your loans. You're not just going to go into delinquency or default on these debts. And that's why I say it's better than level zero, which I'm making up, which is completely ignoring or completely avoiding the situation. Minimum effort, making minimum payments. It's going to slow your progress. It's going to take forever and you're going to pay way higher. Minimum effort. Interest costs. So it's this loan that we're trying to get out of, it's going to stay in your life for longer than it maybe needs to. And you are going to pay more interest instead of when you're investing, actually earn interest. So minimum effort level one. Number two is this moderate effort. So this is where I get a lot of people talking about trying to balance their approach to paying off debt, but then also contributing a little bit into retirement and into investing. So if you have some, good income and there's some money to be spread around, then I think this is a good approach that you can use where you're using. You're going to go towards competing goals. So a little bit extra is going into your debt repayment, but then you're also saving for retirement. You're also saving for maybe a new house or whatever your other financial goals are. You're going to make progress in both. And This is good because at least you're moving both in the right direction. Your debt repayment is reducing. Your investments are growing. The only downside that I really see to this is you're slowing your progress. You're going to slow down your progress on both ends where getting out of debt is going to take on a little bit. You're going to take extra time. You're going to pay extra interest on that. So based on the numbers that could work against you at the same time, if you also have really low interest. on some of your debts. Mathematically, that might be a good thing to slow down your progress as you can get more returns on your investment. So this balance approach, and this is where I've really come around here. I've seen it work where Mandy and I, that's what we used in our approach to paying off our loans where we were just we could have been more merciless. We could have gotten out of debt quicker, but we just balanced it out where we had our own savings, our own investment, our retirement, and then we were still. knocking our way out of her student loans, and I finally have come to this more moderate level here as I've aged and hopefully gotten a little more wise in my time, but good for making progress on both sides can slow down the process. There's our takeaways for this level two moderate. Next, when we move into level three is this high effort and we're moving into the high effort where you're focused on this debt payment. And this is where my default usually goes to when it's trying to coach people because my intention is I want my students to get out of debt as quickly as possible. I know how it feels like to be in debt and I know what it feels like to put my head on the pillow when I'm in debt. I also know how it feels like. To be out of debt and I know what it feels like to put my head on the pillow and not owe anybody anything And I want people to get to that other side where They don't have the debt and I want them to do it as quickly as possible. This is what brings me to my default Let's make this happen Let's high effort now. You can see i'm already going back reverting to my old Basketball playing self and If you have that disposable income, there's a in my opinion. There's a satisfaction of really making Efficient progress. So if I have extra money at the end of the month, I know where it goes. I and making fast progress. I'm feeling my overall stress and anxiety reduce. So you have that benefit as well. And it just feels really good. There's that certain element of discipline that feels really good for most people. If I'm getting up and going to the gym every morning or For me it's rocking the Peloton upstairs in my workout room and then doing both. When I'm doing that, I'm seeing the results. I'm feeling good. It's high effort, but man, there's that payoff that keeps working in my favor. And so this is where the high effort has many pros and many benefits for. effort in only downside I can think about is man putting all that extra money into debt repayment temporarily limits our funding for our savings and investing goals. So that's the downside of it. It puts our investing goals and other savings goals on pause for a little while until It is paid off, but what I like to tell students is once that if you, the idea of doing our monthly financial plan is to have money left over at the end of the month, that money can go towards debt. And I encourage students to do that, knock out that debt as soon as possible with all that extra money. And if you are not depriving yourself and living a happy lifestyle, that's happy within your own means, naturally, what can happen with that amount of money when you're done paying off your loans is that easily converts into higher savings. So that way, whatever money that is, that's 500 a month that was going towards your debts suddenly moves into The next phase of wealth building where you're prioritizing your flexibility fund, three to six months worth of expenses. Then you're moving into higher contributions for your retirement and you start the wealth building process with that extra money. Just temporary, it just flips over there. But it does slow that progress because you can't put them in both every month. That's the high effort. This is our focused debt payoff. And then you have level four. Which is your extreme intense effort. So think about somebody who really cutting back on expenses in order to work your way out of debt. It's high. Effort on steroids where this is where you are really not doing anything fun or I take that back you can still do stuff fun but you have this extreme focus on whatever you're doing is not going to cost any money all of your expenses are very minimal this is more or less I was between this three and four level where you're merciless where I remember I called my ex wife when we were first married. We were 21 years old or in our 20s, right? And I was like, I remember calling her saying, I saw that you got lunch at this, bagel place for 8. And I thought we really were on this. And I'd look back on it. It's Oh gosh, Brian, chill out, bro. And so anyway, I can see this extreme effort. I had good intentions. We were going to change our whole trajectory of our finances. The intention was good. Execution was very extreme. And so obviously you can get debt free as quickly as possible. You are going to reduce your interest expenses as much as possible. Through this really extreme way of living, but there's a couple of things here that I want us to be aware of if we're in that mentality, and one is obviously really this deprivation thing of not feeling maybe there's a sense of we're trying to get this. out of debt, but then there's also an underlying feeling of not feeling worthy or not feeling good about yourself. And so maybe there's more to it than just your extreme effort. This is coming from my own experience of really finally figuring out, Hey, there's something more to it. It's called mental health. And let's work on that. And then when that lines up, all the other things fall into place. But anyway, this extreme focus, or this extreme effort can have some burnout feelings. The feeling of deprivation. And then also, this feeling of scarcity. Which means there's never enough. Or we're just trying to eke out with this finite amount of income that we have. And there'll never be more. We're living just within some of these confines. And I think that this provides some sort of issue. Sometimes when we get out of debt and are now building wealth, keeping that same. Mindset can really hurt us. And this is what we start seeing where we get out of debt. And now we're saving a ton of money and we're still living this more or less deprived life. Now I'm not talking about a life where we're living within our means. I'm talking this real extreme level and. Of saving and you have the real high percentage in order to get out of debt. This sometimes becomes this mindset of I'm just not able to spend it because one of these days you're actually going to have money set aside. And if you're living this extreme. cutting, no expenses, lifestyle. I've noticed it's really hard for these individuals to turn it on. And this is where we say, just be careful. If you have this extreme intense effort, we want you to be aware of. First, is there anything else going on that might be a bigger issue? And then secondly is let's think about what we're doing this whole money thing for and think about how we're going to be able to switch our mindset into something that is abundant. and not restricting, and if we actually have money, will we use it in the right way, or will we continue to deprive ourself for it? We've got four levels of effort here when it comes to paying off the loans, and that's where I want you to think about which one best fits you, and then design your financial goals around that level. And we can talk now. The same. Jargon or the same language around this because now we know that hey, there are four different levels. It's not all about rice and beans and Getting out of debt as soon as possible. There are different ways to do this choose the one that best fits yourself friends if you made it this far, I applaud you. Thank you very much for listening and all of your support. And once again, if you need anything from me, find me on YouTube or most likely on Instagram, Dr. Brian Foltis would love to hear from you. Thank you all very much. Have a wonderful day. And we'll see you next time. Thank you for tuning in to another episode of the Brian Foltis behavioral finance podcast. We hope you found our exploration into the fascinating world of human behavior and finance, both enlightening and thought provoking. Be sure to subscribe for future episodes and until next time, stay curious and financially savvy.