[The Secret to Debt Repayment] The Reason You Should Not Repay High-Interest Debt
Hello, this is Koyama.
How much money is actually needed for retirement?
No matter how long time passes, the debate never ends,
Nissay Research Institute has suggested a figure of 32 million yen.
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“People in their 50s earning the most, in the range of 5–7.5 million yen annually,
will need 32 million yen by the age of 65.”
Nissay Foundation Research Institute assumes life will continue after 65,
and has produced this calculation with that premise.
The deficit for households with annual income of 10–12 million yen is up to 65.5 million yen.
Nikkei
(From July 24 issue of Nikkei’s 2019途『Japan’s Path』)
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There are estimates like 20 million or 30 million yen
and so on, but if you do not work at all and
do not change your lifestyle,
it would be reasonable to think that even 30 million yen in savings would be insufficient.
What you need is not just living expenses.
For example, medical costs and hospital fees.
Some people are absolutely unwilling to share a hospital room,
but
in that case the hospitalization cost
is about 15,000 yen per day.
If you are hospitalized for a month, that alone would be 450,000 yen.
In addition to living expenses, unexpected expenses will occur during life,
so it is essential to have a certain amount of savings
for emergencies.
On the other hand,
there are opinions saying,
“There’s no time to save,”
for example, recently,
the book by Takafumi Horie,
“Use all your money (Magazine House),”
was published.
Quite a provocative title, isn’t it?
There will be readers who agree, and those who oppose it,
and various responses,
but for those who feel comfortable with the phrase
“use all your money,”
there might be some.
Money spent is enjoyable, after all.
However,
believing the phrase “use all your money”
to be comfortingis dangerous.
Horie is surely someone who knows how to use money well.
In his books,
he talked about “having no material desires,”
but because you have no desires,
you don’t waste money on unnecessary things and use money well
only on what you need.
On the other hand,
generally people who are good with money
are few, I think.
They tend to be ruled by desires, influenced by ads
and pay more than value warrants.
Such people, simply put,
think, “Oh, I’ll just spend all my money as it comes,”
and end up squandering,
so that nothing remains later.
Please be careful.
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The Secret of Debt Repayment
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“No, I’m in debt and can’t save at all.”
There may be people like that, but
if you have debt,
you should prioritize paying it off above all else.
Still, paying off debt is not easy.
In particular, when you have a huge amount of debt,
the future looks so bleak that
many give up.
So here is one piece of advice about debt repayment.
When people try to repay debt,they often start with the debt with the highest interest rate.
Reasonably thinking,
there’s nothing wrong with that, right?
Even financial advisors and experts
would say the same thing.
But,
repaying debt in order of highest interest
doesn’t easily lead to full repayment,
and you will almost certainly give up halfway.
Why?
Because the sense of despair never ends.
For example,
if you have a debt of 10 million yen with high interest,
and you pay back 30,000 yen,
you won’t feel anything good.
On the contrary,
the path to full repayment becomes so far away
that the despair may increase.
In the end, debt repayment isa battle against despair and lack of motivation.
Continuing to walk the enormously long road with patienceis more important than anything.
And,
if you accept that premise,
the method of repaying debt from high-interest debts
may seem rational but is actually impractical.
So what should you do?
One recommendation is to repay the smallest amount of debt first,regardless of interest rate.
By accumulating small wins, you keep motivation going.
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When you face a task that makes you feel faint with fear,
you should break the task into smaller parts.
In other words, make changes in small steps.
Make the change so small that it is absolutely achievable.
If you clean one room,
or repay one debt,
the fear will disappear, and the situation will snowball into better shape.
Chip Heath, Dan Heath
“Switch!” (Hayakawa Shobo) 2016 Oct 15
P.180
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As you can see here,
even if the amount is small, if you can completely repay one debt,
positive emotions will arise.
You will be able to taste the small sense of achievement.
This accumulation of small achievements
will eventually lead to a large change.
If today you are in debt and drowning in hopelessness,
please first complete a small repayment.
Even 10,000 yen is a repayment.
Hope will rise in your heart,
to a greater or lesser extent.
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The same applies to trading.
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What I’ve just told you about debt repayment can be applied
to many situations.
For example, it can be applied to trading as well.
For example,
if you hold a stock that is frozen with losses
and the loss is piling up.
If you are overwhelmed by despair,
you might leave the position as is, but
in such cases, the key is to make small changes.
For example,
how about closing the position with the smallest unrealized loss?
Using other positions,
you could take profit equal to the unrealized loss and
settle to offset and
remove the position with unrealized losses.
This is just an example,
and if you don’t have a proper strategy,
things won’t go well,
but when you fall into an unbelievably dangerous situation
and lose the will to fight,
think about making small, positive changes.
If you can see even a thread of hope,your emotions will surely move.
With that,
thank you for reading until the end today.
I sincerely hopepositive changes occur within you.
— Koyama Keizo
