Hey Everyone! Today I want to again talk to you about money. Specifically, about debt and how it has the single biggest impact on your ability to make financial progress in life.
Debt can take many forms, your house, your car, credit cards, student loans, medical bills, personal loans and many other things fall into this category. Debt will put you behind the curve when it comes to winning at life and building wealth.
Why is wealth building important?
In an earlier post, we discussed focusing on what’s important and how often in life we spend so much time “being busy” or working that the things important in life can take a backseat. The reason building wealth is so important is because it gives you the flexibility to focus on giving, family, god, and other things.
When you have debt, your income goes towards paying the interest and repaying the principle on your debt. You no longer have the freedom to save money, invest, build wealth and then give it away. When you have 25% of your income going to your house, 15% of your income going towards a car, and the rest being split among saving (if you can) and regular monthly expenses, you’re left with next to nothing to invest and build wealth so that in the future you no longer have to worry and have the ability to retire, give it away, and do things you enjoy.
Dave Ramsey is one of the most prominent speakers on the subject of debt. Aside from your home, he would tell you that there is never a situation where you should go into debt. This includes a vehicle and student loans, two of the most common types of debt.
You can do it!
If you’re like me, it may be too late to immediately eliminate your debt. You probably have at least one or more of the types of debt discussed above. That doesn’t mean you’re out of luck. What it does mean is that you have to re-prioritize your life and make sacrifices of your time and money in order to get right and pay down debt as quickly as you can.
Imagine your life with no monthly payments except for your phone and utilities. What would that look like? How much money would you be able to invest, save, or give? You would likely have $500, maybe $1,000 extra a month to do anything you want. What if your home was also paid for? Would that be $2,000 per month? What could you do then?
Visualize your future
Visualization is a great tool to help you stay motivated. Picture your future, picture your situation, picture your family. Imagine you’re able to invest $1,000 a month in mutual funds. At only an 8% return, after 10 years, we would now have $180,000. That’s $120,000 in investments turning into $180,000. If we continued this for another 10 years, we would have invested $240,000 and we’d be up to $592,000. This just continues on and on and soon you’re a millionaire.
This is just one example of what could happen if you were to eliminate your debt. The possibilities are endless, but you could make a huge positive impact on the world if you had an extra $592,000 available. Debt has such a significant impact on our ability to build wealth and win financially. If we want to really win with our finances, getting out of debt is the most important thing we can do.