There are a lot of congratulations going on with lots of people paying off gigantic amounts of debt and that is terrific, but a massive philosophy change needs to happen immediately in the world. The goal of paying off debt is not number one. The goal is to avoid debt from the start and to invest as soon as possible.
Avoid Debt Like the Plague
Our relationship with debt across the world is just way too casual. We act like it is no big deal because it is easy to do and everyone else is doing it so we should/could too. No NO NO! It is time for that thought process to be done. We usually don’t realize how bad credit, debt, and bills are until they get too out of control, and we literally see ourselves entering financial ruin.
Need To Start Early in Life
This attitude needs to start with our children. That is where we should have learned it ourselves. It needs to be taught in your home to your kids or grandkids. If they can’t learn from your experiences and challenges with debt, then what good are you doing? You can help them from the start to avoid debt and start investing right away.
What greater thing can we do for our children than to help them with their financial life early on? Debt outside of major purchases (home, cars, education) is not okay. Even major purchases need to be held in check as well. It is not okay to purchase a brand-new car right away or max out our mortgage so that we are house poor or choose a college and career that puts us into a lifetime of student loan hell.
We Can Not Afford Debt Like Earlier Generations
There is a pattern developing of increased debt load. It is starting with the general acceptance of extremely large student loans. The increase is incredible and why we are accepting this as a country is not fathomable to me. Then we add on a large mortgage and cars and consumer credit cards and bam, we are toast. We do not have the retirement vehicles that our parents or grandparents had access to. It is going to be up to us to fund ourselves later on in life which makes it all that much more critical to start investing early on in life.
Social Security Likely Won’t Carry Us
Those of us in our 20s, 30s and 40s are not going to be afforded the luxury of depending on social security to carry us through our retirement. If that is your game plan then good luck. Maybe it will and maybe it won’t, but that is a pretty big risk you are taking hoping things will work out.
You Are In Charge of You
Honestly, I like being in charge of my destiny. I don’t like to depend on others and hope things work out. I like to be in charge and financially I don’t want anyone else in charge of me. I want to determine my destiny as best as I can.
You need to realize that you are in charge of yourself. There may not be other avenues available to you later on in life. So that means it is more important than ever to start investing earlier on in life. To do that we have to avoid debt earlier on and start investing earlier in life.
But I Don’t Make a lot of Money
Doesn’t matter how much you make. Please remember that. It does matter how much you spend. We have this attitude that it matters what our salary is, but it is what you spend that matters at the end of the day. Someone who makes $100,000 but has obligations of $150,000 is not wealthy. Someone making $25,000 but spends $20,000 and invests the other $5,000 is better off than the person making $100k, (but for some reason we’re always jealous of the high earner) so stop worrying about your salary and start worrying about your spending today.
My Parents Were Poor School Teachers
Again, the conversation about income doesn’t carry a lot of weight. My dad was the sole provider in our house and was a schoolteacher. They don’t make much and yet my parents paid off their house in 19 years and my dad retired in his 50s.
Know why? They didn’t carry debt other than the mortgage. If they didn’t have money, they didn’t buy it. Our cars were not impressive, but looking back they saved and were able to retire wealthy so who cares about that car early on? When your obligations are low you have a lot more money to work with.
My parents saved $25 a month for me and my sister for our college fund so $50 a month. They had it set aside from the day we were born so they never saw it in the paycheck and it was never an impact. That allowed me and my sister (along with us paying and working full-time during school) to graduate without debt out of school.
My parents allowed me to succeed. Even though we were living on a teacher’s salary they kept the costs low and were able to put money aside to pay off the house, invest in their retirement, and children’s education. The only way it works was to keep costs low. If they can do so can we, but we have to avoid debt early on and keep costs low.
Taking It to the Next Level and Investing
My parents did an amazing job, but never really allowed their money the time to grow. They kept their money in small growth accounts at the credit union or bank. Imagine what could have been done over 18-20 years in mutual funds. But that is the past and I don’t like living with “what if”, but luckily my wife and I can follow what they did and then add upon it to grow our wealth. We’ve done it and are almost financially independent in our 30s. However, we keep working to make generational differences and to accomplish some other goals we have in life; plus I like my job.
I Am Already in Debt So What Can I Do
Well, that is a reality for most people, so you are going to have extra work to do, but you likely already know that. So you have to work your way out, but if you can invest any amount as you do it you will be glad later on. Just imagine what your accounts would look like if you put that money from credit cards or other consumer debt into mutual funds. That compound interest that you are paying off to others would instead be growing and paying you later on in life.
The immediate need is to break the pattern of debt accumulation. You cannot be cozy with debt and think it is no big deal. It is a big deal, it may not allow you to be financially independent and may force you to work until you die.
Pay it off and set some aside for investment. If we never set money aside who is?
Start the Pattern of Life Time Investment
Just imagine a life where we are as comfortable adding money to our savings and investment as we are with adding debt. We are so used to adding debt, but what would the world be like if we flipped it around and had more money saved? What a place!
Debt Needs To Hurt
When you are faced with the decision to spend and go into debt I hope that decision really makes you uncomfortable. It is such a big deal to increase our debt. The addition of debt to our bottom line needs to be a painful decision and well thought out.
- Why are you adding debt?
- Could you save up a little longer and fully pay off what you are buying?
- Could you buy something cheaper?
- Could you invest some or all of that money?
- What are the long-term impacts of this purchase?
- Do I really need it?
- Do I love stuff or money and financial freedom?
This Is My Niche
Lots of people write online but I’ve discovered recently that freedom from debt and early investment is my thing. I’ll write about savings, frugality, and other tips, but I’ve been living a life of debt freedom and it needs to be the focus of folks instead of the general acceptance of debt and working our way out.
It’s not enough to simply say, “don’t get into debt or pay off your debt.” We need to teach and learn the why. The long-term impacts of debt are going to crush our generation because we just can’t afford to not save for later on in life. We’ll be working forever and there will be simply too many people that need work and I’m not sure we’ll have enough employment opportunities. Plus it is really hard to keep up marketable skills later on in life with technology changing rapidly.
I have seen my grandparents and parents avoid debt and pay things off as soon as possible. I didn’t realize what they were doing because we didn’t talk about it, but I was learning from their example. We just took the next step and invested early and watch our accounts grow like crazy because we started putting money aside for it. It was a priority over getting a truck, boat, trailer, 4-wheelers, or any of the other common toys we see popping up in the neighborhood.
Any Amount is a Step Towards Wealth
Save what you can, any amount. You do not have to be wealthy to invest and save. Most people who accumulate wealth have done it over the long term. Short-term wealth generation is just not common at all. Steady, long-term saving and investing will accomplish the goal. The sooner you start the sooner you reach the finish line.
The biggest factor in wealth is when you start investing. When you do that, you will realize that paying off debt is not goal number one, staying out of debt from the beginning and saving and investing is goal number one.