“Should I pay off my debt entirely before I start investing?” This topic keeps me up at night (not really). I do feel very passionately about the guidance people receive on this matter.
Paying off our debt and becoming debt-free is one of the single most incredible moments of our 16-year marriage. We used many standard techniques to become debt-free, including living below our means, reducing expenses, and saving our income.
But we also learned how to invest along the way. In fact, I started investing before we tackled the debt.
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Saving versus Investing. I wrote a three-part series (the magic of saving, the magic of investing, saving vs. investing) to explain the difference between saving and investing. Let me try to clean it up a bit.
Saving is a function of discipline and time. Investing is a function of discipline and knowledge.
I just created this saying, but I promise you will see it again. Being a saver is impressive, as long as you have time. Investors can leverage knowledge to expedite growing their resources (via wealth generators) or create money from thin air.
Where does paying off debt fit into the picture? Paying off debt is a function of saving. Yes, to pay off the debt, you will live below your means, reduce expenses, track spending, live on a budget, and consolidate bills—but you are building skills, not growing knowledge.
The process of paying off debt is life-changing because you undo all the damage you did earlier in life. You and your spouse have a come-to-(insert entity here)-moment if you are married—then the debt repayment begins.
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You become fed up with the status quo and decide to change. You shift your entire lifestyle to live on fewer “things” and “events.” You become happier and more relationship-oriented.
These lessons and techniques you learn during the debt-repayment portion of your life will always stay with you. I still check all my bills every month. And if one spikes more than $10, I am digging into the reasoning.
What’s after debt-repayment? Dave Ramsey is a hero to the American people. I read his latest book, “Baby Step Millionaires,” and will go and read his back catalog over time.
Dave Ramsey believes that you should pay off all of your debt before you start investing. And when you do invest, you should do so via mutual funds and a professional financial advisor.
Why does Mr. Ramsey say these things? He knows the average person is not going to take investing seriously. If they do jump into the markets, it will be to earn a quick buck. We call this being a trader (vice an investor).
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I’m different. I am different from Dave Ramsey because I do not aim to be a mainstream household name. I don’t need to sell millions of books. I want to earn $3000/mo from my books, blog, and YouTube. I’m good with this number.
Therefore, I can write directly to the 5-10% of people who genuinely want to get ahead in life. Robert Kiyosaki wrote the best financial book of all time, “Rich Dad Poor Dad,” and most people don’t understand its meaning.
To create the life you want, you have to build it. Paying off debt is part of a more extensive process of removing yourself from the workforce, building an automated business, and living off passive income from dividends.
As you read this article, decide who you want to emulate. Do you want to be debt-free with $100,000 in the bank? Or do you want to be debt-free, $100,000 in the bank, and $1 million invested earning $50,000/year in dividends?
Equal timelines. You can make them both happen in the same amount of time. You can save $20,000/year for five years at your job. Having $100,000 in savings is a spectacular achievement.
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In the same five years, working the same job, you can learn how to invest. Your $20,000/year can earn you 9% a year in USDC. You can create an income portfolio that also pays you 9%.
Even better, you can become a Passive Income Hero in your free time. You can build a business within the creative fields (music, photography, art, video, audio, writing).
Yes, you can invest $1 million within five years; you will just need to do 10-15 years of work in this timeline. This means you’ll have to grind and grind hard. You’ll need to grind-out on reading books, building businesses, learning programs, reading articles, networking, advertising, and marketing.
Back to Dave Ramsey. This is why Dave Ramsey doesn’t talk about investing too often. He talks about paying off debt, building an emergency fund, and paying off your home.
I won’t put words in his mouth, so I’ll put them in mine. Most people aren’t going to grind their way to becoming wealthy. Most people don’t want to obtain the knowledge to invest in the markets, business, real estate, and cryptocurrencies.
Boring Investing is Good Investing
Suppose you are ready for more. If you are prepared to achieve more, I can give you some free resources. I just finished my Signature Series 2. These books represent my articles in financial mindset, retirement planning, investing, cryptocurrencies, real estate, and business. Please download and enjoy. These may help you convert you from a saver to an investor.
- Financial Mindset– “Become CEO of Yourself 2” (free pdf)(Amazon)
- Retirement Planning– “Your Retirement Planning Guide 2” (free pdf)(Amazon)
- Investing– “How We Plan to Retire on Dividends 2” (free pdf)(Amazon)
- Cryptocurrencies– “Counting on Crypto 2” (free pdf)(Amazon)
- Real Estate– “Financial Independence through Real Estate 2” (free pdf)(Amazon)
- Business– “Retire Rich, Retire Comfortable with a Business 2” (free pdf)(Amazon)
Conclusion. Hopefully, I did better explaining these concepts than I did almost a year ago in “Pay Down Debt or Start Investing.” I have read and grown a lot since then. The question is, what will you do with this information? How can it change your life?
If you aren’t debt-free, read the Dave Ramsey book “Baby Step Millionaires” to get motivation. Also, for a step-by-step guide, I recommend “I Will Teach You to Be Rich.” If you want to achieve your dreams, becoming an investor is not optional.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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