Getting out of debt is the best feeling in the world. I remember how I felt when my wife and I paid off $77,000 in debt; it was a fantastic time to be alive. Please read “Start Your Debt Payoff Journey: Defeat Toxic Consumerism.”
Somehow, the American dream became synonymous with debt. I don’t know how it happened, but it is a hazardous combination of over-wanting and overspending.
Today, I want to explore debt and help you decide if this journey is right for you. Make no mistake: paying off debt is a spiritual journey, not a financial one. Let’s begin.
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What is debt? Debt is the magic of compounding working against you. Many people (including myself) consider the power of compounding to be the 8th wonder of the world.
However, combining debt and compounding is not good for the debtor (you). How did debt become such an integral part of our society?
Debt has always been around. I learned this fact after reading “Debt: The First 5,000 Years.” Debt is always around because it is an emotion.
We all want stuff. We want to provide a better life for our kids. We want to drive nice cars and live in a nice home. We want to travel the world, try new food, and have fresh experiences.
When we want more than we make, we get into debt. In fact, America saddles young people with debt—in the form of student loans—right out of high school. They also give them credit cards right on campus.
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Since the education system doesn’t teach financial intelligence, it’s apparent that society wants people to be in debt.
Every interest payment makes someone richer and someone poorer; you must decide what side you want to be on.
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Fighting the system. Most people want to fight the system through politics or handouts. However, the best way to fight is to learn about money.
Every single financial decision in your life has consequences. You can decide to spend $25 on a teddy bear for a birthday party or you can invest in an AT&T (T) preferred share.
The best way to fight the financial system is first to fight your inner monologue (the voice in your head). You must stop spending.
This is a tough thing to do and will take some time. I remember removing the saved credit card information from my Amazon account to avoid spending.
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It’s hard for me to believe that I loved spending that much. I was so addicted to spending that I had to remove my saved credit card information. It’s not a good look.
Creating your dream life. To avoid spending, you must first create your dream life. Without a dream, there is truly no reason to pay off debt and elevate your financial intelligence.
My dream life consists of being able to take my family on small trips and eat out sometimes. Truly, I want my kids to have assets so they can choose what they want from this life.
I want my kids to have $10,000/month of passive income that underrides their life. That way, they can choose what career or business suits them.
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I loved being a US Marine. I loved it so much that I stayed for 24 years. However, I didn’t have a financial choice to leave early. I came into the Corps with $10 in my pocket.
I want my kids to have more choices. Of course, they will have to follow my directions. But, hopefully, they see my success and want to follow in my footsteps.
What is your dream life? Do you equate your dreams to spending a lot of money? To spend a lot of money, you would have to make even more money.
How much does your dream life cost? I assume you want to pay for it out of cash flow and not on credit. How will you generate the income to live your dream?
The first steps of paying off debt. Once you have written down your dream, it’s time to attach a cost. The lower the price tag, the sooner you will arrive.
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Let’s say your dream life costs $9,000/month. The first step is to collect all of your debts together and look at them. Yes, this is the hardest part of the journey.
We all have credit cards that we don’t want to look at, but it’s time to overcome these fears. We cannot let the demons of the past overtake our present and future ambitions.
I gathered up all of my debts on a spreadsheet in June 2019. The total was $77,000 in debt including cars, credit cards, and personal loans. I felt ashamed and embarrassed.
How did I let myself get into so much debt? It’s pretty simple actually; I didn’t track my money. I didn’t count every penny.
I let money fall out of my pockets. I didn’t track my bills religiously, so utility and phone companies took advantage of me.
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As soon as I wrote down my debts and tracked my spending, magically, I started paying off my credit cards and loans. As they say in the Marines, “Freaking Magic.”
A budget is everything. Your budget is your saving grace. It is the single most important thing you can do to save your financial life.
If you create a budget for $9,000/month, stick to it. My wife and I created a budget for $7,000/month in June 2019.
We are still on the same budget, although we make over $15,000/month. We save and invest the rest of the money, which positions us to collect more assets.
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The more sub-budgets you create under your central budget, the more detailed you can become. Some sub-budgets you can create are: clothes, entertainment, personal, family, food, restaurants, and coffee.
You can choose what is important to you. Your $9,000/month budget can look like this: housing ($2,000), utilities ($1,000), cars ($1,000), food ($1,000), entertainment ($1,000), and saving and investing ($3,000).
Saving and investing will add additional income to your bottom line for clothes, shopping, and fun. Your assets produce your true discretionary spending.
If your dividends produce $500/month, that is your discretionary spending. To save and invest, you must first pay off your debt.
The more you focus on your budget, the less you want to spend. Eventually, you’ll get to a point where you can purchase almost anything you want.
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Conclusion. The rich own assets, and the poor own liabilities. The only way to become rich is to acquire assets and live on a budget.
If you make $1 million a month and spend $1 million a month, you are poor. You are rich if you make $1 million a month and spend $500,000.
If you make $50,000 a year and save $20,000, you’re on your way to becoming rich. You are poor if you make $50,000 a year and spend $60,000.
Your debt will accelerate the rate at which you become poorer. Debt is a transfer of wealth from rich to poor.
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Everything starts in your mind. If you want to acquire assets versus liabilities, it begins with the $25 you have in your pocket.
You can go to Cash App right now and purchase $25 in McDonald’s (MCD) stock, or you can go to McDonald’s and spend $25 on your credit card to get a Big Mac combo (P.S. I love McDonald’s). Which is it?
Over time, the numbers get bigger, either in the debt column or asset column. You can change your future starting today.
I chose in June 2019 to never be in debt again. I paid off all of our debt (minus mortgages) in April 2021. Becoming debt-free is the second-best decision I have ever made, right behind marrying my wife. Good Luck!
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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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