If you have a lot of debt, chances are you do not earn a lot of dividends. Debt represents the worst part of the power of compounding, while dividends reflect the best part.
But, how do you go from being in debt to earning passive income? What shift in mindset must you undertake to achieve your financial goals?
There are many ways to start your debt payoff journey and get on the road toward financial freedom. However, all roads lead through discipline and self-determination.
Use Bonds to Supplement Your Retirement
Welcome to the From Debt to Dividends series, where we will explore the transition from using credit cards to living on the beach with passive income. Let’s begin.
Understanding debt. Debt has always existed because it allows you to obtain something before you can afford it. Basically, debt is a workaround for saving.
However, eventually, you cannot assume more debt, and things become much more difficult. Then, you must make tough choices about how to escape the debt cycle.
Debt also comes from a lack of financial education. I got into debt because I thought spending with a credit card was normal; it’s not.
When I turned 38, my family had $77,000 in consumer debt. We owned two homes; however, things were definitely tighter than I would have liked.
Become CEO of Yourself 3
In June 2019, I consciously decided to get out of debt and start building passive income streams. I never looked back.
To get out of debt, you must understand its origins. Debt is not your friend; it is your mortal enemy. Being in debt is not cute; it only causes pain and suffering.
The slow way forward. The toughest part about getting out of debt is recognizing your spending problem. They trained us to spend everything we earn—and then some.
Once you admit to yourself that you have a spending problem, it’s time to calculate your debt payoff date.
I got this idea from Ramti Sethi’s book “I Will Teach You to Be Rich.” I read it in September 2020, and it changed my life.
Most people do not fully understand how much debt they have and when they will pay it all off. Instead, they are trying to “wing it” and praying everything works out.
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I calculated our debt in June 2019, and it was eye-opening. In fact, it made me feel so much better knowing I discovered all of the skeletons in the closet.
Let’s focus on spending. What spending habits got me into debt? The number one thing was buying a house that was way too expensive in 2008.
I can trace most of our financial issues to building a house in Arizona in 2008. My military allowance for housing was $1,200 at the time, and our mortgage was $1,800.
I thought we could afford the home, but ultimately, it slowly eroded our finances; I learned that 15 years later.
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If you are underwater on your mortgage, it’s time to get roommates. Get them sooner rather than later. You want to harness the power of compounding before it starts to work against you.
My wife and I always drive used cars, which we mostly paid for in cash. We bought a used Mazda CX-9 for $30,000 in December 2013; however, we still have this car today (in 2025).
My personal spending on video games and movies got me into financial trouble. At the height of my stupidity, I was probably spending $400 to $500 a month on this crap.
I have kept every game I have bought since 1999. However, I would rather have this money in the stock market.
Creating a personal budget. The best way to control your spending is to create a personal budget; this is money you can spend on anything you like.
A Recession vs. USDC
My wife and I each have $750 monthly to spend on our personal budget. I like to break mine down into $25 per day.
People always say that going to Starbucks is the problem with overspenders, but that is not the case. Going to Starbucks AND buying lots of video games (for example) is the problem.
Let’s say I love Starbucks and want to spend $15 daily on it; this is $450 monthly. That means I have $300 left to spend as I choose. I would have to limit my video games and movies for the month.
However, if I want to spend $500 per month on video games, I would need to limit my Starbucks visits to every other day.
It’s that give and take that makes having a personal budget wonderful. I have tracked my spending daily since September 2023, and the results have been great.
Run an Upscale Bed & Breakfast
Track your food. Food is the least tracked line item outside of your housing and personal spending. People simply do not keep track of what they spend on food.
The best way to track your grocery and dining budgets is to separate them into different accounts. Then you set a limit.
For example, let’s say you give your family of four $900 per month for groceries and $300 for dining out. You should transfer $900 to Cash App for monthly groceries and $300 to Venmo for restaurants.
This method is similar to using envelopes, but only digitally. Please track your food spending, as it can become the most out-of-control of all your line items.
USDC vs. Series “I” Bonds
Most countries have a culture of food, while America has a culture of eating. Therefore, trim your food budget to help you trim some pounds. That’s what I do.
Putting it all together. You’ll be far ahead of most Americans if you reduce your housing, follow a personal spending budget, and track your food purchases. I would say that this would put you in the top 20% of financial education.
Remember that the bar is low. Most people cannot even fathom the concept of having a general budget, let alone personal and food budgets.
The ultimate goal is to free up money so that you can start paying off debt. Once you complete your debt payoff journey, you will have bigger things in store.
The Publishing Chronicles 5
If you have trouble cutting your personal spending, create an arbitrary number to get started. For example, give yourself $1,000 per month to spend.
Once you have that number, you can determine what’s truly important to you. Will it be tough? Absolutely. But you cannot make an omelet without breaking some eggs.
Conclusion. This article is the first step to changing your life. You now have everything you need to become rich. All you need to do is add discipline and self-determination.
How bad do you want to get out of debt? How much do you spend on yourself every month? Are you willing to reduce your personal spending to put toward your future?
Don’t Gamble with Retirement 7
These are tough questions; however, you should ask them in the mirror. Nobody is coming to save you; you are all you have.
I retired at age 42, not because I became rich but because I followed these steps. To this day, I still give myself $750 per month for my personal allowance.
I love controlling my spending because it prevents me from “wanting.” Every once in a while, I want a new shiny object (like a Nintendo Switch 2).
However, I enjoy hanging outside with my wife most of the time. I do not need or want much. I just want to be financially free. If you want that future, start building your budgets today. Good Luck!
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