Four years ago we got a new, fancy, higher paying job and I was thrilled! But after a few months, I checked my bank account balance and was sorely disappointed. Our account was empty and payday was still a few days away. We were still broke. That was a gut-wrenching and frustrating feeling. I was so disappointed.
I didn’t grow up wealthy. In fact, my parents were good with money but we didn’t have a lot of it. I couldn’t wait to be an adult and have gobs of money and be able to shop my little spender heart out at Target and Pottery Barn!
Unfortunately, that wasn’t anything like the reality of adulthood for me.
I wanted to have the freedom to spend. I imagined I would have extra money to spend on wants. I desperately wanted the shiny car and the beautiful Pinterest home!
It certainly wasn’t happening anytime soon because every month we were broke. We weren’t saving anything. Our financial future was not looking bright.
That’s right about when I decided to make a huge change. I had to get a hold on our finances one way or another so that I could achieve this dream of mine. I was determined to get to a place where I could spend freely and pay for my wants without causing us to be broke and savings-less.
There was one thing we needed to do to change our entire financial future.
Before we did this one thing, our net worth was . . . wait for it . . . -$71,000, Yes, negative! Since we’ve taken on this one thing, it has completely changed our financial future. Now, our net worth is well over $100,000 and growing rapidly every month. We don’t stress about money. We are building a business and have built up several streams of income. We have a healthy savings account. Best of all, we have a plan for the future and we’re making it happen.
(And let me say real quick here because I know you may be wondering . . . we make just over six figures but not loads of money, and we’re primarily a single income family. We have 3 beautiful, expensive kids too!)
Do you relate? Well, good! If you do this one thing, you too will be far away from the wrong path and well on your way down the right path that leads to wealth, peace, and freedom no matter what your starting point is.
So, what is the one thing that will change your entire financial future?
Paying off your debt. ALL of it.
Yes, ALL of it, girl.
The credit cards, the car loans, the student loans, the medical debt, the phone loans, all. of. it!
We had $1,300 of minimum payments every month and they were keeping us broke as a joke. The only way we would be able to crawl out of this paycheck-to-paycheck cycle was to get rid of those stupid loans. We had no idea that taking on this one simple thing would not only make us debt-free, it would change our entire financial future.
Related Reading: How We Paid Off $71k of Debt in Less Than 3 Years on a Single Income
Keep reading to find out the massive impact of paying off debt and why it does so much more for you than just making you debt-free! You do not want to skip this huge first step in your financial plan and I’m going to help you take steps to get started today.
Debt Causes You to Be Paying Interest Instead of Making It And That Will Keep you BROKE!
Want to be wealthy? You need to be earning interest every month through investments, savings, and more. Debt has the exact opposite effect. It causes you to pay interest in the form of credit card debt, car loans, etc. Boo! Debt will keep you from getting ahead because everything you buy on credit ends up costing you more over time and prevents you from spending that money on investments that actually earn you money and grow over time.
Let’s say you have a $25,000 car loan at 8% interest. That adds up to about $2,000 in interest per year that you will pay. Holy schneikies!
Now let’s say you own the car outright. Congrats! You are now able to pocket that $2000, and you can even invest it into an index fund. It will earn you 8% interest every year! So not only do you get to keep the $2000 every year (yipee!), your $2000 could actually be earning you another $160 per year too!
Do you see how debt holds you back from achieving those greater earnings? It does. And those greater earnings are your ticket to actually having money to spend on wants and wishes – in cash!
Debt Keeps You Constantly Wanting More and Buying What You Can’t Afford (Yet!)
Here’s the huge problem with debt- once you buy something on credit, you have the item (yay!), but you have that payment following you along and nagging at you. By the time you pay it off and are free of the interest and payments, chances are, you’ve moved on to another want or wish. You don’t even stay excited about your new item, but you may still be making the payments on it! That cycle will keep you in debt forever and still never satisfied. You have to break this cycle!
When you are buying things on credit and with loans, you falsely allow yourself to believe that this is the lifestyle you deserve and you can afford. You become very comfortable with it. The reality is however, that you can’t afford it at all if it’s on credit and paid for with loans!
If you can’t buy it in cash, you can’t afford it.
What happens next is that your income increases over time and instead of using that extra income to pay off your debt, you just increase your lifestyle (again thinking that you deserve and can afford it), and remain trapped in the cycle of debt. Forever. Ugh. So frustrating.
You Can Break the Debt Cycle and it Will Turbo-charge Your Path to Wealth!
There’s good news though! You can break this annoying cycle and set yourself up for success in your future. I’d by lying if I said there wasn’t any sacrifice involved. There is. But it’s so worth it and it will set you up for that dream future in a really strong way. It actually propels you into success financially in so many ways and it’s an essential part of being completely financially independent. Paying off debt is truly the best way to propel yourself into wealth! This is because:
- You will have a “come to Jesus” moment about what you can actually afford
- You will stop paying interest and start earning it
- To pay off debt, you will have to learn to budget and cut back
- You will start to see the effects of how good it feels to keep your income instead of sending it toward minimum payments and want to continue it
- You will free up income to save, invest, and spend wisely
- You’ll finally be able to spend on your wants in cash, with no guilt and no credit card debt following you around!
You’ll Gain So Much More Than Just Debt-Freedom
The process of paying off debt will teach you all the things you need to know to have an incredible financial future.
As you dive into paying off debt, you’ll quickly discover that you need to get on a zero-based budget. You’ll master that so that you can create more extra money each month to pay off debt.
You’ll wonder about how much savings you would need in an emergency, and make a plan to save more.
You’ll think about where you want to be in 10 years and what you’ll do with all your extra cash when you’re debt-free.
You’ll become more aware of your spending habits and vices. You’ll cut out credit cards that keep you in debt, and learn to live within your means.
You’ll realize you don’t have enough in investments, and don’t know enough, so you’ll research investing and start to contribute more to your 401k and plan to save even more once the debt is paid off.
In true If You Give a Mouse a Cookie fashion, this one step will propel you into the world of financial freedom. And let me tell you, this world is where peace and freedom are found.
Imagine yourself 10 years from now. You’re lying on a sandy beach on vacation with your family, without a care in the world. Money is piled up in your bank account back home, you have a happy and healthy family running around you, your house back home is lovely and just the right size for your family. Your car may be a couple years old but it’s paid off. You never worry about your spouse getting laid off because you’re prepared.
This is not a fantasy. This is what financial peace and freedom look like and it is within reach of everyone who will take the first step toward it and then keep going. The best place you can start is by paying off your debt. It will truly change your financial future.
One Day or Day One? Start Today With This Simple Step
More Ways to Get Started Paying Off Debt
Now, you’re in. You agree with me. But where do you start? I have awesome tools and a ton of reading you can dive into next! Go down the rabbit hole and actually get started on paying off your debt today.
The 7 Steps to Paying Off Big Debt
How to Calculate Your Debt Free Date 2 Ways
How to Pay Off Debt Fast With the Debt Snowball
How to Make a Budget: Step-by-Step Guide + FREE Excel Template
I know it might seem like a lot, but it’s really not! Paying off debt can be really rewarding and during the process of debt-payoff, you’ll learn budgeting, plan future goals, understand your spending habits, cut out bad habits, and more.
It will completely change your financial future. I know it did for us!
Make sure you follow me on Instagram (@easy_budget) for daily debt-free and budgeting inspiration!