“Why do you care so much about getting out of debt?”
This question left me dumbfounded with my jaw on the floor and my head spinning. A close friend of mine could not see how her reckless borrowing during college would haunt her later in life.
To be fair, I was miserable.
I never ate out with my friends, I borrowed college text books or snapped photos of the assigned readings to look over later, I sat in the Panera Bread parking lot for hours with my laptop to tap into their Wi-Fi without spending money on coffee, and I worked 4 jobs between classes. The only time I had for homework was during my job at the gym where I worked from 4:00-8:30 in the morning four days each week. I worked at a pharmacy during the day or attended class, and worked. every. night. at one of my two different waitress jobs. Most nights, I clocked out anywhere from 10:00 pm all the way to 2:00 am from a restaurant and went straight to the gym where I would sleep on the couch until my shift started.
I look back at these decisions with no regrets.
I graduated with honors, a Bachelor of Business, and about $12,000 of student loan debt. I borrowed money when I was 19 to purchase my first home, which is now an investment property. I borrowed again to purchase a farm, which is where we are raising our children and making the land work for us. I have debt, but it is shrinking every month.
I don’t have to wonder where this friend is at now in her finances.
She dropped out and never completed her Bachelor’s degree. She has more shoes and clothing than you could wear in a month and more makeup than you could use in a lifetime. She spends money on extravagant trips, going out to eat, bottles of wine… and she thinks that I make so much more money than her.
The truth is, even if I made less money, I would still have more money than her.
I still cannot fathom that anyone would not see the obvious value in being debt free, so let me break it down for you. If you have consumer debt, it means that you spent more money than what you made. It means that every month you are throwing your own money away in interest payments for the privilege of using someone else’s! It means that the assets you think you own do not really belong to you. It means that your time doesn’t belong to you because you have to work 40+ hours per week to pay for your debt.
To win in your finances, redefine “afford.”
Can I afford a latte? Can I afford to put central air into my home since it is 90 degrees and I work/sleep/eat/relax here almost 24/7 with two small children? Yes, I have enough cash to pay for the latte, and yes, I have enough cash to pay for central air. However, buying a latte means that I don’t pay $5 of the principal on my mortgage and I have to pay interest on that. It also means that I have $5 less to invest, and $5 less earning interest for me. To pay for central air, I would have to use money from my emergency savings. If I need it, the money will not be there and I will not be able to pay for the emergency.
Try to grasp the real cost of spending money on things you do not need – calculate the price tag plus the opportunity cost. Buy and enjoy the birthday latte, but realize that every time you spend, you are prolonging your interest payments or missing out on interest income!
Your money can work for you. It has more earning potential than you!
I encourage you to research compound interest. Work hard now to eliminate your debt so your money can start working for you! In 2014 we paid off $13,000 of debt. In 2015, we increased it to $21,000, and in 2016 we paid off $25,000 of debt. That is almost $60,000 of debt in three years! Get this- we are on track to be out of debt in a little more than 4 years! We can get more aggressive with investments, and finally enjoying things like non-local vacations and central air.
Change the way you think about debt. Debt is a chain that imprisons you and keeps you from doing the things you love. It is the reason you have to work at a job you might hate, the reason you cannot spend enough time with your family, and for many, the reason that you cannot pursue what your love! You debt enslaves you. Redefine “afford” and start to watch your debt shrink!
Want to read more? Click here.