When you set out on your journey to Financial Freedom, you’re inspired and excited. That’s to be expected, and we love to seeing that enthusiasm in the community. But you’ll still be experiencing the pressure of paying off the debt you’ve built up. Don’t be discouraged!
Although you have the same debt, with the support of the Financial Foundations Community, you have the tools to tackle and exterminate that debt. Naturally, one of the questions you’ll have is which should you do first: build wealth or get out of debt?
How Did You Get Here?
Too often people fall into the rut of living paycheck to paycheck, paying only the minimum payments on credit cards, car payments and mortgage payments. If that’s your situation, you probably thought that as long as you paid the monthly minimum you were fine. Except you kept getting deeper into debt as credit card interest and fees accrued.
And because you didn’t have a Security Buffer, new “emergency” charges increased your balance. Have you been feeling like you’re bailing out a leaking row boat with a tea cup? No matter how fast you bail you continue to sink.
So Should I Get Out of Debt First?
As you’re evaluating your monthly spend for opportunities to add to your Pay Yourself First amount, you’ll probably notice that debt takes a big chunk of your income. Debt interferes with your ability to increase your wealth by directing that money out of your hands and right into your bank’s already full coffers. That vacation you got a great deal on? Taking the compound interest into account, by now you’ve probably paid for it twice over. So, yes, you want to get out of debt quickly and send that money out to work for you!
But if you’re just working on paying off your debt, you won’t have a Security Buffer protecting you and you won’t be working toward building your Freedom Generator. This pushes your goal of Financial Freedom further away.
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.