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Get out of debt to unleash your inner money maker

The series I ran on why you must get out of debt looked at how credit cards can double the price you pay, the cost of foregone investments, and why mortgages are the only good debt.

But here’s another reason to get out of debt. It’s hard to price, but it may be the most valuable benefit of all.

It’s peace of mind and freedom to make money.

When you’ve no debts, you literally don’t owe anyone anything. Your money is yours to do with as you will.

Sure, you may feel you owe:

  • Your parents for raising you
  • Your friends for the good times
  • A beer to anyone who encouraged you through the bad times
  • Whoever gave you the spare bed in debt article three

But financially speaking, you’re free.

Many people get out of debt only to use that freedom to go straight back into the mire. They filled the void left by paying off their debts with… more debt.

A better plan is to keep up the momentum to start growing your finances, both by saving and investing the free cash, and also by increasing your earnings.

Make money for yourself, not some bank

I’ve heard many times from people who’ve gotten out of debt how liberating it is. They discover what I relish every day – that this month’s salary is going wherever I want it to go, not on paying for things bought and forgotten about years ago.

Debt-free, you can save up an emergency fund, invest to create a future income – or just treat yourself to a meal out or new pair of shoes guilt-free.

And here’s the real bonus – when you’re financially secure, you’re also more likely to look for ways to make money.

Everyone knows the rich get richer. Having compound interest working for you instead of against you is a big reason why.

But I believe there’s also a mental pay-off for the debt-free. Operating from a position of strength, you are more able to think of money as an opportunity and a tool, rather than as a burden. Your whole outlook on money and the language you use can change – and that’s the first step to getting richer.

I don’t think it’s any coincidence that top personal finance blogs such as Get Rich Slowly, The Simple Dollar, Frugal Dad, and Fabulously Broke were all founded by writers battling with debt.

In getting debt off their backs, these writers learned a lot about money and themselves. And they’ve kept on learning long after paying off their debts.

What about my pal Bob / Uncle Bertha / Donald Trump?

Sure, we all know a few people who (seem to) handle their debts and still grow their income faster than their repayments.

I’m not saying debt is always fatal disease. Rather, that it’s a hugely debilitating one, which can easily catch up and snuff out its victims.

How much wealthier would those income rich, asset poor debt jugglers be if instead of shuffling credit card payments, they put their brainpower into growing their investments or creating a passive income stream?

The bottom line on debt

If you’ve got any non-mortgage debt – even if you think it’s balanced by assets – pay it off as soon as you can. In every way it’s worth it.

Yes, it can be hard to get out of debt. But all that really matters in life is health, friends, family, love, and useful work or another purpose you enjoy.

Plus beauty and truth, as the poet said.

And I’d add Mexican food.

The point is: Last I looked, getting into debt to buy an iPad when you can’t afford it just to have one before your friends wasn’t on a single philosopher’s list.

Series NavigationThe only good debt is dead debt

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{ 9 comments… add one }
  • 1 Rob Bennett February 22, 2010, 5:25 pm

    Operating from a position of strength, you are more able to think of money as an opportunity and a tool, rather than as a burden. Your whole outlook on money and the language you use can change – and that’s the first step to getting richer.

    I agree 100 percent.

    I’ve never before put forward a blog comment where that is all that I had to say, but I think it is called for here. The point you are making is of huge importance, in my assessment.

    .-= Rob Bennett on: My E-Mail to New York Times Columnist David Leonhardt =-.

  • 2 The Investor February 22, 2010, 11:13 pm

    Thanks Rob – much appreciated!

  • 3 Money Reasons February 23, 2010, 1:38 am

    Having any debt is an added stress in my book. I feel so very very free without any debt.

    It also give me confidence to try other things, since I know that my house is paid off!

    Right now, I’m happy blogging after hour, but tomorrow who know what I’ll want to do!

  • 4 Evolution Of Wealth February 23, 2010, 1:44 am

    When it comes to debt we all have the worst role model thrust in our faces day in and day out, the government. If you ever wonder why so many people have so much debt just look at the example that is being set by the most powerful people in America.
    Debt is very stressful for most people and it has a huge impact on how they think of money. Unfortunately, most are more motivated by the things money can buy than they are at realizing how good they could feel by being debt free.
    .-= Evolution Of Wealth on: Why Your Finanical Planner is Like a Buffet =-.

  • 5 LeanLifeCoach February 23, 2010, 4:46 am

    Ditto Evolution!!!

    Investor – Too true. You nailed it. Even though I still have a mortgage (a very affordable one at that) to deal with not having any consumer debt has transformed my life and my attitude. I truly is liberating!
    .-= LeanLifeCoach on: America Saves Week =-.

  • 6 Niklas Smith February 23, 2010, 10:34 am

    I agree 100% with Rob 🙂

    Seriously, this is a very interesting point – everyone knows that being in debt can be stressful (to an extent that, in my mind, would almost always outweigh any utility gained from the extra consumption it enables in the present). Evolution of Wealth makes the important point that people don’t realise how good it feels to be debt-free, so they keep on consuming on credit because they feel that’s the best way to use their financial resources.

    But the idea that people who are free from debt treat money differently is surprisingly deep. It stands to reason that people would see their money differently if they just see it leeching into a bank’s coffers than if they have a nice credit balance. Does the English aversion to talking about money have anything to do with our high rates of personal indebtedness?

  • 7 Jamel Rose February 24, 2010, 1:17 am

    Debt is really a stressful thing. This post is really good for everyone

  • 8 Paul @ FiscalGeek February 24, 2010, 6:43 pm

    I’ll give you a solid AMEN! As one who has recently found debt freedom after 17 years of servitude I can vouch for how wonderful it feels to be free. It’s indescribable, and if I could adequately pass on the feeling those struggling through would bust it even harder to be free. But alas I cannot and we must all find our way.
    .-= Paul @ FiscalGeek on: What is a Good Credit Score? Should you Care? =-.

  • 9 Daddy Paul February 28, 2010, 1:06 am

    Good read. When you have debt you have less freedom. In general interest is money thrown away.

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