Wealthy Mindset Series #12

Net Worth versus Pay Down Debt

As you know, one of the most important keys to creating wealth is the right attitude, and in this series today we will talk about how the wealthy focus on building their net worth versus paying down debt. In the previous article we spoke about how to treat yourself like you matter by paying yourself first.

As I previously mentioned, (Series #11) after two divorces and a failure in the art gallery business I was broke at age 50 and felt I only had 15 years to plan for retirement. While I no longer use the word retire (instead I talk about creating complete financial choice), we will use that word for the wealthy series emails and articles.

In my gut I understood that I had to build a net worth even though I had thousands of dollars of credit card debt. So what I did was use a concept that is 5000 years old called pay yourself first. (Again, see the Wealthy Mindset Series #11 – Treat Yourself Like You Matter.)

In my Wealth On Any Income book I have a chart that shows if you focus on eliminating a $6,000 debt BEFORE you begin to invest, it can cost you about $200,000 in lost investment earnings over a 30 year time frame. And that is only if you are investing $300 per month, or $10 per day!

Wouldn’t you agree that giving up $200,000 to get rid of a $6,000 debt is not a wise thing to do?

While I felt this in my gut, while I put this down in my book, I was still haunted by carrying the debt while I was saving and investing. However, after a few years I was able to see and feel the wisdom of this approach.

After about three or four years, I do not remember exactly when, the income from the apartment buildings we were buying was able to provide some extra income to pay down the credit card debt. In a few more years I was able to pay off my credit card balances in full every month from the income from our investments.

I will admit it was an emotional, and sometimes financial, struggle in the early years of investing, but the payoff has been huge. It does not matter if a credit card bill comes in at $2,000 or $20,000, it gets paid off in full when the bill arrives. There is no way I would be in this situation if I focused on paying off debt instead of building my net worth.

And it will work the same way for you too if you commit to the process.

In the next article of the series we will talk about how the wealthy understand good debt versus bad debt and how they use good debt to become millionaires.

To your prosperity,