The following staff post is by Greg Johnson.
Paying off the mortgage is crucial for growing your wealth!
Pssst….Hey you!…Yeah you!…Come closer…I’ve got a secret to tell you. It’s a secret that can change your financial life forever. I’ve unlocked one of the biggest secrets to building personal wealth, but we’ve got to keep it down. We don’t want “them” to hear us.
Shhhhh… If you are a middle class person like me, you’ve been bombarded with images and stories about what “means” to be rich. From countless advertisements to watching Robin Leach, the middle class has been enticed to want more than they can afford.
We have been told to “BUY, BUY, BUY!” They’ve even made it through the use of easily available credit. We’ve decided that we would rather look wealthy than actually be wealthy. Unfortunately, for most people it isn’t working.
What would you say if I told you that you could become wealthy by changing a few simple things? Well, you can. All it takes is a shift in attitude and to make one simple commitment to yourself.
Are you ready to hear what that commitment is? OK, here is the secret: become and stay debt free. I know, I know. The reaction you are experiencing is normal. That angry, churning feeling in your gut is the Debt Demon struggling to stay relevant. He’s trying to convince you that I’m lying. He wants you to think that everybody is in debt. He wants you to believe that only debt can help you build wealth. He wants you to stay in debt because it makes HIM wealthy, not you. The Debt Demon is wrong. Not everybody is in debt. You don’t need debt to become wealthy. You can build wealth simply by using the most powerful wealth building tool at your disposal: your income. These are things that the rich already know. Still don’t believe me? Let’s explore what being debt free can mean to you.
Build Wealth More Quickly
If you are living like most people in North America, chances are that you have used debt to purchase things that you have wanted or needed. You probably have a car payment, maybe even two. If you have purchased a house, it is likely that you have a mortgage payment. You’re living a normal, middle class, debt-filled life. Imagine for a minute that you were debt free. Imagine that you did not have to shell out $800 a month in car payments. Better yet, why not pay off your mortgage early and get rid of that $2,000/month mortgage bill? If that was the case, your income could be used as a wealth building tool instead of a bill paying tool. Think about how quickly the money would pile up if you didn’t have to use it to pay back the bank! What could you possibly do with all that money? Well, maybe you could…
Have More Money to Invest
If there is something I love more than getting paid, it is making money that I don’t have to work for. That is why I love investing! By investing, I don’t just mean putting money into the markets. While that is a great option, you may also consider investing money in real estate or start your own business. The great thing about being debt free is that you have more money to invest in whatever way you choose. Furthermore, even if your investments fail, you still have the security of knowing that you aren’t going to lose your home because it is already paid for! So, now that being debt free has helped make your money work for you, what are you going to do with all of that extra cash? How about this…
Retire Early
HOLLA! Now that your investments are creating constant returns for you, why not kick that day job to the curb. Do you dream of traveling the world? You don’t have any debt, so get moving. Enjoy spending time at the lake? Now that you don’t need a day job to pay down your debt, feel free to spend as much time there as you like. Does sitting on the couch watching Oprah reruns really turn your crank? Have at it! The whole point of building wealth is to create more personal freedom, so why not take advantage of it? The secret seems so simple, doesn’t it? All it takes to build wealth is owing others less money.
While the debt free concept is simple, we all know that putting it into practice may take a little more work. However, I’ve broken it down into an easy to follow plan to debt freedom that will have you sipping cocktails in Aruba in no time. So, now you know the secret to building wealth. What you do with that information is up to you!
No debt provides many more choices. I used debt (mortgages) to build a business. I invested in income property and did very well. It allowed me to reach financial freedom at 38 years old. I never could have bought those properties without the leverage of a mortgage.
We have used mortgages to invest in income property as well. It is also going to allow us to retire early. While using cash to start a business is optimal, obviously that isn’t possible all the time. Debt certainly can be useful in that sense.
Being debt free is quite impossible especially for middle class people. But I believe that with enough determination and discipline, wealth can surely be achieved far easily than we can think of.
Actually, I would disagree. That is what the banks want you to think. Being debt free is quite possible. We are nearly there…and we are 33. We will be completely debt free, including the house, by 36. It takes sacrifice and not buying everything you “want”. However, it can be done.
that’s so true! If you want to build success it is very important to be and to remain debst free. Debts have tendency to pile up and if we live our lives depending on bail outs from one debt to another, we will live paying off debts and not able to move from our present financial position.
So true! It is hard to get ahead when you are constantly trying to play catch up with debt.
I was chatting with a girlfriend of mine the other day about our financial goals for the year. (oh, shish kebabs, I’ve become a money nerd…)
Mine was to – having graduated and gotten steady work – pay down all of my student debt. My friend made the goals of accumulating no new debt, and getting rid of consumer debt. Considering she’s an impoverished MA student – I thought that sounded pretty good.
It made me a little sad to think about so many people in their twenties who – if they’re thinking about it at all – ardently desire a neutral net worth.
Aiming for Zero! It’s good to be a millenial. 😉
The whole idea of having funds to invest or put towards a home – the idea is so far away – but so appealing.
Thanks for this! I like having something to shoot for.
Good luck and thanks for your comment! You can do it 😉
Debt freedom is definitely a key to building wealth. I think a better kept secret though is the power of compounding interest and the benefits of persistence.
Actually, I think the benefits of compounding interest are pretty well known. Unfortunately, nobody ever talks about staying out of debt too. Thanks for stopping by!
Just to clarify, I love me some compounding interest too! In combination with debt reduction, you are talking about some serious wealth building potential.
I learned from a financial guru that the only justifiable form of debt is for a good investment purpose. The money is therefore being borrowed in order to generate more money instead of just being used for expense.
I think that is good advice, although I wouldn’t necessarily apply that to ALL investments.
Our biggest debt right now is the mortgage, and to compensate we’re trying to save a lot of money in other areas of our life, only bringing out the cash when it’s for a good, high-quality purchase. It’s possible to save quite a bit of money if you stay with one car and reduce your debt in other ways.
That is very true. We have two cars, but luckily they are both paid for. Good luck reducing that debt Kevin!
So true! *sigh* We’re working on my student loan debt at the moment and at the current pace, we should clear it ($27,000) in three years or so. I’m hoping to get rid of it a bit faster, but that depends on any extra income I can manage to achieve!
It takes time and a concentrated effort. We are working our tails off to pay the rest of our mortgage down in the next three years! Let’s do it together!
Interesting Perspective, and I generally agree. I actually think that there is “good” debt and “bad” debt. Credit card debt is the nasty stuff you want to avoid, same thing with personal loans. Debt to finance a depreciating asset doesnt make much sense.
I’ve had no issues using debt to build up an investment portfolio of high quality dividend paying stocks. In fact the times when the stock market has been particularly been beaten down is when I have leveraged debt to purchase additional stocks.
Over the long haul, if you are investing in an income producing asset, the income thats generated from that asset can be used at a minimum to help service debt cost, and possibly also repay principle. Of course too much debt can be a disaster. It needs to be used in moderation.
Nice article! Having useful tips regarding wealth creation when applied in a proper way can help to make a real good fortune. By following the effective ways of creating wealth sincerely, a person can become rich and maintain the status for a very long time.